INSIGHTS
- Thriving local businesses help small towns have a sense of community identity, generate tax revenue, preserve natural resources, and foster innovation, among other benefits.
- The presence of large corporate retailers in small towns can lead to depressed wages, the closure of local businesses, and the loss of natural resources.
- A 44-year-old grocery store in North Carolina saw a 30% drop in sales when Walmart opened in the local community, and the store was eventually forced to close.
OVERVIEW
A local economy with thriving small businesses can provide many economic, social and environmental benefits for small towns, such as tax revenue, community
involvement, and local jobs. However, the local community may experience negative impacts from the presence of large retailers such as Walmart, including the closure of small businesses, a loss of local identity, and depressed local wages. You'll find a deep dive of my research below.
involvement, and local jobs. However, the local community may experience negative impacts from the presence of large retailers such as Walmart, including the closure of small businesses, a loss of local identity, and depressed local wages. You'll find a deep dive of my research below.
BENEFITS OF SMALL BUSINESSES
According to this report from Shopkeep, there are ten key benefits that a healthy local economy bring to small towns:
1. Community Identity - small businesses helps build the identity of the community. Store fronts that show local products gives a glimpse into the community's culture.
2. Community involvement - local entrepreneurs tend to be more involved in the community.
3. Community support- Small business owners often form relationships and community groups to support each other through mentoring, merchant's associations, and other networks.
4. Environmental Benefits - Pedestrian-friendly town centers are environmentally beneficial, reducing automobile use, traffic congestion, and urban sprawl.
5. Increasing the Tax Base - The tax dollars generated through shopping at local businesses stay within the local community, which helps to improve the community as a result.
6. Local Jobs - Small businesses create local jobs, hire local people, and prevent community residents from needing to commute far from home for work.
7. Entrepreneurship - The entrepreneurial spirit behind small businesses is a core building-block of healthy economies that lift people out of low-wage jobs and into the middle class.
8. Innovation and competition - The competitive nature of starting a business encourages small business owners to create a product or service that really serves a need in the community, and to do it well, which benefits the community overall. "Having multiple small businesses all striving to be unique, innovative, and better can result in a healthy marketplace and well-served consumers."
9. Less Infrastructure and Low Maintenance - Small local businesses tend to require fewer public services and less infrastructure than shopping malls and chain stores, as well as being less destructive to the local community in their development.
10. Diverse, Locally Made Products and Services - Tourists can be drawn to communities that have many unique local goods and an inviting shopping experience. In addition, locally-produced goods are attractive to residents who want to reduce their environmental impacts and support the development of their community.
ADVERSE EFFECTS OF LARGE RETAILERS
On the other hand, big box retailers are known to have negative effects on local communities, according to Good Jobs First and the Institute for Local Self-Reliance:
1. Big-box stores undermine small businesses and entrepreneurialism: small businesses struggle to compete with the economies of scale leveraged by large corporations, and often go out of business as a result.
2. Big-box stores undermine retail wages: These corporations tend to depress local wages, in contrast to small businesses, which are linked to income growth.
3. Loss of open spaces and natural resources: big-box retailers and shopping malls take up a lot of space and are often new developments.
4. Loss of uniqueness of place: the presence of big-box retailers undermines social capital, civic participation, and community well-being, compared with local businesses.
5. Losses caused by main street and mall abandonment: vacant or underutilized properties cost local communities in the form of lost tax revenue.
6. Hidden costs in the form of public assistance to low-wage workers: the low wages paid by these companies put a burden on state healthcare and other public assistance programs.
CASE: WALMART
To see the effects of large retailers on local economies, we can use Walmart as a case study.
According to Investopedia, "The Wal-Mart Effect" is a term used to refer to the economic impacts on a local community when a large corporation such as Walmart enters the community. For example, according to Investopedia, this effect can reduce local wages and put small retailers out of business. This has created resistance among local businesses to the introduction of these companies.
For example, Bloomberg News reported a 30% drop in sales for a 44-year-old grocery store in North Carolina when Walmart opened in the store's community. Walmart was consistently able to match or undercut the prices set by the store, and eventually the store was forced to close.
CASE: DARIEN, GEORGIA
This town in Georgia is a clear case study of how the presence of large retailers can negatively impact a community, particularly when those businesses eventually leave the community in which they have little to no investment. Until recently, Darien's main economic driver was an outlet mall. It featured big name stores such as Gap, Liz Claiborne and Nautica, and had an 80% occupancy rate ten years ago. However, the town of Darien is located just 50 miles from Savannah, and when a new outlet center opened there, the occupancy in Darien's outlet mall dropped to 25%. As a result, the county saw an 80% drop in tax revenue.
CASE: JERSEY CITY, NJ
Jersey City is an example of a town that has made efforts to support small, local businesses and ensure that they are given preference over large retailers. This efforts have been led by Mayor Steven Fulop, who took office in 2013. Since then, he has enacted policies to give small businesses expedited permits and financial assistance, as well as a zoning ordinance that prevents large corporations from dominating in the city. According to the zoning regulation, these corporations are not permitted to occupy more than 30% of the ground floor of commercial areas of buildings. This law went into effect in 2015, and more than 600 small businesses have opened in Jersey City since the Mayor took office in 2013.
CONCLUSION
To wrap up, research studies and expert insights illustrate the many economic and social benefits for small towns of having healthy local businesses, and the potential negative impacts when large retailers enter these communities.