Why Wal-Mart Can Be Good for Small Business

The Washington Post yesterday reported on how the conventional wisdom that Wal-Mart is the bane of small mom-and-pop businesses is being shattered in the wake of a new Wal-Mart opening in Landover Hills, Md., a close-in Washington suburb in Prince George's County, Md.

The article cites research showing that in urban areas Wal-Mart has not driven out small competing businesses, as it often has in rural and more distant suburban areas. It seems that Wal-Mart can drive up the amount of customer traffic in an area, which can actually benefit neighboring businesses, even if they are in direct competition with Wal-Mart.

From the Post:

Ted Decker of Chandler's Medical Supply said the opening of Wal-Mart has also been good for his business, which specializes in products such as diabetic socks and blood pressure units and competes with Wal-Mart in some categories. The store is a remnant of Chandler's Pharmacy, a neighborhood landmark that closed three years ago when the owner retired. Chandler's Medical Supply recently moved about a quarter mile from its original location and now sits next to a CVS. Wal-Mart is a five-minute drive away.

"People come in here looking for service," Decker said. "You go in [Wal-Mart], you don't ever know who you're going to see. And none of them can help you."

So if you know how to distinguish yourself and play up your business's strengths—such as service—in areas where Wal-Mart is weak, you can compete with even the biggest of the big boxes.

I should also note that while probably denser than most suburban environments, Prince George's County is not that different from the "sprawl" found throughout the country. So I don't think we're dealing with a unique case here.

Another interesting part of the article looks at how Wal-Mart is actually going out of its way and spending money to help local businesses in Prince George's:

In Prince George's, Wal-Mart has donated several thousand dollars to help four independent businesses near the store advertise in local newspapers. It also produced radio spots to air over the store's sound system. Wal-Mart selected the stores with help from local officials.

I think there are two ways to look at those ostensibly benevolent actions by Wal-Mart (and these points of view are not mutually exclusive):

1. Wal-Mart is participating in the kind of charitable capitalism that not only aids the community but helps the company's bottom line by refurbishing its image, showing that even the most notable target of critics of consumerism is not above giving back.

2. These activities are helping Wal-Mart only because of the looming threat of regulation. The company has been denied entrance to communities by local governments in many places around the country. Sponsoring these community activities might be Wal-Mart's way of placating what might otherwise be an unwelcoming local government.