Lately, there has been much discussion on our Blog about the merchandising giant that is Wal-Mart. Well, now we see another attempt by Wal-Mart to further diversify itself. Wal-Mart Stores Inc. recently released plans to build more than 50 stores in struggling communities over the next two years, as part of a goal to create between 15,000 and 25,000 jobs. Wal-Mart plans to build the new stores in areas of high crime and/or unemployment rates, on sites that are environmentally contaminated, or in vacant buildings or malls in need of revitalization.
How will this influx of Wal-Mart stores affect the economy, more specifically, the economies of each town the new Wal-Mart store inhabits? If the stores are going to be built in such undesirable areas, how much economic (as opposed to accounting profit) cost will the stores face? In examining the issue, we must examine the possible intrinsic costs. If the Wal-Mart store is successful, this could decrease the demand for merchandise/services from local businesses. In turn, many small businesses would be forced to go out of business. Also, how much is it going to cost to perform proper and efficient clean-up of the aforementioned environmentally contaminated or vacant properties? Will the profits earned by the store be enough to reconcile for the costs that it took to build the store? Perhaps in the long-run they will.