Should Small Businesses Fear Wal-Mart?

Q&A with Russell Sobel of West Virginia University


One of the things I like to tell groups: Wal-Mart doesn't drive anyone out of business. It's consumers who drive those moms-and-pops out of business. 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.

But even if the number of businesses doesn't change, couldn't small businesses still be worse off because of Wal-Mart?

We added on at the end of the paper about revenue per establishment and also the profits per establishment to answer that question. There's no evidence that the average revenue or average profitability has gone down. That coffee shop that opened up downtown appears to be as profitable as the five-and-dime that it replaced. That might partially be due to lower rent or leasing on the building. Wal-Mart seems to have taken note of criticisms and is trying to change its image. What's in its future?

When I was growing up, it was Kmart that everyone said was taking over the world. Now people laugh about that, but they say the same thing about Wal-Mart. I tell my students, "I guarantee you, 20 years from now, it's going to be something else."

West Virginia University
small business