Is Big-Box Retail bad for the economy and free-market capitalism?


Over the past 25 years America has seen a transformation of our retail infrastructure go from mom-and-pop stores to big box stores.

Speaking for myself, I love the convenience of big box. And certainly the retail evolution that has led us to the big box model is understandable.

But that may not be the point, but instead, possibly, that the big box retail infrastructure represents:

  • a condensation of wealth that is prohibitive of a healthy economy where wealth is distributed to millions of moms and pops,
  • a destruction of a competitive labor pool, where good workers can bargain with their employers for better wages, or else go work for their employer’s competitor,
  • a destruction of a competitive goods and services environment where vendors and manufacturers are plentiful, each competing to access retailers supply chains.

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To illustrate these problems, imagine a small town with hardware stores. Back in the old days, there were probably 10 hardware stores, each with a different owner.

EXAMPLE 1 – imagine one of these hardware stores, such as Mayberry Hardware. The owner wants to sell wrenches. If there are thousands of different hardware stores around the country, then each owner will probably have slightly different wishes for what kind of wrenches they want to sell, and thus there will inevitably be dozens and dozens of wrench manufacturers around the country developing slight variations of the common wrench.

But if there is only one hardware company in the country (with thousands of stores), and that one hardware company chooses AmeriWrenches as its brand to sell at all of its stores, then the dozens and dozens of other wrench manufacturers will be unable to survive, and will go out of business. And all of its employees will have no choice but to go work at AmeriWrenches.


EXAMPLE 2 – imagine a worker, Little Joe, working at Bubba’s Hardware Store. Imagine that Little Joe is an amazing worker: he knows all the tools, all the construction projects around town, all the customers, all the vendors in the industry, all the tool manufacturers in the industry. But Bubba hasn’t given him a raise in 2 years. Little Joe requests a raise. Bubba refuses. But if there are lots of other hardware stores, Little Joe can go to one of them, such as Steve’s Hardware, and say, “Listen, Mr. Steve, I am great; if it weren’t for me, Bubba would go out of business; but he doesn’t pay me enough … hire me and I can bring my expertise to benefit your store.” In this scenario, we see that employees are in a natural, free market environment, using the principles of ‘competition’ to improve their own value.

However, if there is only one hardware store company in town that owns 10 individual stores around town, then Little Joe is not able to bargain on his own for better wages.

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It should be noted that these same problems occur when one national bank swallows up thousands of local banks, or when one large insurance company swallows up thousands of local insurance companies.




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8 responses

  1. In response to your post, I confess that I’ve always had an uneasy feeling about the Big Walmart stores, etc. They are convenient by far, but my lack of peace suggests weak foundations with selfish motives of over-powering the other stores and controlling the cash flow and economy.

    Patrick
    imperishabledesign.com

  2. Big-Box stores will always be bad for the economy. By design of a Free Market, the big-box store is trying to get the biggest box for the cheapest price. This means the big-box will have to be produced by the cheapest labor, the cheapest parts, cheapest taxes, cheapest regulations, and so on. This, unfortunately, is the working paradigm of the Free Market, which is the parent to big-box development.

    Mom and pops stores, or local stores, are going to give you the biggest bang for your dollar. They will be small enough to have good oversight on any particular product, they will have to have meaningful relationships with their employees, and, most importantly, the money you spend their is going to get circulated back into your local economy. Capitol circulation is only going to increase the value of wealth within a community that primarily works in mom and pop stores. Corporate america would like us to allude otherwise, but the fact is an economic sovereignty will have better management of resources and larger increases to the value of community.

    If you still question this plain logic, than look at some of the cities left in North America who have zoned out corporate development (to Archie’s comment, this is how it stops being self-defeating – by saying you cannot own a store here if you don’t live here). For instance, cities like Telluride and Martha’s Vineyard, most of Vermont and parts of Maine. These places demand an economy where local citizens build the entrepreneurial blueprint.

    eriewire
    eriewire.org

  3. There are two things to consider with this dilema: Major cost svaings and large scale employment VS Local ownership.
    If you are only interested in that major savings part, then big box stores are great. You can almost always find what you want at a price you can afford. Because these stores are so large they require significant staffing thus creating mass employment. The second part of the argument is ,in my opinion, the hardest to deal with. Currently our economy isn’t producing many jobs yet companies like Walmart still employ thousands. If you look at the traditional mom-pop type operations, they usually only employ a handfull of staff, and generally at a fairly low wage.
    Of course , if you like the personal feel and service of the smaller shops, the local ownership has to be appealing.
    Where I feel we really need to focus our attention is how to make the smaller more competitive with the larger.
    the big companies can usually buy their products in such a manner that pricing them low is not difficult. They can also pool together resources that are not generally available to the single operator(stock sales,etc). Unfortunately they tend to also recieve an additionally dis-proportionate break in their tax structure as well.
    I am completely convinced that if we really want to save our small businesses, such as the corner drug store or a local printer, we must change the tax structure to favor them. If we can counter the big boy’s buying advantage with a small business friendly tax structure, I think you will find those small companies can better compete for the consumer dollar.

    Just a thought, Glenn Smith Jr
    kingdomkeysbooks
    ewpublishing.com

  4. Glenn, I agree;

    I have considered the idea of assembling mom-and-pop shop networks, like co-ops;

    co-ops of loosely related small businesses would improve their overall buying power if they were to purchase their product together, thus giving the co-op an inventory buying power similar to large franchise-based companies;

    easy to say, but logistically unreasonable to hope for I think;

    thanks,
    Shannon

  5. Big box certainly changes the economic landscape. The picture is bigger than just the retail aspect, it goes all the way through the supply chain, the credit markets, and it affects the kinds of jobs available. Besides the economic implications there are also social and moral consequences. My point is not a condemnation. As you wrote, big box is an inevitable result of not just retail model evolution but the myriad factors shaping all finance and commerce. Although I don’t see economies where big box prevails shifting in a direction away from the driving factors, there are economies where big box is non-existent. Conventional macroeconomic measures like GDP would favor neither these or the economies of 25 years ago. There are, of course, people who don’t measure success in production – an extreme example of which might be the Amish or Menonites, but there are as many niches as there are idealogies. The rise of commerce in Babylon is necessary for the fulfillment of God’s word, but not everyone worships the beast.

    Ben Maulis

  6. They are convenient. But the have become an all-you-can-carry buffet for our times. Think about life 50 years ago: things were better made but more expensive. My mother could clean the house in about three hours. Now, thanks to big box stores and Chinese slave labor–and the ruling class’ vision of a One World Government–we have so many iterations of every item we own that there is no hope of ever getting it all dusted in one day, or even two or three days.

    And what about the landfills?

    I’d rather go back to the days when I had to watch my allowance carefully in order to afford new pencils and I could walk through my house without tripping over so darn much cheap stuff.

    beachglow

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