Wednesday, October 01, 2014

Walmart - Sign of Progress

Recently the town council of Timberville Virginia had before them an application for Walmart to open a store in the community. Various voices, both individuals as well as organized groups, stood against the proposal. Such opposition isn’t new for since the late 1990s Walmart has experienced some opposition from various communities across the nation, and in growing frequency.  Walmart coming into the community will depress wages is one argument put forward.  Another argument they put forward regarded the estimated economic impact upon the community (both wages and tax revenue) that Walmart projects are overly optimistic. The major argument against approving the request was that when Walmart moves into the community, it kills local businesses.


Interestingly, the majority of the opposition voices came from outside the Timberville/Broadway community. Many from the community via email, letters and appearances supported the proposal. At the end of the day, the council approved Walmart’s request and the store will likely open in the first half of 2016.


That Walmart doesn’t pay well the average store employee in a low skill position is true, but the same can be said for so for food stores, restaurants, and convenient stores. So do the common retail stores like Macys, JCP, Best Buy, Target, etc. If one stands against Walmart because it pays low wages to workers in low skilled positions, then you must also stand against the opening in your community fast food restaurants, food stores, convenient stores, other big box stores, or a even a mall coming to your town. And if you don’t oppose them, then why do you oppose Walmart and not those other places that also pay low wages?    


Walmarts’ economic impact statements/figures give a favorable picture. The figures are not false but have to be viewed as incomplete and at places optimistic. This is to be expected as they are casting their argument in the best light. If Ford, Microsoft or another firm was opening a large plant in a community, the figures from the company would likewise be rosy and not taking into account the farther reaching impacts.  Walmart’s figures don’t often include all infrastructure costs that may well be incurred by the town, costs ranging from installing of extra lights along the route to the store to an extra police officer or two. That said, the increase in tax revenue from Walmart will more than offset those costs. So too will revenue from the types of businesses which will in the coming years cluster or expand in the store’s area.


The concern about lost of retail businesses is a legitimate concern as some retail businesses will close, but it is a concern that if heeded holds back progress and efficiencies. Change and the successful new ways ultimately bring the relinquishing of the old ways.


The railroads of the expanding railroads in the 1870s to 1890s not only united a nation but they made it possible for goods and services to be transported more rapidly and further than ever before. The railroad system transformed the economic and business models. The railroads provided for the great expansion of what had been a limited profession, the traveling salesman. Railroads enabled beef raised in Texas to Wyoming to be moved quickly to new large meat processing plants in centers across the nation and from those plants for fresh meat to find its way into the hands of the local butcher in small towns. The railroads made it possible for S.S. Kresge to bring to his stores thousands of low cost items from afar into his store, a store that would expand into the Kresge chain and then become Kmart. The railroads enabled two salesmen to establish a store with a catalogue and warehouse, and to sell items through the catalogue across the Midwest to people in small towns and on farms, and to grow that company into a major retail giant, Sears (now a dying firm).  


Look at how the interstate system transformed Florida and our way of doing business. Do you think Florida would have the even a third of its current tourist, snowbird and retirement communities if there was no interstate system? Much of Florida would be a swamp without the interstate system allowing people to travel five to six hundred miles a day in order to spend time in Florida’s winter sun. That same system now transports goods across the nation, transforming the manufacturing and retail structures of 1950s and 1960s. A local farmer who a hundred years ago could only sell his milk to a few local small towns can now has a heard ten to twenty times the size and sells his/her the milk in communities hundreds or even thousands of miles away. The handful of chickens that once were only sold locally are now raised in the thousands per year at a fraction of former costs, processed in plants that can process and package over a million chickens a year with the products from those plants being sold across the nation.  


Gone are the days when the vast majority of one’s furniture and clothing was made within a twenty mile radius of home. Now clothing, furniture and other household items are made thousands, or even tens of thousands of miles away for a fraction of the costs, and for the most part are better quality too (see my posts of August 16 & 23).  


Progress and scales of production has brought forth greater efficiencies, lower prices and a greater range of products to every community.  Yes local businesses that made a few furniture items a week have died. They failed to adapt or had products whose quality could not compete with better quality products now reaching their community at a lower cost. Just as businesses like buggy manufacturers and radio tube firms have fallen to the wayside because they failed to adapt, so too will other inefficient businesses.


Local businesses will fail when Walmart comes to town mainly because they have failed for a host of reasons to be competitive.  Some of those reasons were outside their control, and others were beyond their control. Kodak is a recent example of a huge company that is a shell of its former glory because it just didn’t adapt to the new trends and technologies quick enough.  Kmart’s decline is a result of its management and model being too slow to change and adapt. If Walmart does not adapt to new trends, products and other changes that will take place in the coming years, it too will fail. As attested by the decline of Sears and Kmart, a profitable formula in one decade may well become unprofitable one a decade or two later.


Today Walmart is an example of progress and efficiency. And it is also an example of how its current way of doing business may be at risk from a new form of doing business…the Amazon  model, a digital version and revamping of the Sears catalogue a hundred years ago.


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