Wal Mart seeks to expand and crush the last bit of competition in retail

Wal Mart, otherwise known as 'retail cancer' has metastasized by over a thousand percent in the last decade, and keeps growing. It is now publically announcing its intention to destroy what remains of retail in this country through a new expansion campaign called "Project Impact." By creating a more efficient layout and targetting pharmacy and crafts, Wal Mart believes it will take out more businesses and continuing its massive expansion. What to make of a company which is already the largest retailer in the US seeking to expand further?

First, a firm like Wal Mart uses economies of scale to knock out competitors since they use their larger size to cover fixed costs over more and more stores. By doing so, they can expand and sell at a loss to take out competitors by selling at a loss at newly opened stores then making up the cost in other profitable stores elsewhere. The net benefit in terms of lower prices soon become a burden as the loss of jobs caused by smaller competitors closing drains on the local tax base. According to Iowa State University economic research, for each gain in sales from a Wal Mart there is a corresponding loss in sales from competitors. Now, that does not seem so bad, right? People just spend all of their money at one store instead of ten, right?

In theory that would be correct, but in practice no such thing will happen. Let's suppose there are ten local competitors employing 10 people each prior to the opening of the big box store. Those 100 workers all pay taxes to the local area, purchase goods from the other stores, etc. The local box store opens and employs 75 people because they consolidate their staff to be able to cover multiple areas so this one massive store is 25% more efficient than the ten small stores combined (in terms of labor efficiency). Suddenly the same area has 25 people without work and 9 fewer employers. Since there is a correpsonding loss of sales in surrounding areas due to the big box stores, they find it harder to relocate to work, and suddenly are drawing on the welfare state. These 25 workers went from paying taxes to draining tax revenue, so the city becomes worse off on a whole. However, you can save 25 cents on a toaster, so it all works out, right?