Why Low Cost Focus Destroys Economies ~ Small Business Improves Standard of Living

Kaufman is one of those rare cities fortunate to still have a thriving downtown, small businesses and no Wal-Mart, Lowes, or Home Depot.

How long that happy circumstance will last and small businesses survive remains to be seen because it was through lucky circumstance and not local awareness that Wal-Mart has not yet built there.

They do have experience with what happens to small businesses when a multi-national corporation expands. Kaufman had three family owned pharmacies. Two have closed since CVS expanded. (To be fair, regional grocer Brookshires expanded too so CVS alone may not be responsible for the loss of two family pharmacies.

The way I understand it, Wal-Mart did look at building in Kaufman about 7 years ago, but the property they wanted was outside the “wet” part of town. (Texas has some very unusual zoning when it comes to alcohol.)

By the time a vote could be held to allow beer and wine sales on that property, Wal-Mart had decided to build in Terrell, TX instead. My source remembers that vote passing with 95-97% approval, so it is obvious that there was no awareness that Wal-Mart is ALWAYS bad for small businesses.

Since then the declining economy saved Kaufman as Wal-Mart first built in Segoville and Forney and has so far not gotten around to building in Kaufman. For Kaufman’s sake, I hope they never do – or sufficient numbers of people living there realize what they will lose if they allow a Wal-Mart to be built in their town.

My regular readers know I am a huge proponent of supporting small businesses. Raising their visibility, assisting them to implement the highest priority ways to use the Internet – most of them free – and encouraging their customers to understand the impact their actions have on their neighbor’s businesses are all reasons I created this new Kaufman, TX Business Section.

The more Kaufman locals know about what helps their communities and what hurts them, the more likely they are to make good decisions. Since I believe the reason Kaufman is still doing so well is the lack of a Wal-Mart, let’s start there. In the Executive Intelligence Review, Richard Freeman wrote about how Wal-Mart destroys communities:

“During the last 20 years, Wal-Mart has moved into communities and destroyed them, wiping out stores, slashing the tax base, and turning downtown areas into ghost-towns. This is accomplished through Wal-Mart’s policy of paying workers below subsistence wages, and importing goods that have been produced under slave-labor conditions overseas. Often, communities will even give Wal-Mart tax incentives, for the right to be destroyed.”

That post has many statistics based on actual sales tax receipts of how Wal-Mart impacts both the town where they build and neighboring towns. He is only one of many who write about how Wal-Mart pricing creates unemployment by pressuring Wal-Mart suppliers to move manufacturing overseas and employ child and virtual slave labor in sweatshop conditions.

Wal-Mart is also known for having their HR department teach their employees how to get government assistance as shown in a University of California at Berkeley Study on the burden Wal-Mart’s practices place on state government programs.

Wal-Mart burden transferred to California:

Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.

• The families of Wal-Mart employees in California utilize an estimated 40 percent more in taxpayer-funded health care than the average for families of all large retail employees. The families of Wal-Mart employees use an estimated 38 percent more in other (non-health care) public assistance programs (such as food stamps, Earned Income Tax Credit, subsidized school lunches, and subsidized housing) than the average for families of all large retail employees.
• If other large California retailers adopted Wal-Mart’s wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees.

Wal-Mart burden transferred to Taxpayers:

A Congressional study estimated that a typical Wal-Mart store employing 200 people costs the American taxpayer $420,750 a year – about $2,103 per employee. And in every state that releases the data, Wal-Mart tops the list of companies whose employees rely on state-funded health care. (Quote from Wal-Mart and the Earned Income Credit)

Companies that refuse to pay a wage their employees can live on and transfer responsibility to the taxpayers are responsible for our declining standard of living. Local businesses can not compete and pay their own employees fairly so we – as buyers – need to understand that by shopping at these multi-national stores we are equally guilty.

Price is not everything. Would you sell what you do for less than the cost of creating it? That is what they are doing and as quoted in Marxism 100: The Case of Wal-Mart :

“Wal-Mart is leading the so-called ‘race to the bottom.”

We CAN do something about this. Stop shopping at big box stores and shop at small family businesses. For example:

1. Instead of CVS, visit the friendly folks at Medication Station on 175 near the hospital
2. Buy your groceries at David’s and NOT Wal-Mart – Did you know you can see their specials or find a store online at their sites (Just click their name – they’re linked to their site.)
3. Kaufman has TWO hardware stores.  So I recommend shopping at Cates Hardware instead of Ace Hardware, Lowes, or Home Depot. Unlike the big stores, THEY carry the blades and bulbs for what they sell!
4. More coming soon

Every dollar you spend with your local small business is paid to their employees who live here and spent in other small businesses who then spend that dollar at another small business. Doing this brings a higher standard of living for each person who is touched. When you spend your money at a multi-national store it does NOT come back to support your community.

The profits are funneled off and their suppliers are primarily in other countries. The more local sources we use and the more we keep the money we spend local the better Kaufman will weather the sliding dollar. Do your part and buy local. Support your local small business by writing reviews for them online. See our Support Small Business for where and how to write those reviews.

New research: Economists Stephan Goetz and David Fleming, both affiliated with Pennsylvania State University and the Northeast Regional Center for Rural Development, conducted the study, “Does Local Firm Ownership Matter?“.

Their study finds local businesses create income growth:

The key to reversing the long-term trend of stagnating
incomes in the U.S. lies in nurturing small, locally
owned businesses and limiting further expansion
and market consolidation by large corporations.

Previous studies by Goetz have found that the number of Walmart stores in a county correlated with both higher poverty rates and reduced social capital.

This situation is not new. Even Fast Company explained (in 2003) where shopping at Wal-mart would lead us. So sad that we, as a society, did not listen and change our choices.

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Gail Gardner

Small Business Marketing Strategist at GrowMap

Gail Gardner is the founder of GrowMap.com. She is a Small Business Marketing Strategist who mentors small businesses, bloggers, and freelancers. After 23 years in the field with IBM and 5.5 years managing AdWords accounts, her focus shifted to small business marketing strategy. GrowMap.com is listed by Cision as a Top 100 Site for Marketers and has received three Small Business Influencer Awards from Small Business Trends. Named by D&B a Top 50 SMB Influencer on Twitter, you can follow Gail @GrowMap and on LinkedIn.

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