One of my favorite quotes (erroneously attributed to Mark Twain) is “There are three kinds of lies: lies, damned lies and statistics.”
Statistics are a business writer’s favorite device. I use them often to support my conclusions. Statistics help me make connections between what seem to be unrelated issues and draw parallels to the antiques trade.
It’s too easy to lie (deliberately or inadvertently) with statistics. It’s important to understand the studies that produced a set of statistics: Who did the study (and who paid for it); who the participants were; how the study was conducted; and what was being measured and compared. Statistics taken out of context (darned lies) can be used to prove almost anything, and if used often enough, can sway the opinions of a large portion of the population.
Take the Wal-Mart controversy, for example. Wal-Mart often finds itself on lists of “America’s Top 10 Most Hated Companies.” News of a Wal-Mart coming to town will cause most small business owners to tremble in their boots. But if you’re an antique dealer, one of the best things that can happen to your business is to have a Wal-Mart move into your zip code.
Everyone “knows” that Wal-Mart crushes small businesses and skews local economies. A 2011 New York Daily News article titled “Study proves it: Walmart super-stores kill off local small businesses”. The watchdog group Wal-Mart Watch claims that Wal-Mart has been responsible for the closing of countless Mom and Pop stores in Iowa alone, including 555 grocery stores, 297 hardware stores, 293 building suppliers, 161 variety shops, 158 women’s stores and 116 pharmacies. Former Clinton administration Secretary of Labor Robert Reich even hopped on the “anti-Wal-Mart” bandwagon, declaring in the New York Times that Wal-Mart turns “main streets into ghost towns by sucking business away from small retailers.”
Do the studies used as a basis for the above conclusions quote facts? Yes, they do. Do the studies show the whole picture? No, they don’t. The conclusions surrounding the “Wal-Mart destroys small business” issue are based on statistics that are, in my opinion, lies.
Here’s why: The data used for most studies was taken from county tax and corporate records, and analyzed only businesses that were in direct competition with Wal-Mart in a particular county [http ://bit.ly/1u7i9ts]. If I were an independent grocer, or owned a pharmacy or garden center/nursery, I’d certainly be concerned about a Wal-Mart moving into my neighborhood. I’d also be concerned if my new neighbor was a Home Depot, Walgreens or Kroger. No matter what your “line,” the big guys always trample the little guys. David beats Goliath only in the Bible. In commerce, Goliath wins every time.
What Wal-Mart detractors don’t account for is that the storefronts vacated by competition from Wally World eventually fill up with a more diverse selection of shops. Researchers Sobel and Dean of the University of West Virginia Department of Economics studied the long-term effect of a Wal-Mart Supercenter opening in
Morgantown, West Virginia [http ://cbsn.ws/1oezek9]. They found that “a shop that was once a women’s clothing store has now turned into a high-end restaurant. A former record and Compact Disc store has been converted into an ice cream parlor.
Other vacated stores have been filled by a coffee shop, an indoor rock climbing facility, an art gallery, a candle shop, a collectible comic book store, a dinner theatre, an antique mall and a new law firm.” When a Wal-Mart arrives, business communities become more diverse and vibrant.
When Main Street storefronts go vacant, landlords don’t collect rent. This creates a much more serious situation than landlords having to go “out of pocket” to make their mortgage payment. The value of a commercial property is based largely on its income, and when income plummets, value plummets. When value plummets, the bank holding the mortgage suffers because their asset is worth less than it was when the mortgage was issued.
This situation makes both bankers and landlords very nervous. So, one landlord on the block cuts the rent to attract a tenant, then another, then another. Soon, businesses that couldn’t afford a Main Street address can now afford it. Main Street eventually thrives because it is filled with Mom-and-Pop businesses that aren’t in competition with Wal-Mart.
No matter what your “line,” the big guys always trample the little guys. David beats Goliath only in the Bible. In commerce, Goliath wins every time.
In 2009, research appeared in the Clark University (Massachusetts) publication Economic Geography and was covered by CBS News in its report “The Myth of the Wal-Mart Effect”. The research focused on the effect Wal-Mart had on four types of retail stores: antiques, photo shops, home furnishings and beauty salons. Data was collected for Florida business from 1980 to 2004, inclusively. Here’s what the study found:
• Worst-hit by a Wal-Mart opening were stores in neighboring communities that were in direct competition with Wal-Mart. Customers would leave their communities to drive to Wal-Mart and take their dollars with them.
• Overall, sales increased for non-competing stores physically close to Wal-Mart. Wal-Marts draw traffic, and independent retailers benefit from that traffic.
• Opportunities for new boutique businesses improve greatly when a Wal-Mart opens.
Retail is a tough business, but it’s not Wal-Mart’s fault that it’s tough. Even Wal-Mart is getting kicked to the ground by online giants like Amazon. In his 1934 work The Theory of Economic Development, Joseph Schumpeter introduces the concept of “creative destruction” in which large new business entities like Wal-Mart and Amazon become disruptive forces in an economy. As the large companies reach their full power, they destroy less efficient entities (competing small business), thus making room for new products and new markets. In the end, says Schumpeter, the economy as a whole realizes net gains as new opportunities arise.
The take-way for antique dealers? If you’re going to open a new store, consider opening it in the same zip code as your local Wal-Mart. You’ll probably find a good lease because many entrepreneurs are afraid to open near a Wal-Mart. Also, be glad you don’t carry consumer goods that are in competition with Wal-Mart. And that’s no lie.
About our columnist: Wayne Jordan is a Virginia licensed auctioneer, certified personal property appraiser, and accredited business broker. He specializes in the valuation and liquidation of estate and business assets. His column Behind the Gavel appears in every issue of Antique Trader. Learn more at Wayne’s site ResaleRetailing.com, 276-730-5197 or firstname.lastname@example.org.