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The Wal‐Mart Effect: Wave of Destruction or Creative Destruction?

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  • Srikanth Paruchuri
  • Joel A. C. Baum
  • David Potere

Abstract

During the past quarter century, large multistore retailers have experienced considerable growth. In this article, we examine the widely held belief that the expansion of these chain stores, Wal‐Mart in particular, has had a large negative impact on the small locally owned retail sector. Our analysis of four types of independent retailer entries and exits in Florida from 1980, prior to the opening of the first Wal‐Mart store in the state, to 2004, reveals that Wal‐Mart's impact varies with independent retailers' market overlap with and proximity to Wal‐Mart. Notably, our findings suggest that within zip codes, the Wal‐Mart effect is driven by the suppression of entry rates, but not by the increase in exit rates, while in adjacent zip codes, it is driven by exit rates increasing more than entry rates. Our results provide empirical evidence that may help economic developers, public officials, and owners of small businesses make informed decisions about economic development in their communities.

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  • Srikanth Paruchuri & Joel A. C. Baum & David Potere, 2009. "The Wal‐Mart Effect: Wave of Destruction or Creative Destruction?," Economic Geography, Clark University, vol. 85(2), pages 209-236, April.
    • Handle: RePEc:bla:ecgeog:v:85:y:2009:i:2:p:209-236
    DOI: 10.1111/j.1944-8287.2009.01023.x
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    3. Rudholm, Niklas & Li, Yuijao & Kenneth, Carling, 2018. "How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach," HUI Working Papers 130, HUI Research.
    4. Klaesson, Johan & Nilsson, Helena, 2020. "Entry of malls and exit of stores - The role of distance and economic geography," HFI Working Papers 12, Institute of Retail Economics (Handelns Forskningsinstitut).
    5. Freedman, Emily A. & McConnon Jr., James C. & Hunt, Gary L. & Gabe, Todd M., 2016. "An Analysis of the Economic Impacts of Big-Box Stores on a Community’s Retail Sector: Evidence from Maine," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    6. Michael Hicks & Stanley Keil & Lee Spector, 2013. "Mom & Pop’s or Big Box Stores: Some evidence of Walmart’s impact on retail trade," Working Papers 201302, Ball State University, Department of Economics, revised Mar 2013.
    7. David Merriman & Joseph Persky & Julie Davis & Ron Baiman, 2012. "The Impact of an Urban WalMart Store on Area Businesses," Economic Development Quarterly, , vol. 26(4), pages 321-333, November.
    8. Brian Adams & Joshua Gans & Richard Hayes & Ryan Lampe, 2018. "Does Organisational Form Drive Competition? Evidence from Coffee Retailing," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 155-167, June.
    9. Donald Vandegrift & John Loyer, 2015. "The Effect Of Walmart And Target On The Tax Base: Evidence From New Jersey," Journal of Regional Science, Wiley Blackwell, vol. 55(2), pages 159-187, March.
    10. Janghee Cho & Hyunbae Chun & Yoonsoo Lee, 2023. "Productivity dynamics in the retail trade sector: the roles of large modern retailers and small entrants," Small Business Economics, Springer, vol. 60(1), pages 291-313, January.
    11. Edgard Barki & Felipe Zambaldi & Carlos Eduardo Lourenço & Cristiano do Amaral Britto De Castro, 2016. "Store patronage and retail competition in emerging markets," International Journal of Business and Systems Research, Inderscience Enterprises Ltd, vol. 10(1), pages 62-77.
    12. Håkansson, Johan & Li, Yujiao & Mihaescu, Oana & Rudholm, Niklas, 2016. "Big-box retail entry in urban and rural areas: Are there productivity spillovers to incumbent retailers?," HUI Working Papers 118, HUI Research.
    13. Chung, Hwan & Ahn, Dae-Yong & Ahn, Seungho, 2022. "Spillover effects of a mega shopping complex on pre-existing, small retail shops over space, over time and across retail types," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    14. Kim, Sohee & Woo, Ayoung, 2022. "Streetscape and business survival: Examining the impact of walkable environments on the survival of restaurant businesses in commercial areas based on street view images," Journal of Transport Geography, Elsevier, vol. 105(C).
    15. Alessandro Bonanno & Stephan J. Goetz, 2012. "WalMart and Local Economic Development," Economic Development Quarterly, , vol. 26(4), pages 285-297, November.
    16. Donald Vandegrift, 2016. "The effect of Walmart and Target on property tax rates," Letters in Spatial and Resource Sciences, Springer, vol. 9(3), pages 309-327, October.

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