Via Independent Street, I see a new study on how Wal-Mart affects small retailers. The study found that when Wal-Mart comes into town, local mass merchandisers, supermarkets and drug stores all see significant sales declines. For supermarkets, cutting prices only "mitigates" the harm, and doesn't work at all for mass merchandisers and drug stores, the study found.
But while it makes sense that Wal-Mart has a negative effect on small businesses that directly compete with it, it does not follow that Wal-Mart is overall harmful to the small-business sector. In fact, by driving down prices and thus freeing up resources in communities, Wal-Mart might actually help small enterprises overall. Check out my previous interview with West Virginia University economist Russell Sobel for his empirical research on this issue.
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