Does Wal-Mart Really Hurt Small Business?

It’s conventional wisdom that when it comes to small companies, Wal-Mart is bad news. The press is full of stories about how Wal-Mart comes to small towns and leaves a trail of failed Mom and Pop businesses in its wake. But is it true?

Turns out the answer is yes and no. According to a paper that will be published in an upcoming issue of the journal Economic Inquiry, Wal-Mart has had no real impact on the number or health of small businesses around the country. Russell Sobel, professor of economics at West Virginia University, of the paper says no matter how you slice it-number of small companies, employees working for small businesses or financial health of small operators-Wal-Mart doesn’t have a positive or negative impact on those overall stats.

But that doesn't mean some small companies don't suffer. Sobel says what tends to happen is that local small companies that are competing directly with Wal-Mart may go out of business when the giant comes to town. But other businesses, mostly likely those that don't go head to head with Wal-Mart, pop up in their place. Painful for those whose businesses go under, but not a hit to the overall small business economy.

How, or if, that equation changes now that gas is over $4 a gallon will be interesting to watch. Already some are predicting Wal-Mart and other big box retailers will suffer as consumers stick closer to home to shop. So does that mean we'll see small grocery stores and other upstart retailers reemerge in small towns where Wal-Mart had previously stomped them out?

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