Dave DeWitte, CR Gazette –
Iowa State University economist Ken Stone made headlines in 1988 when he released the first academic study on Walmart’s economic impact on the economies of small communities.
Twenty-five years later, the professor emeritus, who retired in 2007, has co-authored a new ISU study that could make another splash, but for different reasons.
Walmart opened 45 stores in Iowa between 1983 and 1994, then took a five-year break on opening new Iowa stores. Beginning in 1999, another wave of store openings began that brought Walmart to 59 stores in 55 different communities.
Stone’s 1988 study found Walmart’s arrival hurt retailers competing head-on with Walmart in the same merchandise categories, but had a positive effect on retailers that sold different kinds of merchandise.
Retail sales tended to fall in surrounding non-Walmart towns, and the initial sales jump towns received from a Walmart opening tended to taper off as competing retailers closed or cut back.
Now, ISU’s research find that Walmart has been an overall retail boon for small Iowa towns with Walmart stores and the drain on surrounding towns has stabilized.
Real per capita sales in Walmart towns increased an average of 11 percent after the stores opened and fell to about 5 percent after 15 years.
Sales in a control group of towns without Walmart stores declined by an average of 25 percent, but had stabilized by the end of the 15-year post-opening study period.
Early Walmart store openings in the late 1980s focused on smaller communities, the report said. They tended to increase general merchandise sales in the community by about $9.8 million, the report said, possibly because Walmarts were relatively new and attracted many customers from outside the host town.
In the 1990s, the size of new Walmarts increased to about 90,000 square feet and they could conservatively generate $22.5 million in annual sales. Host communities gained a more modest $7.8 million in net retail sales.
Stone said his biggest surprise from the research was the stabilization of retail sales in non-Walmart communities.
The reasons weren’t probed in the study. Stone’s best guess is that control group of communities stabilized because they have discount and specialty retailers such as Hy-Vee, Fareway, Family Dollar and ALCO. Those retailers have adjusted their strategies to cope with Walmart.
Stone’s 1988 study raised the ire of top Walmart officials including founder Sam Walton, Stone said, and launched him in a new direction of speaking and consulting on how best to cope with Walmart in Iowa communities.
One criticism of the original study was that it ignored Walmart’s store site selection criteria. If Walmart chose high-growth areas for its stores, they said the study and others like it would underestimate the negative effects of a Walmart on the retail economy, and overestimate the positive effects.
The new study addressed the concern by reaching back 15 years before the Walmart stores opened. That historical analysis of retail sales in the community over that period made it clear that most of the small communities were already in an extended trend of retail decline before the Walmart stores opened.
Coping with Walmart is a daily fact of life for stores like J.T. Hadherway Co. in Monticello. The family-owned department store has made adjustments like ending apparel sales because a Walmart less than ten miles west in Anamosa made apparel lines unprofitable, and focusing more on things like selling high-quality fabrics not available at Walmart to quilters.
“We felt a ripple when the Walmart came, but we never tried to compete with Walmart,” said founder Julie Tuetken, who now works for her son Chris part-time at the store.
Tuetken said that Walmart in earlier years would send employees into J.T. Hadherway to benchmark her prices so that Walmart could undercut them. She said J.T. Hadherway’s strategy has been to offer products that are in local demand that customers can’t find at Walmart, and to offer service that leaves customers smiling.
Stone said the fate of small community retailers that were competing directly against Walmart is the sad part of the situation, but it’s clear that having a Walmart helps communities by improving sales tax collections.
Communities might be inclined from the study findings to offer incentives to attract Walmart stores. Economists generally agree that incentives should only be used when they do not harm the competitive position of other local firms, the study said, but municipal leaders might find it to the town’s overall benefit.
The ISU study analyzed over 20 Iowa communities with populations between 3,000 and 20,000, in which Walmart stores opened no later than 1994, and an equivalent number of non Walmart communities.
If small towns with Walmart stores were overall gainers and small towns without Walmarts have stabilized, it might seem that everyone’s coming out OK in the Walmart game.
That’s not true, Stone said, because retailing has swooned in small Iowa towns with populations of 2,500 or less. Those towns are not only too small to attract a Walmart but other discount or specialty retail chains, Stone said. Their retail sales have declined by about 33 percent over the 15-year period.
Stone hadn’t planned to work on any more Walmart studies, but changed his mind after the Economic Development Quarterly asked him to write the lead study for an edition devoted exclusively to Walmart studies. He said he still takes a strong personal interest in the mega-retailer.
A half black, half white person is called a “mulatto”.
The term for someone who is half black and half white is “mulatto”.
Peter, No. 1, Obama isn’t the first black president,he’s the first (known) mixed race president,half black, half white.
No. 2. There is enough oil and gas reserves in this country to last the next 50 years without imports. (Who shut the drilling down?)
No. 3 He’s pushing for stingent coal restrictions in a country in which 50 percent of the electrical power is from coal.
The list is endless. What about 5.3 trillion added to the debt and if he’s given four more years that could push the debt past 20 billion before he leaves office.
The last straw is Joe Biden…hasn’t he embarrased this country enough?
Walmart sucks. I wouldn’t shop there if it was the ONLY store in town.
Peter-just what does Romney have to do with WalMart? It sure seems like WalMart fits Obama a lot more. Talk about a communists croney. You and your leader are so far left you should live in Russia. You just couldn’t resist a cheap shot just like all the democrats. You have nothing good to run on so you try to avoid the issues with crappy cheap shots like this.
Romney and his other business ilk capitalized off of the exporting of American jobs and importing of cheap Chinese goods. He has everything to do with Wal-Mart. And sorry, but you’ve got it turned around. The Republicans are the new communists of the day. Once they realized they could substitute fair wages for proletariat hegemony, they became the new yard bosses. Democrats under Bill Clinton, no doubt contributed to the expansion of Wal-Mart…but it’s the Republicans who most benefited from it. Bleeding heart Dems, probably thought they were helping out 2nd and 3rd world countries, but Republican BOSSES, turned them into sweat shoppes, and exploited and distorted the original Peace Corpse mission. It’s all convoluted no matter who was involved, and the way out of it is to CEASE AND DESIST all trade with China and start making the products right here in North Iowa. Like, I said, you’ll need a big retailer to distribute all the goods that are being made, since Wal-Mart will undoubtedly reject your goods to be sold in their stores. They are completely un American and should be driven out. All the distribution and fuel prices will virtually be eliminated, and you can somewhat compete with Wal-Mart. Call it North Iowa Direct , or something like that. Get people working, and keep ’em working right here in America. Screw the Chinese government. The new patriots are those who build everything right here in America.
Damn Code-I had a real snappy rebuttal for you and lost it. Let’s just say I agree with you on China and taking American job’s overseas but I believe it was Clinton and NAFTA that made it all possible. I really believe that Obama has done more to hurt the creditability of America than anyone since Jimmy Carter. I was in the business of setting up manufacturing operations in other country’s and know what is involved and hated it. If they can prove the administration was behind the security leak on the new underwear bomb they should put everyone involved including Obama in jail. I dislike Romney and all like him but he is better than the alternative.
Peter-I would have been disappointed if you had not replied. You have me altogether wrong. I am not a Republican, I am an Independent and am for a reason. I dislike both party’s but really don’t care for the thuggery tied to Obama. He is a proven lier (he lied the first week in office) and has continued to lie throughout his first term. I am a patriot who hated seeing him put down our country and do away with our defenses. If we wanted to be like Europe we would have stayed in Europe. We are different and better and I like it that way. I was traveling around the world when Carter was in and it was terrible being a American at that time. We were insulted and kicked around everywhere we went. That didn’t happen when Ronny Raygun was in. I almost voted for Obama because I really thought we needed change, but didn’ because I just didn’t think he could do everything he said he was going to do. I was right.
Peter-conflicted is my middle name. How can anyone be anything else in this world when politicians of both party’s will lie right to your face. I am one who says screw the rest of the world. Bring our people home and protect our own. If businesses want to do business in other country’s let them. It should be on their own heads to protect themselves. They are the ones making money on the deal. Why should our young people be put in harms way and why should we spend all of our money to protect their profits. I am all in favor of term limits (no more than two four year terms) for ALL elected politicians or better than that, one six year term and out. At least it would be a start to cleaning up this mess.
However, small Iowa businesses are not better off with a Walmart in town.
I disagree. I was just having this discussion with my mother yesterday. I was alleging that the cheap influx of Chinese goods as exemplified and (pioneered) by stores such as Wal-Mart put more jingle in everyone’s pocket short-term which invariably led everyone to excessive consumption trends. Around the same time the Dollar Menu hit McDonald’s, SUV’s went bigger, McMansions were built with paper thin walls, and everyone thought they had it made. But now the reality has set in. A department of Bariatrics at Mercy tries desperately to correct 20 years of poor eating habits…and China has become a world superpower…because of …WAL-MART! I contend that Wal-Mart are actually traiterous since they weakened the Nation overall. Seriously. If I had complete power, I would start hearings and bring these people in for treason. Is the Nation really better off? Less manufacturing, higher gas prices, cheaper goods. Loss of navigation and orientation. I don’t believe this study for a moment.
Furthermore, it should dawn on people that the majority of the profits and gains are being sent OUT OF YOUR COMMUNITY to corporate heads. You think you are getting a good deal, until you realize you sold your community out for a $5 dollar Chinese shirt. It’s dawning on people now that to shop at Wal-Mart is a vote for the Chinese Government and is treasonous and unpatriotic to the United States. Ironic isn’t it? The God Bless America Red White and Blue Wal-Mart is nothing but a big fat CHINESE RED STAR. Wal Mart even adopted the Chinese Star as their logo.
How to correct this? Start making the same goods the Chinese do right here in your community, and set up a new retailer that offers everything Wal Mart does and more, AND does it with local goods and local manufacturing. All you rich dudes out there listening? If you want to do something good for your community, start up manufacturing and retail as the antidote to Chinese Wal Mart. That would be a true HERO in my book.
Forget about all these big business ideals of profits and free-markets. It’s all hogwash. There is more to life than money. Community, Environment, Neighbors, Homeland, Security are worth more than corporate profits.
Also, please get Mitt Romney off the stage. He represents everything wrong with America in the last 25 years.