Wal-Mart in the hood?
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.
6 comments:
I found this article to be very interesting. At first glance, it does appear Walmart is trying to fix the wrongs they in fact created. If Walmart continued with their previous habits, negative press and opinions would most likely continue to grow as competition for Walmart would shrink. With less competition, those consumers who can afford to go elsewhere, will. Consumers who could not normally afford to go elsewhere might find another option or hold out for special sales at the remaining competitors. By actually creating new businesses, Walmart will be securing their competition and by training them, there will not be much guessing on Walmart's part to become the better company.
Another issue brought up in the article includes employee pay rate. Will wages be cut even more to pay for these new Zones? Like Zach stated, I wonder will the cost outweigh the income from these new Zones and businesses?
I will be curious to see how this all plays out in the next few years.
It seems like a good idea to try and place a company that has had so much economic success in an area with little economic success but one must ask if it will really work? Afterall, the main reason that poverty areas are the way they are is due to a lack of money. Even if more jobs open up and create work for the "struggling citizens" who will shop there? The reason Wal Mart has been so successful is because for the most part they are all in areas where there is money to be spent. Due to the large size of Wal Mart stores crime may also be a problem (such as stealing and robbery). Its a great idea but I am not sure that Wal Mart would benefit from this action (but then again small business owners would probably like to see that happen).
A new opening Walmart store may not be good news for many retailers in that area. Walmart, as the biggest wholeseller in the world, it supplies goods at a cheaper price than any retailers can offer; therefore, it has more competitiveness in the market.
But on the other hand, it is not easy for it to open in a foreign country, for example, China. China become one of the biggest markets in the world recent years, and Walmart want to share the big "pie". However, Chinese government wants to protect its national industry, so it did not allow Walmart in China, except few provinces.
Walmart is probably only one of a few companies that have the ability to drastically influence an economy in a small area due to its ability to offer customers low prices and quick shopping with a wide variety of products. In the short run, this idea will be very costly to walmart because it needs to build its building from the ground up, but also the land that is contaminated. However in the long run, this idea could save several areas that need to be rebuilt; thus paying off in the long run for walmart through revenues and creating a good name for itself.
Walmart can afford to build new stores even in contaminated areas. At first it might seems like they are spending tons of money, but it will all pay off in the end. With more jobs available maybe the crime rate will decrease. Walmart might also improve the towns by updating old buildings or building new building in contaminated areas. I think this is a very smart idea for Walmart.
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