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From the Ground Up

Before stringing him up, give Phil a chance on Wal-Mart

Could it possibly be that having a Wal-Mart in a community might actually be good for Main Street?

Well, perhaps — maybe — sometimes. It all depends.
Now before my downtown development friends send out the mob to lynch me allow me to paint a scenario where a downtown, especially a downtown in a rural community, might actually be the beneficiary of a new Wal-Mart. It would even help if the Wal-Mart is one of those big supercenters.

Please don’t hang up yet.
There are several things that must fall into place for this counter-intuitive idea to benefit everybody.

First, the Wal-Mart must be located in the city limits. That way the local government will receive 1% of the sales at the store. In Mississippi, 1¢ of the state sales tax is “diverted” to the local municipality in which the store is located. One percent of a million dollars is $10,000; 1% of $10 million is $100,000. The amount your local municipality receives depends on sales at the local store. Even if the Wal-Mart is not located inside the city limits, the city will probably benefit from increased visitors to the area. Some of those visitors may even go to the downtown area.

Second, the Wal-Mart store must increase the total sales in the city. In other words, it must pull in new shoppers to the community who would not have otherwise shopped there. A study entitled “The Economic Impact of Wal-Mart Supercenters on existing Businesses in Mississippi” by Dr. Albert Myles of Mississippi State University Extension Service reviewed 10 years of sales data and found that the first year of opening of a Wal-Mart Supercenter in a county of less than 100,000 residents would increase the total retail sales in that county by 3.3% in the first year after the Wal-Mart opened and by 10.4% in the fourth year. Another way to say this is that the Wal-Mart must increase the size of the economic pie. If it does not, then it is taking away sales from existing local businesses. If it does, it is either bringing more people into the community to shop or local residents are increasing their individual spending, both of which increase the economic pie.

Third, the local government must use the increased sales tax revenues to enhance the downtown. This can be done in a variety of ways — committing funds to specific downtown projects or funding downtown organizations, for example. In fact, my own survey of local downtown development organizations reveals that almost all of them receive funding from their local government. Local officials must sometimes be educated on the benefits of a vibrant downtown. This can be especially difficult if there are traffic jams out on the bypass and constituents demanding road improvements.

The irony in all this is that the Wal-Mart phenomenon has forced downtowns to reinvent themselves. In reality, this may be the best things for downtowns.

Some downtown merchants have failed to adapt to contemporary trends or learned to understand their customers. Some have even discovered that the old ways are what customers are still looking for. There is no standard approach. Each business and each community must discover what works best for each. What works best in Oxford may be totally inappropriate for Natchez and vice versa.

We shoppers no longer go downtown to shop for the commodities of life, i.e., things we buy and replace over and over again. Nor do we go downtown to buy items for which there is a lot of price competition.

Instead, we go to Wal-Marts or similar stores. We tend to go downtown for specialty items and for an experience, such as meeting friends at a local coffee shop, browsing an art gallery, shopping for antiques or perusing a locally-owned bookstore.

The preceding discussion has dealt only with sales tax collections. A Wal-Mart store also pays property taxes, which are divided between the city, the county and the local school system. A Wal-Mart store may often have the effect of increasing the value of real estate around it as outparcels such as fast-food restaurants develop.

I reread this column and reluctantly concluded that you are likely to label me as “for” Wal-Mart. Please don’t do that because to do so is part of the problem.

It is not as simple as being for or against Wal-Mart.
To label someone thusly is to oversimplify a complex issue. Economic growth, community development and so-called smart growth are much more complicated than “Are you for or against Wal-Mart?” To say so is to take a narrow view of the real issues.

Phil Hardwick’s column on Mississippi Business appears regularly in the Mississippi Business Journal. His e-mail address is phil@philhardwick.com.


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