Please don't let it be Wal-Mart

With yesterday's announcement that Coles has been approached by a potential buyer my first reaction was "Please don't let it be Wal-Mart".

There is no doubt that prices for consumer goods drop when a Wal-Mart enters an area but is this price drop sufficient to cover the increase in poverty that accompanies the opening of a Wal-Mart?

A study published in the June issue of Social Science Quarterly examined the effect of Wal-Mart stores on poverty rates in the US. The study found that nationwide an estimated 20,000 families fell below the official poverty line as a result of the chain's expansion. During the last decade, dependence on the US food stamp program nationwide increased by 8% while in countries with Wal-Mart stores, the increase was almost twice as large at 15.3%.

"After controlling for other factors determining changes in the poverty rate over time, we find that both counties with more initial Wal-Mart stores and with more additions of stores between 1987 and 1998 experienced greater increases (or smaller decreases) in family poverty rates during the 1990s economic boom period," Stephan Goetz, a Professor of Agricultural and Regional Economics at The Pennsylvania State University states. Although Wal-Mart employs many people living in its communities the study claims that for most, the hours worked and the wages paid do not help these families transition out of poverty.

Another effect is that the closing of 'corner' stores following the appearance of a store leads to the closing of local businesses that previously supplied those stores including: wholesalers, transporters, logistics providers, accountants, lawyers and others. The authors state that "by displacing the local class of entrepreneurs, the Wal-Mart chain also destroys local leadership capacity".

The higher poverty rate that is attributable to the presence of a Wal-Mart store means that more residents of the community become eligible for public assistance or welfare programs. Because these programs are funded by taxpayers, the payments basically represent a direct transfer to the corporation's bottom line. In effect, taxpayers subsidise the operation of the chain, and these subsidies can offset any savings consumers may realise by buying goods at a lower cost.

Currently, the food and beverage sector is being driven to modify its operations to meet the demands of Coles and Woolworths. The costs for these modifications are borne by the suppliers but the benefits are largely realised by the retailers. As a very aggressive company, the introduction of Wal-Mart to the equation can only make it harder for suppliers to operate and prosper.

Hence my plea - please don't let it be Wal-Mart.