One (or maybe one and one-half) cheers for Walmart

I don’t particularly like Walmart. I find their stores crowded and unpleasant and I don’t shop there. They do not treat their employees well, a true failing given that a successful competitor, Costco, is able to do much better.

Urbanists have criticized Walmart for their negative effects on downtown areas in small and medium-sized cities. A Walmart opens, drawing customers away from the established shops. The result can be a shuttered main street.

Walmart attracts those customers, of course, with its low prices, significantly less than those that were being charged by the downtown merchants. It is able to do this because of its tremendous purchasing power, economies of scale, and highly efficient inventory and distribution systems.

Opponents have tried, sometimes successfully, to block the development of new Walmarts. They obviously believe that the preservation of the current merchants and the downtown is worth continuing to pay the higher prices that those merchants charge. That is, if those opponents would ever choose to shop at Walmart in any event.

The opponents may argue that Walmart’s prices are not that much lower than their competitors in any area, which may now be true. On the other hand, the price differences may have been greater when compared to those merchants who failed because of the competition from Walmart.

But whatever the magnitude of the price difference, being able to purchase the goods you buy at lower prices effectively raises your real income. And the effect will be greater for those with lower incomes, who spend a higher proportion of their income on goods sold at places like Walmart. (That is why a general sales tax is regressive.)

For a family with a very modest income, saving even a few percent on the things they buy might make it possible for the family to go out every few months to a movie or for a dinner at Olive Garden or wherever. It could make the difference between having a number of special gifts for each child at Christmas as opposed to providing one “real” gift and wrapping up packages of socks or underwear to have more presents under the tree.

For a very poor family, the savings could make it possible to buy a pair of new shoes for each child at the start of the school year. Or it might even mean having enough food for the last few days of the month.

I am not sure that keeping out Walmart and paying higher prices to maintain existing merchants in the downtown will look like such a good tradeoff to these families.

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