Friday, January 06, 2006

Wal-Mart vs. Local Retailers

Citing the results of a report by the Institute for Local Self-Reliance (ILSR), the Raw Story makes the case for spending your money with locally owned businesses.
According to a report by the Institute for Local Self-Reliance, $100 spent in locally owned businesses provides the town and surrounding area $44.60, while large retail chains only give back $14.10 to local communities, mainly in the form of wages and service. Therefore, local communities lose at least $30.50 for every $100 spent at Wal-Mart.
What’s the outcome of this dynamic?
For this holiday season, Wal-Mart's record-breaking sales mean staggering losses for Main Street, U.S.A.: $20.3 billion. Had that $66 billion been spent at locally owned businesses, it would have generated some $29.7 billion for local communities. However, thanks to Wal-Mart, that $66 billion translates to only $9.4 billion going into local economies.
The ILSR might be right about the $9.4 billion figure, but I think their extrapolation to arrive at the $20.3 billion figure is a bit fuzzy. Even supposing that about half the money spent with locally owned businesses goes back into the community, as the numbers suggest, I question the likelihood of locally owned businesses generating the $66 billion that Wal-Mart raked in. The ILSR’s implicit argument here is that dollars that don’t go to Wal-Mart will be spent at locally owned business. That’s a big assumption. Nonetheless, theses figure, even if slightly exaggerated, give us another reason to avoid the retail giants.