A Wal-Mart spokesperson was quoted October 7th. in the Trenton, NJ Times as saying “Wal-Mart believes in healthy competition and the free enterprise system that has made this nation great. Often when a Wal-Mart arrives in a community, the area thrives…we trigger competition, we also become a destination to many who may not come to an area normally. This means that the gas stations, car washes, restaurants and other retail vendors in town” get more business. Although Wal-Mart claims to be a “retail magnet,” nowhere is this myth more exposed than in the grocery industry, where Wal-Mart now controls more than 20% of all food sales in America. The result? Weakened competition, lost sales, closed stores. This week, one of the major national grocers, Safeway, announced that its third-quarter profit dropped by -21%, due to a combination of the food worker strike in Southern California earlier this year, and competition from Wal-Mart. As the Associated Press put it, “Like many of its rivals, Safeway has been struggling to prevent its customers from defecting to discount retailers, such as Wal-Mart Stores Inc., that have been steadily expanding into the grocery business.” Wal-Mart is the largest grocer in America. To lower its labor costs, Safeway, Albertson’s and Kroger’s endured a strike that lasted nearly 5 months, cutting back on wages and health care to look more like the lowest common denominator — Wal-Mart. Safeway also closed down 10 stores in southern California, and is looking for wage and benefit concessions in other market areas across the country. Safeway is proof that areas do not “thrive” when Wal-Mart comes to town.
The shake-down in the food industry is an excellent illustration of the “transferred sales” theory of economic displacement. Most families have a very inelastic food budget. What they spend on food from week to week does not vary widely. As more players get introduced into the market, a family’s food budget does not rise. The Wal-Mart theory of “triggering competition” makes it sound like the consumer gets hungrier the more grocery stores are built. But a recent study from the consultant Retail Forward suggested that the opening of one Wal-Mart supercenter means the closing of two grocery stores in the same area. This is not economic development. All those communities “trading up” from an existing Wal-Mart discount store to a Wal-Mart supercenter get only two things from the process: 1) an empty discount store blighting the landscape, and 2) a shift in grocery market share. In cases, like Safeway, where the grocery workers were unionized, the community gets a third result as well: 3)a drop in the average wage in the food industry. None of these results are desirable, none of these results bolster the case for approving Wal-Mart supercenters. What’s happening to Safeway, or what has happened to other grocers, like Winn-Dixie, should be an obvious lesson for local officials: Wal-Mart is not a form of economic development, and brings no added value to your community.
