4 PCSR 07-14-1994 - Laserfiche WebLink

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.,r EXHIBIT L EXECUTIVE SUMMARY • THE IMPACT OF WAL-MART STORES ON RETAIL TRADE AREAS IN IOWA* The Wal-Mart Company is one of the most remarkable success stones in modern day retailing. It has grown from its original store in Rogers, Arkansas in 1962 to over 1750 stores by early 1992. In the past decade, its sales grew from $1.2 billion in 1980 to $43.9 billion by 1992. In 1990, Wal-Mart narrowly passed K Mart and Sears to become the largest U.S. retailer, in terms of sales. In 1991 Wal-Mart had a 35 percent growth in sales and pulled ahead of K Mart by $10 billion. All this was accomplished by locating in small to mid-size towns, beginning in the South and Midwest and expanding to both coasts. In the last few years the company has also enlarged its location strategy to include some larger cities. Wal-Mart is rapidly expanding to the remaining contiguous 48 states at the rate of 160 to 170 new stores per year. Business people in Wal-Mart trade areas are very concerned about the impact of this rapid growth and how to deal with it. This study used sales tax data to document changes in trade area size in 30 Iowa towns between 5,000 and 30,000 population, over the last five years. The purpose of this study is to give business people and other community leaders a better understanding of the probable impacts of a Wal-Mart store in their area, based on the findings of the Iowa study. The results are • discussed below. In most towns where Wal-Mart located, sales and trade area size increased in the first few years after the store opening. Two simple rules of thumb were developed from the study: 1) Businesses that sell goods or services other than what Wal-Mart sells tend to experience higher sales because of the "spillover" effect of the additional traffic attracted to town by Wal-Mart. 2) Businesses that sell the same goods as Wal-Mart sells tend to experience some reduction in sales after Wal-Mart opens. CAUTION! These results apply to a state that has had static population, resulting in a fixed size retail "pie." In this situation, when a large well-known retail store enters a town, it captures a significant slice of the pie, thereby leaving less sales for the other businesses. In areas of growing population and in cities, the retail pie is typically expanding, thereby diluting these effects. Table 1 shows the cumulative real percentage change in retail sales for businesses in Iowa Wal-Mart towns compared to the same size towns without Wal-Mart stores. The shaded cells indicate business types showing sales gains in the years following the opening of a Wal-Mart store. The three year figures are probably the most meaningful since 15 towns had Wal-Mart stores in existence that long. After examining the table, the following conclusions can be made. • A study by Kenneth E. Stone. Professor of Economics, Iowa State University, 1992.