Walmart Supercenter Drives Smaller Walmart Out of Business
Posted on July 24, 2012 by jway
Community activists, small business owners and many researchers have long argued that Walmart endangers the viability of nearby small stores, forcing many to shut their doors. Last week, one more business closure offered strong evidence that it’s hard for small shops to get by in the presence of a Walmart Supercenter.
Ironically, Walmart drove its own 15,000-square-foot convenience-grocery store, the Walmart Express, out of business.
On Friday, the Chicago Tribune reported that a Walmart Express in Chicago’s West Chatham neighborhood is shutting its doors just six months after a Supercenter opened nearby. The company opened the smaller pilot store last July. In January, a new Walmart Supercenter opened across the parking lot, just 100 yards away. According to the story, “Walmart’s vision was to have the two stores complement each other… but increasingly customers were shopping at the Supercenter.”
Unsurprisingly, the Supercenter drew away the smaller store’s customers. Surprisingly, the Express’s pricing was comparable to the Supercenter’s, but the Express still couldn’t compete with the Supercenter. For the thousands of small businesses that struggle to stay above water when Walmart comes to town, the challenge is even greater, since they generally don’t have access to Walmart’s bottomless resources or its vast, globalized network of cheap goods.
The obvious implication for the small business community is that Supercenters really are a death sentence for many small businesses. This reinforces the results of multiple studies, which have traced the closure of small businesses and the decline of local downtowns to the opening of Walmart Supercenters. Most recently, a study of South Seattle’s Skyway neighborhood from 2012 shows that a new Walmart store could divert $25.38 million in sales per year from existing retailers and result in a loss of 6.4 fulltime jobs and $13.97 million in economic output over a 20-year period.
The West Chatham store’s closure is also an early sign that Walmart’s second phase of experimentation with the Express format might be a flop. Walmart is facing increasing competition from dollar stores, and for some analysts, the Express format was to be the company’s solution.
Back in May, Walmart U.S. CEO Bill Simon announced that the 10 existing pilot Express stores were a “surprise success” when they turned a profit less than 12 months after opening. That was phase one. Phase two is the “density test,” where the company tries to figure out: “how many can you build in a market?” Apparently, the West Chatham store failed the company’s density test.
This post was written by Rebecca Cassler.