Should Small Businesses Fear Wal-Mart?

A new study from West Virginia University argues that Wal-Mart has not negatively affected small businesses but has instead changed the nature of small businesses. U.S. News & World Report recently published a Q&A with Russell Sobel, a professor of economics who co-wrote the West Virginia University study.

"What I’ve witnessed in my own experience in Morgantown is that indeed when Wal-Mart came into town, a couple retailers downtown did close down, and they were the ones in direct competition with the product lines that Wal-Mart carries," Sobel says. "But within four or five years, every one of those storefronts was filled again, but with different things – fancy restaurants, a coffee shop, an art gallery."

Sobel adds that most studies of this subject in the past only count store failures and never note the businesses that later opened. "If a hardware store closes and an art gallery takes its place, that’s a net zero in our data," he says.

After going through all the data on self-employment rates and number of establishments and determined that Wal-Mart actually had no effect at all, positive or negative. "Wal-Mart doesn’t drive anyone out of business. It’s consumers who drive those moms-and-pops out of business," Sobel says. "They choose to shop at Wal-Mart because they’re saving money. So it changes the structure of which small businesses are around. But in terms of the total number, there are just as many small businesses around today as there were before Wal-Mart."

Read the full Q&A and see reader comments here.

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