These studies look at how the arrival of a big-box retailer displaces sales at existing businesses, which must then downsize or close, resulting in job losses and declining tax revenue.

The Impact of an Urban Wal-Mart Store on Area Businesses

by Julie Davis, David Merriman, Lucia Samayoa, Brian Flanagan, Ron Baiman, and Joe Persky, published by the Center for Urban Research and Learning Loyola University Chicago, December 2009.

The opening of a Wal-Mart on the West Side of Chicago in 2006 led to the closure of about one-quarter of the businesses within a four-mile radius, according to this study by researchers at Loyola University. They tracked 306 businesses, checking their status before Wal-Mart opened and one and two years after it opened. More than half were also surveyed by phone about employees, work hours, and wages. By the second year, 82 of the businesses had closed. Businesses within close proximity of Wal-Mart had a 40 percent chance of closing. The probability of going out of business fell 6 percent with each mile away from Wal-Mart. These closures eliminated the equivalent of 300 full-time jobs, about as many Wal-Mart added to the area. Sales tax and employment data provided by the state of Illinois for Wal-Mart's zip code and surrounding zip codes confirmed that overall sales and employment in the neighborhood did not increase, but actually dipped from the trend line. Although Wal-Mart claims its urban stores recapture dollars leaking to the suburbs, the findings of this study suggest that urban Wal-Mart stores primarily displace sales from other city stores. "There is no evidence that Wal-Mart sparked any significant net growth in economic activity or employment in the area," the researchers conclude. The study also examines Wal-Mart's Job and Opportunity Zones initiative, which provided marketing for five local businesses, and found it largely ineffective.

Major Flaws Uncovered in Study Claiming Wal-Mart Has Not Harmed Small Businesses [PDF]
By Stacy Mitchell; Institute for Local Self-Reliance, December 2008

A new and widely publicized study, "Has Wal-Mart Buried Mom and Pop?", claims that there is no evidence that Wal-Mart has had an overall negative impact on the small business sector. A close inspection of the study by the Institute for Local Self-Reliance, however, found major flaws. The authors failed to use the correct U.S. Census data when attempting to show that "mom and pop" businesses have not experienced a net decline over the past two decades. When the correct data set is used, it is clear that the small business sector is much less robust now than it once was, with the number of retail businesses with fewer than 10 employees declining by one-fifth from 1982-2002. This decrease is even more drastic when measured relative to the population. During the 20-year period, the number of retail firms with 1-4 employees per 1 million people fell by 38% and retail firms with 5-9 employees per 1 million people declined by 30%.

The Impact of 'Big-Box' Building Materials Stores on Host Towns and Surrounding Counties in a Midwestern State [PDF]
by Economics Professor Kenneth E. Stone and Extension Program Specialist Georgeanne M. Artz, Iowa State University, 2001.

This study examines several Iowa communities where big box building supply stores, such as Menards and Home Depot, have opened in the last decade. Sales of hardware and building supplies in the host community and surrounding counties are tracked over several years to test what the authors call the "zero-sum-game theory," namely that the retail sales gains generated by big box stores are offset by sales losses at existing, often locally owned, retail stores. The results confirm the theory, finding that sales of hardware and building supplies grow in the host communities, but at the expense of sales in smaller towns nearby. Moreover, after a few years, many of the host communities experienced a reversal of fortune: sales of hardware and building supplies declined sharply, often dropping below their initial levels, as more big box stores opened in the surrounding region and saturated the market.

What Happened When Wal-Mart Came to Town? A Report on Three Iowa Communities with a Statistical Analysis of Seven Iowa Counties
by Thomas Muller and Elizabeth Humstone, National Trust For Historic Preservation, 1996.

This study examined the impact of Wal-Mart on several Iowa communities. It found that 84 percent of all sales at the new Wal-Mart stores came at the expense of existing businesses within the same county. Only 16 percent of sales came from outside the county---a finding which refutes the notion that Wal-Mart can act as a magnet drawing customers from a wide area and benefiting other businesses in town. "Although some suggest that the presence of Wal-Mart outside of, but near to, the downtown area results in additional activity downtown, both sales data and traffic data do not show this gain," the study concludes. "None of the nine case studies was experiencing a high enough level of population and income growth to absorb the Wal-Mart store without losses to other businesses." The study documents losses in downtown stores after Wal-Mart opened. "General merchandise stores were most affected," the study notes. "Other types of stores that closed include: automotive stores, hardware stores, drug stores, apparel stores, and sporting goods stores." The supposed tax benefits of Wal-Mart did not materialize either: "Although the local tax base added about $2 million with each Wal-Mart, the decline in retail stores following the opening had a depressing effect on property values in downtowns and on shopping strips, offsetting gains from the Wal-Mart property."

Competing with the Discount Mass Merchandisers
By Dr. Kenneth Stone, Iowa State University, 1995

The basic premise of this study and others by Ken Stone is that the retail "pie" is relatively fixed in size (it grows only incrementally as population and incomes grow). Consequently, when a company like Wal-Mart opens a giant store, it invariably captures a substantial slice of the retail pie, leaving smaller portions for existing businesses, which are then forced to downsize or close. This study of Wal-Mart's impact on Iowa towns found that the average superstore cost other merchants in the host town about $12 million a year in sales (as of 1995), while stores in smaller towns nearby also suffered substantial revenue losses. These sales losses resulted in the closure of 7,326 Iowa businesses between 1983 and 1993, including 555 grocery stores, 291 apparel stores, and 298 hardware stores. While towns that gained a Wal-Mart store initially experienced a rise in overall retail sales, after the first two or three years, retail sales began to decline. About one in four towns ending up with a lower level of retail activity than they had prior to Wal-Mart's arrival. Stone attributes this to Wal-Mart's strategy of saturating regions with multiple stores.

St. Albans, Vermont State Environmental Board Act 250 Decision, 1994

A cost/benefit analysis of a proposed Wal-Mart store in St. Albans, Vermont, found that the store would cause dozens of existing businesses to close, leading to a net loss of 110,000 square feet of retail space. The 214 jobs created by the new superstore would be offset by the loss of 381 jobs at other businesses. The analysis also found that the overall tax losses expected from the small business failures would be greater than the tax revenue generated by the new Wal-Mart. Moreover, the city would incur a variety of new costs to provide roads, sewers, police, and fire protection to service the sprawling new development. The analysis concluded that for every dollar in tax benefit created by the superstore, there would be 2.5 dollars in tax losses and public costs.

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