What does Wal-Mart owe the towns it leaves? 9 experts weigh in
What obligation—if any—does a business have to the communities it leaves? The answer is not as clear as you might think
When Wal-Mart announced last month that it planned to close 154 stores in the U.S. and shutter its Walmart Express concept, two questions naturally arose: Why? And what’s next?
Long known for its large network of stores in almost any location—urban, rural, suburban—many publications, including the New Yorker, Bloomberg, and the Washington Post, all published their own takes on the questions.
The majority of headlines focused on the stores Wal-Mart is closing in small, rural areas of the U.S. The Post reported that these 154 store closings “disproportionately affect lower-income, low-density areas,” with Walmart Express stores accounting for more than 90% of closures. Many pointed out that Wal-Mart’s absence will create a void of grocery options in some towns, after the company effectively forced other retailers out of business when its iconic “Always Low Prices” signs first went up.
Wal-Mart has said the company has spoken to community representatives from the towns it is leaving to both “expedite the process and help communities if possible,” spokesman Brian Nick wrote in an email to the Washington Post.
With that in mind, RetailWire, an online retail discussion forum, asked its BrainTrust panel of retail experts the following questions:
- What responsibility, if any, does a successful business such as Walmart have to communities when it decides to pull out?
- Do you see Walmart's decision to close stores, particularly in areas where it is shuttering its big boxes, as an opportunity or an impediment to growth for the communities the stores once served?
Here are 9 of the best comments from that discussion. Comments have been edited by Retail Dive for content and length.
1. New life for the stores
Zel Bianco, President, founder and CEO, Interactive Edge: While a Walmart closing in a community will be an immediate hardship, it does present huge opportunity for growth and could give new life to a community. Walmart could buy a lot of good will by ensuring that their former locations don't stand empty for years and Walmart or other companies looking for outreach opportunities could try to help foster small businesses in the area.
And here is a free idea for anyone with a background in architecture: develop a cost effective and environmentally friendly way to transition former big box locations into community centers with space for retail, dining, performances, health facilities, etc.
2. Stick to the Friedman Doctrine, but...
Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive: As far as responsibility to communities, ultimately I would agree with the Friedman Doctrine [that the only social responsibility of a business is to increase profits]. However, a compassionate gesture and a sign of corporate responsibility would be to work with locals in the places that are affected by the closings.
On the other side of the coin, if there's a vacuum, there's always an entrepreneur in the shadows waiting to fill the void.
3. What's the primary goal of a business?
Steve Montgomery, President, b2b Solutions, LLC: My first thought is would this be a topic if the stores that closed were named something other than Walmart? I suspect the answer is no. The reason it garners headlines is the perception of Walmart is that in smaller markets it wants to put other retailers out of business or it is a known consequence of its opening stores.
The customers in those markets freely elected to shop at the Walmart rather than the historic venues. The issue in Oriental was that there was not enough business to support both and as it turns out not enough to even support the Walmart location.
Social responsibility is a tough issue for any business. The first goal of a business has to be to survive and to do that it must be profitable. At the local level that means each store needs to contribute to the overall financial health of the company. If it does not, the parent company's obligation to its shareholders/owners requires it be closed. This does not make a happy ending to the story.
4. Look to Kmart
Ron Margulis, Managing Director, RAM Communications: There is a lesson in what has happened to the Kmarts across the country 10 years ago. Some are now supermarkets and club stores, while others have been sub-divided and are now fitness and health centers. Still others have been demolished and the land developed for high-density residential. Very likely the same will happen with the closed Walmart stores.
5. It’s time to take responsibility
Paula Rosenblum, Managing Partner, RSR Research: I think the Friedman Doctrine (had no idea it had an author, I just knew it was B-school 101) is hopelessly near-sighted, out-of-date and counter-productive to our society as a whole. I'm much more bullish on the notion of conscious capitalism, which states that a corporation also has a responsibility to its employees and the communities within which it operates. We cannot continue to deny the impact our corporations have on the environment and the people that live in it.
Walmart should have a responsibility to those communities, but likely it won't do much of anything. That's its recent history. My friend Walter Loeb thinks Sam Walton is rolling over in his grave over the actions his company now takes.
In the long run, I do think towns will benefit from Walmart's departure. Filling up those ugly big empty boxes may prove challenging, but it's always nice to see smaller footprint stores, and truthfully, is more in-line with Millennials' desires.
In the short run there will indeed be pain felt — from out of work employees to people spending a lot of money on gas to go get food.
One has to wonder, given that it's closing so many stores, why Walmart is still opening them in areas that are already OVER-served? As always, I point to their upcoming site in Midtown Miami, which is surrounded by a Target, a Publix and any number of other consumer choices. Ground has been broken, the city has lost all its battles and Walmart is coming. Will the new store suck some business away from its neighbors? Probably. Will it be enough to save Walmart's flagging fortunes? I doubt it.
6. It’s how the process works
Jonathan Marek, Senior Vice President, Applied Predictive: Stores open and stores close. The responsibility of the retailer is to operate them profitably and generate value for the shareholders. Of course that means having a great offering where consumers want to shop, but sometimes there aren't enough sales or the cost of business is too high. Sometimes, in the the case of the Oakland, CA, Walmart, the government is making the cost of business too high.
But as others have said, a Walmart closure presents a massive opportunity to others to develop stores in those areas that aren't as big and expensive to run. I'm sure someone out there could make a lot of money following the closures and putting in the right smaller concept. That's how the market works. Businesses die and others that are better suited grow in their place. It's when we try to stop that process that the economy dies.
7. ‘Don’t expect much’
Mark Heckman, Principal, Mark Heckman Consulting: As long as Walmart controls the leases on these closed stores you can bet that a competitor will not replace them in that location. Bring on the flea markets and fitness centers.
Walmart does have a decision to make in terms of how gracefully they leave a community or a location, particularly in their efforts to find jobs for those associates in those closed stores. In this regard, most retailers of size do their best to find opportunities for those employees. Beyond that, do not expect much.
8. Self-inflicted wounds?
Kevin Graff, President, Graff Retail: No offense to the consumers in communities who opted to spend a nickel less on an apple at Walmart and as a result put their local business out of business, but seriously, they kind of did this to themselves. Consumers vote with their wallets. Now, for the softer side of me, it would be socially responsible for Walmart to extend some added help to the employees displaced by their closing.
9. Change hurts
James Tenser, Principal, VSN Strategies: Change often hurts. In smaller communities where the local Walmart had become the largest employer and primary source of consumer goods, a store closure is likely to have devastating effects in the near term. Lost jobs, lower tax revenue, and an ugly, vacant blight surrounded by a parking lot.