NewsNews Features

Big Box Boon or Bust?

Stacy Mitchell is the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses and a senior researcher with the New Rules Project of the Institute for Local Self-Reliance, which seeks to support communities through legislative and regulatory initiatives that prioritize “humanly scaled politics and economics.” Janet Geddis spoke with Mitchell for Flagpole about Selig Enterprises’ proposed downtown Athens development, focusing primarily on the developer’s plan to include a 90,000-square-foot Walmart, and what initial and ongoing impacts the retailer’s presence could have on Athens’ valuable downtown area and economy at large.

Mitchell is no stranger to situations like the one Athens is in right now. She has worked with dozens of communities to educate citizens about the true effects the big-box business model has on small towns and cities alike, and she has helped many places prevent retailers like Walmart from moving in.

Walmart has long been a fixture on the outskirts of towns and near malls and other large shopping centers, but seeing them in urban centers is a relatively new phenomenon. Asked if she’d seen Walmart try to build in or adjacent to a downtown grid, Mitchell brought up Rutland, VT, and what happened when Walmart moved in across the street from that city’s downtown.

Stacy Mitchell: [Rutland is] one of the larger cities in Vermont. It’s historically working-class and had a pretty empty downtown. Walmart opened in an old train depot in a not terribly huge store… they had to fit it to this old building because Vermont wouldn’t let them build on vacant land. The train depot is right next to downtown. Basically, you come out the front door of it, walk across a small parking lot and cross the street, and you’re right on one of the main streets of the downtown grid. The idea was that Walmart would generate all this spillover traffic: that people who came from outside the immediate area to shop at Walmart would then walk across the street and shop in some of the downtown businesses.

There was an analysis done, and they actually found that that was not the case at all. Hardly anyone who was shopping at Walmart spent money anywhere else in the community. That kind of speaks to [Walmart’s] “one-stop shopping.â€

[Mitchell said this study was important to keep in mind, since she assumed there were people in Athens who hoped Walmart’s inclusion in the Selig development might be beneficial to downtown.]

Janet Geddis: Yes, that’s the argument. People who are encouraged about this development are saying that this will bring more energy and vitality to downtown, but I’m doubtful of that. [Rutland is] a sad example of how it might not work out… Apart from what they did in Rutland, do you know of any other attempts that Walmart or any other big-box stores have made to develop directly adjacent to a downtown?

SM: Walmart is now making a big push to get into urban areas: Chicago, New York, L.A. In those situations they’re, in some cases, having to deviate from their standard model and build a somewhat small store or something they can fit into the available property in a more densely developed area. The bigger picture is that they have so saturated the suburbs and rural areas that they are desperate to find new ways to grow. And so, they’re now… taking sites that they don’t consider ideal but are a necessity if they’re going to find new places to put their stores. They reached a complete point where they’re so dominant in suburban and rural areas that they’re having to look at these new spots.

JG: A lot of people thought, initially, when it became known that Walmart was interested in moving to the downtown Athens area, that perhaps it would be a small store, maybe one of their “markets.” But this is proposed to be 90,000 square feet, which is quite substantial. Especially as there’s nothing touching that size in the downtown area at all.

SM: Yeah, that’s like two football fields.

JG: Oh, my gosh!

SM: Yeah, a football field is about 45,000 square feet. That helps give people a visual reference. I think that’s helpful sometimes.

JG: Oh, my god, that’s alarming… One of the arguments of people who are either [in favor of] this development, or at least not staunchly against it, is that this part of Athens is one of those so-called food deserts. For years, people have said there needs to be a walkable grocery, or an easily accessible grocery store there, so people seem to think we need this [Walmart]. And that seems to be the one thing that, for people who ordinarily would be against it, convinces them that this is an acceptable plan. Some are saying, “Well, it’s going to be okay, because at least people who can’t afford [or can’t travel to] other grocery stores can afford Walmart food.†Have you heard that argument end up winning people over before?

SM: Yeah. Walmart tried to get into big cities a few years ago. Back in 2004–2005, they made their initial push to try to build in New York City and Chicago. And they were rebuffed by the business owners, elected officials, community organizations… Huge coalitions of people formed and said, “No, this is absolutely economically destructive and not the appropriate kind of development for our communities.â€

Walmart has now circled back for round two, trying to get into these cities, and has come up with a more effective strategy. The strategy is “We’re going to take this significant and very real concern that exists in cities about so-called food deserts, places where supermarkets are scarce and people who aren’t able to drive somewhere else may be left with nothing but 7-11 or Burger King for meals. Walmart has taken the whole issue of food deserts and used it as, as Stephen Colbert called it, “the Trojan cantaloupe†to get into cities. So, they partner with some of these activists working on the food desert issue, and they’ve gotten very smart about how they talk about it. [If they were truly concerned about this issue,] Walmart would be talking about maybe a 40,000-square-foot neighborhood market store, a grocery store, but what they’re actually talking about is a “supercenter,” which combines just about any kind of product you can imagine under one roof, from books to pharmacy to groceries to hardware. The impact of that on existing businesses will be significant.

A couple of other points on the food issue: Walmart’s prices for groceries are about 7.5 percent lower than competing grocery retailers’, but what the research has found is that that price gap diminishes as Walmart gains market share. So, as Walmart earns greater market share, there isn’t such a difference between it and local grocers.

And another thing—and I think this is sort of key on the whole food desert and low-income families’ access to healthy food issues—is that Walmart beats its competitors on processed foods. It’s all that sort of stuff in boxes and bags in the middle of the aisles that are cheaper. On produce and some kinds of dairy products, like low-fat milk, it’s actually more expensive than its competitors. So [in terms of] the food desert problem, what they show is that having access to a food market can be somewhat helpful, but the real issue is poverty and the fact that processed food or fast food is so much more affordable than real food. And Walmart doesn’t help solve that problem; it actually makes it worse.

JG: I don’t know why I’m surprised.

SM; Yeah, there’s also a direct link between Walmart’s arrival in a community—and this is from national studies done by economists—and poverty rates. Poverty rates increase when Walmart opens a store, and obesity actually goes up.

JG: I’ve read a lot on this—including your work—but it’s been awhile, so I’m finding myself shocked all over again at the difference between companies’ claims and the reality they inflict.

I’m not at all interested in getting in yelling matches with people, but I am so compelled by all the things I’ve learned and the things you’ve written about over the years that I just want people to be educated about it. And if they then decide they still want a Walmart, at least they know the reality of it, you know? Do you have any tips from having worked on this for so long? How can we best approach people who seem pretty much closed-off to the conversation, who just say, “You just don’t want this because you hate Walmart,†without really exploring the reasons why, and dismiss us?

SM: Well, to me, this isn’t about a particular company; it’s not about Walmart per se, but about a business model. And I do feel the same way about Target and Home Depot and Lowe’s: there are a number of these large retailers who follow a very similar business model, which involves opening stores that are so outsized for a community that they invariably reduce the amount of actual competition and free enterprise going on in the community.

I actually did a little map here of Portland, Maine, looking back on where all the neighborhood hardware stores used to be. And now there’s one of those hardware stores left, and then there’s a huge Lowe’s. So, instead of having a dozen competing hardware stores, we basically just have one big box. And that’s the kind of model that undermines small business, but, from a consumer standpoint, it undermines actual competition. What happens with these retailers—if you track the economic model—is that they come into a community and actually reduce the number of retail jobs in a community. So, for every one job that Walmart creates, there are 1.4 jobs that area lost in existing businesses, on average. And that’s from research from an economist at the University of California who looked at over 3,000 Walmart stores across the country.

And the reason is, you know, that the amount of sales in a community doesn’t go up. People don’t have more money to spend just because a new store opens. And so, dollars that are going into the cash registers at Walmart are invariably dollars that are not going into existing cash registers elsewhere. Those businesses downsize, maybe some of them close, but if you add up all the laid-off people, it ends up being more than the number of jobs created by Walmart or Home Depot or any of these companies, because they use fewer workers to accomplish the same amount of sales. And you know this if you’ve ever happened to shop in these places: it’s hard to find someone to help you. They’re kind of chronically understaffed.

And then, the other economic effect that happens is that the enlarged retailers, they’re kind of like a colonizing force in the community. When I was writing [Big-Box Swindle], I was looking at this economic model. And what you find is that only about 15 cents out of every dollar that goes into Walmart stays in the local economy, most of it to pay the wages of the people who work there. The other 85 cents leaves the community entirely, heads back to Bentonville, Arkansas or to Walmart’s suppliers in China.

That’s not the case with a local business. The local hardware store, local bookstore, local grocer, they tend to buy lots of goods and services locally. They get their printing done locally, they bank at the local bank, they advertise in the local newspaper. They need a website, they hire a local web developer, and so forth and so on. And the results—and again, there are all these studies that show this—show that somewhere between 35 and 50 cents of every dollar spent at a local business stays in the local economy and is respent again, and thus supports a lot more jobs and business opportunities locally.

Again, it’s about a model: it’s not about Walmart, per se. They happen to be the biggest company using this business model, but there are others. And, I think, from a strategy perspective, focusing on the impacts of mega-retailers is key in proposing solutions that are not specific to Walmart. This may be placing a size cap, for example, on the size of retail stores that can go into this area, or maybe citywide. A lot of places have done that. And what it does is says, “Okay, Walmart, you can come here, and Target, you can come here, but it has to be at a scale that is not going to have such devastating effects on the rest of the economy.” It’s at a scale that’s more appropriate to the size of this community, and a scale that supports competition so we have a lot of businesses in the community instead of one big box.

JG: I think that might be on the table—or at least they’re considering putting that on the table, having a square footage cap. I’ve heard there might be some question as to [whether] it’s too late for this particular development [to be affected by such a size cap law].

SM: Yeah. You could get some advice from a land-use attorney. The question is whether [the developer has] reached the threshold of being vested—and, if there was a moratorium put in place, probably not. But, it depends on Georgia law, and the one thing I will tell you is oftentimes [government officials] will, especially if they’re somewhat sympathetic to the developer, mis-portray where the line is. If you can find a good independent attorney—if you’re not just listening to what the city tells you the law says—that can be really helpful to say “Here’s the case law in Georgia, and the case law is that these guys are not, in fact, vested, and you can do this.†Having worked with a lot of communities, I’ve seen it a lot where the city is of saying, “Oh, no, you can’t do that,†or “Oh, no, it’s too late,†when in fact that is not the case.

JG: Already, we were told a couple times that it’s too late for “x-y-z” to happen, and then you find out that’s not actually true.

SM: Really, attorneys are not cheap, but it’s one of the best things to spend some money on if you can do it. It often makes the difference between success and failure in these cases.

JG: That’s a great tip. I’m sure there are plenty of very concerned people; if we all pitched in, we could make that happen.

SM: I couldn’t say enough about hiring an attorney.