College of Business Administration

Article Reprints:

Kevin D. Jones

Who's Killing Mom and Pop? Retailers Point to Wal-Mart Mississippi Business Journal June, 1988, Vol 10; No 6; Sec 1; pg 30

Devastation. The word crops up often when merchants in Mississippi's small towns talk about what Wal-Mart has done to them. Rodney Norman, owner of Norman's Hardware store in Hazlehurst, used it to describe what's happened to his once-thriving store. "When you look at Wal-Mart's prices for STP, car wax, motor oil, there's no way you can compete. It makes you look like a fool. I've had to just get out of housewares and small appliances.

"I had a heck of a business -- four people in sales and two full-time bookkeepers. Now I've got a part-time bookkeeper and a part-time salesman. My business is down 35 percent since they came to town. And people believe their prices are lower even when they're not. They've just got that image. They're the first store that comes to mind for people now. They don't think about coming downtown. It's devastating. The merchants downtown are just hanging on, and I don't see it getting better."

Devastated was the word Mac Gordon, editor of the Leland Progress, also used to describe the impact of the Arkansas-based discount chain on his town. "I've got no problem with (Wal-Mart) as a business; they sell quality merchandise at an affordable price.

"But with their size and buying power, they are just squeezing the blood out of mom-and-pop stores that dominated business in towns like Leland for years. We had a men's clothes store, selling good merchandise at a fair price that closed down. A large part of the reason can be traced to competition from a Wal-Mart 15 miles away in Indianola and another 10 miles away in Greenville. We're a town of 6,500, and you cannot buy a pair of men's socks or underwear here."

Other volume discounters have done their damage to his small town, but Wal-Mart has undoubtedly hurt it the most, Gordon says. Other discounters are merely down-sizing their operations when they move to small towns. Wal-Mart, on the other hand, began in small towns and understands that market and its needs better than virtually anyone else.

Hardware stores, which used to make much of their profit from small appliances and housewares, have taken one of the biggest hits, but clothing and drug stores have also had to dive for cover into market foxholes where they don't directly compete with the $ 16 billion giant. And there are indications that, after a few years, even supermarket sales suffer.

"It's just devastated our downtown; the mom and pops are closed up," says Harry Hammond, mayor of Eupora and owner of a shopping center clothing store. "There are some pluses in the large amount of sales tax, but overall, I'd have to say it's been a negative for our town."

Even those who see their sales draining away don't deny Wal-Mart used a brilliant formula to become the first volume discounter to make it in towns of 5,000 to 10,000. And they don't deny that "the Wal-Mart way" of low prices and a mall-like selection under one roof gives consumers what they want.

For its part, Wal-Mart points out that it bought $ 312 million plus (retail value) from 88 Mississippi vendors last year, up from $ 125 million purchased from 63 suppliers in 1985. That merchandise wasn't just sold in the 49 stores in the state, but throughout the 1,140 store, 24 state chain.

Wal-Mart paid another $ 3.5 million in real estate and franchise taxes to the state last year. Though the store doesn't release sales tax figures, the store in Hazlehurst, which is a little more than a year old, reportedly told city officials it expected annual sales of $ 6 million. Taking that store as an average, that would put sales in Mississippi somewhere between $ 250 and $ 300 million.

Out of that projected figure comes $ 5 million in sales tax, with local communities realizing some percent.

Then there are the 8,500 jobs it provides in Mississippi, including several hundred of warehouse in Brookhaven, though most are less than 40 hours. And in each community, the store gives a $ 1,000 annual scholarship.

But the Wal-Mart way also saps the economic vitality from the local retailing community, say independent store owners. And, they point out, profits from locally-owned stores stay in the community, while Wal-Mart wires its proceeds daily to Arkansas.

"The merchants here are hurting; Wal-Mart has taken 12 percent of their business, at least. We haven't been hurt as bad as some other towns because they've helped open up an area out on the highway where stores are drawing from a wider area," said a Hazlehurst merchant who didn't want his name used for fear of market retail- retaliation from Wal-Mart. "But they are tearing down small businesses. Ten years from now, downtown will just be law offices and insurance agencies -- service businesses like that. The merchants, the local people who contribute to the growth of the town, don't have a chance."

While Wal-Mart sometimes expands the trade area for the towns in which it locates, it often does the most damage to towns nearby, Flora says. "The conclusion we came to is that those who get Wal-Marts don't do badly. But the impact is pretty devastating on smaller (nearby) towns."

"Small towns are drying up," agrees Spence Dye, director of the Mississippi Retail Merchants Association, a group made up chiefly of independent stores. "Wal-Mart is a classic example of what competition is all about. You just have to learn to compete. But there doesn't seem to be an answer to their price or selection. It's a pretty hard situation for a small retailer to beat. I'm like a lot of other people; I see the problem, but I don't see a solution."

"The money a Wal-Mart drains from the community won't come back; it isn't in the hands of local people who might invest it back in the community.

"Then you lose a sense of community loyalty, that small town atmosphere, and you are in danger of becoming a bedroom community. You don't have business and civic leaders; you have transient managers.

"But those are subjective things," Cooley says. "People may want those trade-offs. We're becoming a more mobile society and people want that price and convenience. There are trade-offs, and people in a lot of small towns seem to be willing to make them."

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