A new economic impact study has been released in Kilmarnock, VA and the Northern Neck, quantifying the likely impact of a proposed Wal-Mart superstore in Kilmarnock. The 18 page report, written by economist Tom Muller, concludes that “Wal-Mart’s interest (in Kilmarnock) is likely due to two factors: there is no sizeable general merchandise store in the market, and Wal-Mart has exhausted the most obvious sites. Because of this, Wal-Mart now has a policy to ‘backfill’ gaps on a map where there are no Wal-Marts…The company is now closing gaps to assure that no one is more than 30 minutes from one of its stores.” Muller’s study says that a 109,000 s.f. Wal-Mart would have average sales of $330 per sq. ft., or a total of $36 million. Total retail sales in the Lancaster County trade area is only $110 million, so the Wal-Mart would equal about one third of all taxable sales in the defined market. Because there are only 7,500 households in the trade area, that the average household in Kilmarnock would have to spend $4,500 at the Wal-Mart each year. This is four times the national average of $1,100 per household spent at a Wal-Mart. Muller’s research suggests that 25% of Wal-Mart’s annual sales would come from recapture of “leakage”, sales now leaving the trade area. But the other 75% would come from existing merchants. Of Wal-Mart’s $36 million in annual sales, $27.5 million would come for local merchants. Of this total, $13 million would come from other grocery stores, and $14.5 million would come from general merchandise stores. The study notes that Wal-Mart opening would “likely lead to the closure of at least one, but more likely two of the weakest Kilmarnock supermarkets. Were this to happen, local shoppers would have less choice than at present.” Wal-Mart sales of food products at a supercenter are estimated to be roughly 50% of all sales at the store. The new report finds that even with a larger trade area “the market could not absorb an enlarged Wal-Mart. The result: closed stores that are an eyesore and reduced value as commercial property. The significance of this shift in retail activity is obvious. Wal-Mart pays property taxes, but the gain, in the absence of rapid market expansion, is offset — and could be more than offset — by reductions in other locations.” Muller notes that the assessed value of a Kilmarnock Wal-Mart would be around $3.5 million, while the assessed value of retail property likely to compete with Wal-Mart is around $8 to $10 million. If these competitive properties were to lose 45% in value over time compared to what they would have been in the absence of a Wal-Mart, the decline would exceed the property gain from the Wal-Mart. “Often, local officials consider only property values based on new construction,” Muller says, “and do not consider the effects of new commercial space on already present property values.” Finally, as for the impact on jobs, the study concludes: ” Although Wal-Mart would employ a substantial number of mostly 20-34 hrs per week employees, this gain would be offset by reduced employment in existing businesses.” Muller calculates that Wal-Mart would create 246 mostly part-time jobs, and would destroy 248 jobs at other businesses. “Thus the gains from Wal-Mart are wiped out by losses from existing merchants,” Muller says. The study does not examine the other secondary effects of a Wal-Mart in Kilmarnock, such as crime, traffic congestion, fire protection, and environmental degradation.
Since most city and town officials have never taken a Retail Economics 101 course, it might be helpful to share with them this Kilmarnock impact study, and suggest that a similar independent study be conducted in your home town. For a copy of the Kilmarnock study, send $5.00 to cover copying and postage to: Sprawl-Busters, 21 Grinnell St, Greenfield, MA 01301. For other economic impact studies, scroll through these newflash pages, and go to the “Reading List” to order “Economic Impacts: A Sampler”, which includes half a dozen studies similar to the Kilmarnock report.
