All over the world, different studies have been conducted to analyze various effects of mega-retailers to small and medium retailers. Opening of mega-retailers bring economic advantages to the community such improved infrastructures and competitive advantages to smaller retailers. However, mega-retailers also impacts negatively on small local retailers who strive for survival due to change various variables of the market such as sales, price, and advertisement costs. Loss of jobs can also be directly linked to unfavorable conditions the small retailers are exposed to. This paper therefore analyzes some of these factors giving examples from Napa town in California.
Napa, California is a town filled of approximately 78,000 citizens. Napa is known for its wine, tourist outposts and small community. Being a small community, Napa is very family like society. The town began as an agricultural location; growing grapes and making enough wine. The town supplied the increasing demand of wine to the entire United States. Although Napa has hundreds of family owned businesses, the community is quickly being taken over by large corporations and chains.
In the mid-90s, Napa opened its first Wal-Mart, after Montgomery Wards had been washed out. Around the same time, Napa also opened its first large shopping center which included Target, Raleys, Office Depot and Home Depot. This was the first time since Montgomery Wards that Napa had experience any real corporations. The small town welcomed these large businesses with open arms, unlike its sister cities St. Helena and Calistoga, who still turn down any large businesses or chains.What effect does Wal-Mart have on the local community? According to Esther Warkov, Mega-retailers influence competitive strategies in the market which bring changes
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on how businesses activities are conducted. Such changes may lead to either reduction quantity of sales or price of products. Looking at just one line of product, hardware, gives a good indication. Since Wal-Mart opened, smaller Mom and Pop shops have taken a huge hit. Ace Hardware, Clarks Hardware, Zellers Hardware have all decreased in gross profit. Unlike Wal-Mart, these small shops only sell hardware products at a price they know can cover the bills. Wal-Mart is able to drop the prices on their hardware product because they receive more customers and are able to make their money back selling other products with less of a gross.
Another negative aspect of Wal-Mart coming to town has been the loss of advertising by the local paper. According to Tailor on an article titled Up against the Wal-Marts, introduction of Mega-retailers into a society affects the advertising industry negatively. This was evident when Wal-Mart first comes to town. They took out huge advertising supplements, but after they cornered the market and drove other stores out of business, they stopped doing advertisements. This move paralyzed the advertising industry since other medium businesses had quit the market.
Tailor also argued in his article that introduction of Mega-retailers into a society results to reduction of job opportunities. Mega-retailers get into the local market at a higher level as compared to medium and small retailers. These mega-retailers often have better resources and high capital that offer a competitive advantage. As a result a stiff competition may arise as businesses fight for a portion of the small market size. The stiff competition forces closure of small retailers out of the market leading to
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loss of jobs. On the other hand, the small retailers may also be forced lay off some employees to cover for the drop in sales (Warkov p3).