This paper examines the dual impact of Walmart supercenters on local communities, particularly in rural and underserved regions of the United States. It evaluates Walmart's strengths in supply chain management and retail expansion before turning to the debate surrounding its entry into local markets. The paper identifies both negative effects — including price competition for small businesses, wage depression, and traffic congestion — and positive effects such as real estate appreciation, increased consumer demand, tax revenue generation, and job creation. The paper concludes by recommending that local planning commissions require Walmart to submit a Corporate Social Responsibility plan before approving store operations in their communities.
Walmart is a global leader in retail supply chain management, logistics, operations, fulfillment, and transportation services. The efficiency and profitability of Walmart's supply chain operations globally have set a new standard in the industry and are often used as the basis for comparing performance in related industries as well (Stevenson, 2009). What has contributed to the company's rapid growth, however, is its acquired expertise in planning, launching, and supporting supercenters in remote geographic regions of the United States, while also being able to tailor its unique retailing strategy to foreign markets.
Walmart has learned how to integrate customer and buyer demographics into its retail planning and execution systems to ensure that every store format — from the very large and complex supercenters to small storefronts in China — operates at an optimal level of sales and profitability performance (Courtemanche & Carden, 2011). By basing many of its expansion plans on insight into buyer demographics and preferences, Walmart is successfully able to turn these retail locations into integral hubs of its supply chains as well (Stevenson, 2009).
The initial success of Walmart in the United States is due in large part to the company's ability to identify rural regions underserved by a variety of retailing services and create supercenters to meet customers' needs. With over 5,000 stores in operation, this skill set remains one of its greatest strengths. For a small business, the negatives of Walmart entering a rural market include price competition, greater product-based competition, and increased competition for the best employees in the area. Walmart also has significant brand awareness and expertise in local marketing, which makes building a local brand even more difficult for a small or medium-sized business (Edwards, 2011).
In addition to the factors outlined above, Walmart has been known to engage in price wars with local food retailers and grocery stores in an effort to gain a greater share of aggregate retail sales (Courtemanche & Carden, 2011). It is not surprising, therefore, that small and medium-sized businesses view Walmart as a significant competitive threat.
Ironically, despite all of these threats, Walmart has also been known to significantly increase the value of real estate in small towns (LaRose, 2011). This occurs because Walmart's largest suppliers often create shipping and service hub locations near the largest supercenters in order to accelerate inventory turns over time (LaRose, 2011). When Walmart moves into a given region, it often brings an entire ecosystem with it that drives up land values once the supercenter becomes established and successful. Another benefit is the higher level of consumer demand for new products, which Walmart often promotes heavily through local advertising channels. In aggregate, demand for specific products and services tends to increase over time as a result.
"Real estate appreciation and supplier ecosystem growth"
"Traffic, job loss, wage depression, and community trade-offs"
"CSR filing requirements and community accountability measures"
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