tsquared
03-03-2005, 05:14 PM
1
February 24, 2005
Point Of View:
Supercenter Effects Must Be Examined
By: By Doug Cunningham
Hometown Merchants Association
Hometown Merchants Association (HMA) is a membership organization whose mission is to provide assistance to
independent businesses to help them remain strong and vital in their community. One of HMA's main focuses is to
research the impact of mega box stores on the community and the surrounding area in which they locate, and to educate
public officials and consumers on the findings.
I am writing this letter because of my enormous concern for the future of our communities and state due to the rapid
expansion plans of Wal-Mart to build new supercenters across Nebraska.
It is the erroneous opinion of many that a supercenter will always bring additional sales-tax revenue to a community.
The research clearly shows that assumption is questionable. Our research indicates that in the majority of communities,
the pre-supercenter sales-tax revenue growth would have outpaced current sales-tax revenue collections had a
supercenter not been located in the community.
Supercenters promote themselves as a retailer who will increase local sales tax and create new jobs. It has been widely
stated that for every two new jobs created in a supercenter, the community will lose three jobs. A study done in San
Diego County, Calif., in 2000 states that for every part-time job created, the community will lose 1 1/2 full time jobs
that would have paid a higher wage. The study also goes on to say that the San Diego area could incur up to $9 million
in extra public health costs because fewer people will be covered by health insurance. A survey done by the Atlanta
Journal in Georgia showed that 1 out of every 4 employees in Wal-Mart in that state had a child enrolled in the state's
free insurance for low-income people. The next highest business's ratio was 1 out of 22 employees having children on
the free insurance. Wal-Mart claims to sell cheap; however, I would contend that we as taxpayers are subsidizing them
through higher taxes. These same findings are arising in several states.
As part of our research, we conducted a price comparison between the 11 Wal-Mart supercenters in Nebraska. We
physically bought the identical grocery order at the highest- and the lowest-priced supercenters in the previous
comparison. In other states, it has been found that when competition has been eliminated, the price of a product in the
supercenter increases drastically. This price comparison attempts to illustrate that supercenter pricing in Nebraska
depends on the amount of competition left in the area. Our price comparisons indicate that when competition no longer
exists, the price of goods increases. In Nebraska, we see a disparity of 17 percent between the highest and the lowest
priced supercenters in the previous comparison. As competition is eliminated, the cost of goods will go up.
To give some insight into Wal-Mart's ability to accomplish its goals, you need only recognize how large this company
is. In BusinessWeek (Oct. 6, 2003), a statement was made that Wal-Mart is three times larger than the world's number
two retailer. Another study suggests that, if the volume of business Wal-Mart does in a year were compared to
economies of the world, they would be the 13th largest economy. It has the resources to lower prices until competitors
are out of business, then increase prices to what the market will bear. This has been shown to be the case across the
country.
It appears that charitable giving declines in communities where supercenters locate. It has been shown that as time
passes and businesses close, money becomes tighter and the non-profits operations that depend on the goodwill of
others begin to struggle financially.
In other areas of the country, Wal-Mart has driven competition out and, after a few years, they themselves have closed
to build larger, more centrally located stores in neighboring communities, forcing consumers to drive out of town for
most retail goods. As competition is eliminated, consumers are left with fewer choices because Wal-Mart doesn't stock
the variety other businesses do. An example of this is a bookstore carrying thousands of titles. When the locally-owned
bookstore is forced to close, we are left with a Wal-Mart that carries around 800 titles.
2
I am fully aware that many consumers are thrilled with the prospects of mega-store locating in their community. It is our
position that consumers should be educated in regard to the long-term impact this type of business will have when they
locate within a community. We must not be shortsighted. I hope that my research will help shed some light on this
subject and will encourage serious discussion. If anyone has questions regarding my research, I would be more than
happy to visit with them. If my research doesn't raise concerns, you need only look to the national news to see the
stories that have been printed in recent months. Numerous articles have appeared concerning Wal-Mart and its
predatory pricing practices and employee-abuse allegations. Consumers are only looking at today. It is my job to look
deeper, to dig below the surface and ask the tough questions in regard to what our communities will look like 5, 10 or
20 years in the future if these current trends continue.
I respectfully request that you consider the issues I've addressed when you make your decisions regarding your
shopping choices. If we could look into a crystal ball and see the future of our community, state and country, it would
be easier to make these decisions. We must remember that the decisions we make today will affect our cities, states and
country well into the future.
Doug Cunningham, Wausa, Neb., is director of the Hometown Merchants Association, based in Lincoln, Neb.
February 24, 2005
Point Of View:
Supercenter Effects Must Be Examined
By: By Doug Cunningham
Hometown Merchants Association
Hometown Merchants Association (HMA) is a membership organization whose mission is to provide assistance to
independent businesses to help them remain strong and vital in their community. One of HMA's main focuses is to
research the impact of mega box stores on the community and the surrounding area in which they locate, and to educate
public officials and consumers on the findings.
I am writing this letter because of my enormous concern for the future of our communities and state due to the rapid
expansion plans of Wal-Mart to build new supercenters across Nebraska.
It is the erroneous opinion of many that a supercenter will always bring additional sales-tax revenue to a community.
The research clearly shows that assumption is questionable. Our research indicates that in the majority of communities,
the pre-supercenter sales-tax revenue growth would have outpaced current sales-tax revenue collections had a
supercenter not been located in the community.
Supercenters promote themselves as a retailer who will increase local sales tax and create new jobs. It has been widely
stated that for every two new jobs created in a supercenter, the community will lose three jobs. A study done in San
Diego County, Calif., in 2000 states that for every part-time job created, the community will lose 1 1/2 full time jobs
that would have paid a higher wage. The study also goes on to say that the San Diego area could incur up to $9 million
in extra public health costs because fewer people will be covered by health insurance. A survey done by the Atlanta
Journal in Georgia showed that 1 out of every 4 employees in Wal-Mart in that state had a child enrolled in the state's
free insurance for low-income people. The next highest business's ratio was 1 out of 22 employees having children on
the free insurance. Wal-Mart claims to sell cheap; however, I would contend that we as taxpayers are subsidizing them
through higher taxes. These same findings are arising in several states.
As part of our research, we conducted a price comparison between the 11 Wal-Mart supercenters in Nebraska. We
physically bought the identical grocery order at the highest- and the lowest-priced supercenters in the previous
comparison. In other states, it has been found that when competition has been eliminated, the price of a product in the
supercenter increases drastically. This price comparison attempts to illustrate that supercenter pricing in Nebraska
depends on the amount of competition left in the area. Our price comparisons indicate that when competition no longer
exists, the price of goods increases. In Nebraska, we see a disparity of 17 percent between the highest and the lowest
priced supercenters in the previous comparison. As competition is eliminated, the cost of goods will go up.
To give some insight into Wal-Mart's ability to accomplish its goals, you need only recognize how large this company
is. In BusinessWeek (Oct. 6, 2003), a statement was made that Wal-Mart is three times larger than the world's number
two retailer. Another study suggests that, if the volume of business Wal-Mart does in a year were compared to
economies of the world, they would be the 13th largest economy. It has the resources to lower prices until competitors
are out of business, then increase prices to what the market will bear. This has been shown to be the case across the
country.
It appears that charitable giving declines in communities where supercenters locate. It has been shown that as time
passes and businesses close, money becomes tighter and the non-profits operations that depend on the goodwill of
others begin to struggle financially.
In other areas of the country, Wal-Mart has driven competition out and, after a few years, they themselves have closed
to build larger, more centrally located stores in neighboring communities, forcing consumers to drive out of town for
most retail goods. As competition is eliminated, consumers are left with fewer choices because Wal-Mart doesn't stock
the variety other businesses do. An example of this is a bookstore carrying thousands of titles. When the locally-owned
bookstore is forced to close, we are left with a Wal-Mart that carries around 800 titles.
2
I am fully aware that many consumers are thrilled with the prospects of mega-store locating in their community. It is our
position that consumers should be educated in regard to the long-term impact this type of business will have when they
locate within a community. We must not be shortsighted. I hope that my research will help shed some light on this
subject and will encourage serious discussion. If anyone has questions regarding my research, I would be more than
happy to visit with them. If my research doesn't raise concerns, you need only look to the national news to see the
stories that have been printed in recent months. Numerous articles have appeared concerning Wal-Mart and its
predatory pricing practices and employee-abuse allegations. Consumers are only looking at today. It is my job to look
deeper, to dig below the surface and ask the tough questions in regard to what our communities will look like 5, 10 or
20 years in the future if these current trends continue.
I respectfully request that you consider the issues I've addressed when you make your decisions regarding your
shopping choices. If we could look into a crystal ball and see the future of our community, state and country, it would
be easier to make these decisions. We must remember that the decisions we make today will affect our cities, states and
country well into the future.
Doug Cunningham, Wausa, Neb., is director of the Hometown Merchants Association, based in Lincoln, Neb.