Has Wal-Mart Buried Mom and Pop?

Many believe the mega discount store Wal-Mart is a plague set upon small “mom-and-pop” businesses. The instant Wal-Mart moves into town, all small businesses are destroyed in its path, leaving downtowns barren and empty.

This popular misconception has garnered significant media publicity and widespread public acceptance. President Clinton’s former secretary of labor, Robert B. Reich, wrote in a 2005 New York Times op-ed that Wal-Mart turns “main streets
into ghost towns by sucking business away from small retailers.” One of the largest anti–Wal-Mart organizations, Wal-Mart Watch, released a report in 2005 claiming that a Wal-Mart expansion in Iowa was solely responsible for the extensive closings of mom-and-pop stores, including 555 grocery stores, 298 hardware stores, 293 building suppliers, 161 variety shops,158 women’s stores, and 116 pharmacies.

Are those claims true? In this article, we use rigorous econometric estimation techniques to examine the rate of self-employment and the number of small-employer establishments in communities where Wal-Mart has entered the market. We find
that Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States. When all is said and done, there are just as many small businesses that are just as profitable despite the presence of Wal-Mart.