OM in the News: When Wal-Mart Closes Shop
The arrival of a Wal-Mart Supercenter in small towns throughout the U.S. often drove out smaller stores that couldn’t compete with its selection and pricing, reports The Wall Street Journal (Jan.27, 2016). And it was no different when the giant chain opened in Winnsboro, S.C. in 1998. It was the town’s biggest employer and 2/3 of the town’s sales tax came from Wal-Mart purchases, which allowed residents to avoid paying property tax.
The Winnsboro location is one of 154 U.S. outlets Wal-Mart shut this week, the first time it has closed more than a handful of domestic stores at once. It is also one of 12 Supercenters, the roughly 180,000 square-foot discount outlets that fueled Wal-Mart’s growth for decades, being closed. But when Wal-Mart opened the store in that town, it fell in line with the company’s longtime real estate strategy of opening in rural, often overlooked areas outside of city centers. Winnsboro sits about 30 miles north of Columbia, S.C., the largest city in the state.
“We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city—pretty far out—and wait for the growth to come to us. That strategy worked practically everywhere,” wrote Wal-Mart founder Sam Walton in his 1992 autobiography. But population growth flowed east and west of Columbia, not north to Winnsboro. Locals say they hope Wal-Mart’s exit will leave room for smaller businesses to thrive again. Town officials are already soliciting grocery store companies and encouraging the few remaining downtown businesses to stock a wider variety of products.
Classroom discussion questions:
- Evaluate Wal-Mart’s location strategy under Sam Walton.
- What were the advantages and disadvantages of a Wal-Mart entering a small town?