Walmart supercentre: Are we asking the right questions?

Walmart wants to turn its big-box store on Winnipeg’s Regent Avenue into a supercentre. Councillor Russ Wyatt says the city should require improved access for motor vehicles and bicycles, as well as trees to soften a bleak parking lot vista. The city’s chief administrative officer, Phil Sheegl, says he’s concerned about the developmental fallout from a negative decision.

In the city’s interest, Mr. Sheegl should perhaps be more concerned about the fallout from a positive decision. A series of studies covering Walmart and similar big box developments, summarized here, suggest that neither Mr. Wyatt nor Mr. Sheegl are taking a sufficiently critical look at this development proposal.

According to these studies, big box stores:

  • Eliminate more jobs than they create.
  • Are far more expensive to service than neighbourhood stores, and can actually produce a net loss of tax revenues.
  • Offer less spin-off to the local economy, because they are less likely to purchase goods and services locally.
  • Are not likely to increase the level of competition and consumer choice in the local economy – in fact, are likely to reduce it, by driving smaller businesses out of the market and subsequently raising their own prices.

Here’s the kicker: Requiring modification of big-box development proposals, or even turning them down, does not necessarily produce the untoward “developmental fallouts” Mr. Sheegl fears. On the contrary, there is good reason to believe that turning down big-box development proposals may have more positive than negative impacts on the local economy. All of this does not necessarily prove that this particular Walmart supercentre development is the wrong way to go. The real cause for concern is that discussion of the proposal focuses on details like trees and access, while apparently ignoring the wider implications of this development for Winnipeg’s economy.

This will not be the first time that Winnipeg has accepted development proposals without thinking through their implications, and, realistically, it’s unlikely that this will change in the foreseeable future, but it’s never too late to start. A growing number of cities are getting good results from a more critical approach to big box development. A good start would be an economic impact study that takes a serious look at the implications, and the alternatives. For a checklist of the kinds of questions City Council and city officials should be asking, click here, and go to p. 83.

•••••••••••••••

For more on the economic impact of Walmart developments, look up:

David Neumark, Junfu Zhang and Stephen Ciccarella. (2008). The effects of Wal-Mart on local labor markets. Journal of Urban Economics, 63 (2), pages 405-430.

For a study of Walmart and American culture, with obvious implications for Canadian culture, get:

Bethany Moreton. (2010). To serve God and Wal-Mart: The making of Christian free enterprise. Cambridge: Harvard University Press.

2 responses to “Walmart supercentre: Are we asking the right questions?

  1. Lance Freeman

    One of the arguments you make against Walmart is puzzling. You say “Studies by independent economists show that big-box stores eliminate more retail jobs than they create.” This is because “The job losses are larger than the gains because
    Wal-Mart accomplishes the same volume of sales with fewer employees.” I have two points here:
    1. Accomplishing the same thing with fewer employees is the very definition of productivity growth. Productivity growth is what makes us all richer. Obviously, those who lose their jobs suffer pain. But making an argument against productivity growth seems problematic.

    2. If Walmart drives other businesses out due to lower prices doesn’t that leave consumers with more money to spend on other items? You suggest Walmarts MAY raise prices after the stores close, although you don’t provide much evidence on this.

    One big problem of with big box stores that you don’t mention is that they often decimate the street vitality associated with downtown shopping districts. To the extent people value pedestrian activity and a variety of shops, these might be seen as public goods or positive externalities from small independent stores.

  2. Thank you for your response, and for making some points well worth considering. Here are my reactions:

    It’s true that accomplishing the same thing with less employees constitutes an increase in productivity, but wealthy countries are not well-advised to focus on low-wage labour as a way of increasing productivity. That’s the very definition of the race to the bottom.

    My argument is not that people can’t save money by shopping at big box stores (and thereby have more left over for other purposes), but that such stores are very likely to reduce the range of choice for consumers, and certain to reduce competition by driving out smaller businesses. As for the suggestion that reduced competition may lead to subsequent price increases, I’d be interested to see some studies on this subject, but I’d be surprised if they showed that big box stores don’t exploit the competitive advantage that greater market dominance gives them.

    Your other comment gets to the heart of the matter: We’re paying a high price in infrastructure and services for development that undermines the vitality, variety and choice we find in traditional neighbourhoods.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s