The Real Price of One-Stop Shopping

Written in my junior year — a business ethics assignment on whether big box retailers produce net positive or net negative value for stakeholders. Spoiler: I was not kind to Walmart. The obesity statistic alone should give anyone pause. The Kodak camera example, meanwhile, is doing its best.

Community Killers: 

The Negative Impact of Big Box Retailers on Stakeholders

A big box store refers to a large establishment, usually a chain, that retails multiple products on its shelves, at various prices, in order to reduce the need for multiple smaller businesses. Examples of this are Costco and Walmart, both well-known for their variety of products. The question that needs to be answered, then, is whether or not big-box stores have a net positive or net negative impact on stakeholders. To simplify this decision, stakeholders will be limited to customers, suppliers, and the community as a whole. Since Costco and Walmart are well-known, they will both be used as examples in order to determine the net impact; Costco is a bulk-retailer, Walmart is known for having a variety of products on short demand, and both market themselves as having lower prices than regular stores. 

While it seems logical to utilize one store for a variety of shopping needs, reliance on these “big boxes” net negatively affects communities. There are definitely arguments for both sides, but the idea that big box stores effect net positivity on stakeholders is a falsehood. In order to prove this, both sides of the argument will be weighed against the benefits presented to customers, suppliers, and the community. 

On one hand, big-box stores provide key competitive advantages for numerous businesses. By allowing stakeholders to tailor their shopping experience, it allows various companies to not only avoid rental space overheads, but directly compete in-store (Schwalm et.al). Along with this, box stores allow for a larger consumer base to easily access products in a wide range of offerings -- those who shop at a large retailer often have “different needs” from someone who shops at a “speciality retainer” (Schwalm et. al). This ease of access is a key factor in the success of big box chains like Costco and Walmart. Costco, for example, offers bulk products ranging from perishable foods to athletic wear. By allowing customers to quickly purchase everything they need from one set location, it streamlines the entire experience, thereby creating net benefit for customers and retailers alike. Another key benefit to big-box stores is that they allow another stakeholder, the suppliers, to have in-store salespeople. For example, at Walmart, managers have a lot of control over displays and sales tactics, thereby allowing individual retailers to mass-market their products easily (Schwalm et.al). One example provided by Schwalm and Harding is when, prior to college graduation, a Kodak representative was allowed to move their single-use cameras to the front of the store by the “greeter,” thereby leading to a complete sale on the product (Schwalm et al). This is prime evidence that big-box stores allow suppliers to easily sell their products without having to take more over-head heavy routes such as having their own stores. By the information provided, it seems quite clear that there is a net benefit to big-box stores. They prioritize the community and customers by making it easy to shop for all their necessities in one location, and also enable them to see a wide variety of products, thereby giving them more purchasing power. Along with this, suppliers are able to market their products in-store (and directly compete with other retailers), as well as avoid pointless costs such as physical storefronts (Schwalm et al). These reasons provide a clear incentive for the use of big-box stores. And yet, there are clear drawbacks to these facilities that must be addressed -- points of contention that tip the scales in favor of net negative. 

In terms of stakeholder value, big-box stores cause severe problems for both customers and the community. While suppliers might find the entire situation beneficial, business value should not emphasize retailers over the consumers. According to David Merriman and others, when Walmart opens stores in large cities, it neither improves its own market impact nor creates significant value to the working community (Merriman et al). In fact, when one Walmart opened in Chicago, it resulted in an estimated loss of “300 full-time equivalent jobs in nearby neighborhoods” (Merriman et al). Along with this comes the direct impact to consumers. The ability to purchase a variety of goods is certainly enticing, but it comes with a direct negative impact to a consumer's health. As per an article in the Journal of Urban Economics, research done on the lowering of prices due to advances in retail technology implies that the “proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s” (Courtemanche et al). This implication should be a clear red flag for not only consumers but the entire community of stakeholders, since health and safety should be prioritized across the board. Another clear tipping point towards a net negative status is the impact that big-box stores have on small businesses. Although some suppliers might find it beneficial to utilize the easy retail and marketing strategy provided by Costcos and Walmarts, others must close down shop entirely. Take, for example, the recent pandemic. As people remained home, large stores were able to provide consolidated goods and services through their advanced supply chain and other capabilities, but small businesses were forced to shut down (Miranda). While there is no “comprehensive data” on the number of small businesses that have closed for good, there is clear evidence that big-box retailers thrived from the inability and refusal of people to venture into a variety of stores to shop for their different needs (Miranda). At the end of the day, large businesses should consider their smaller competitors as a part of their stakeholder community. Since they aren’t large enough players in the global marketplace, effort should be made to ensure that there is space for local businesses to thrive as well, rather than simply expanding, depriving people of jobs while also barely impacting their own sales. The negative impacts of big-box stores like Walmart far outweigh the small positive impacts they have on suppliers and customers -- after all, if communities are suffering, so will all the other stakeholders. 

While they look enticing at first glance, there are several drawbacks to having a chain of larger storefronts as compared to smaller businesses. Essentially, larger chain stores remove value from smaller businesses, straining local economies and making communities dependent on supplies that rely on large supply chains. Although it is easy to say that there is a grey area, when looking at the net effects, it is clear that big box stores are inherently negative on stakeholders, and thereby create more problems than solutions -- which will harm the global community in the long run. It is not possible to stop big-box stores from existing and expanding; in fact, they can prove useful for short-term needs. However, it is imperative that stakeholders understand the negative impacts that come with these “supercenters,” and prioritize not only the community, but also their own health and economic needs. Big Box stores must be compelled to take actions that benefit all stakeholders, including small local businesses, which entails the creation of an intrinsic emphasis on positive externalities rather than immediate financial benefit. At the end of the day, balance must be found within the business community, allowing stakeholders to thrive -- and fulfilling the main purpose of a corporation in our global marketplace. 

Works Cited

Schwalm, Eric, and David Harding. “Winning with the Big-Box Retailers.” Harvard Business Review, 1 Aug. 2014, https://hbr.org/2000/09/winning-with-the-big-box-retailers. 

Merriman, David, et al. “The Impact of an Urban Walmart Store on Area Businesses.” Economic Development Quarterly, vol. 26, no. 4, 2012, pp. 321–333., https://doi.org/10.1177/0891242412457985. 

Courtemanche, Charles, and Art Carden. “Supersizing Supercenters? the Impact of Walmart Supercenters on Body Mass Index and Obesity.” Journal of Urban Economics, vol. 69, no. 2, 2011, pp. 165–181., https://doi.org/10.1016/j.jue.2010.09.005. 

Miranda, Leticia. “A Tale of Two Pandemics: Big-Box Stores Rake in Record Profits While Small Businesses Fold.” NBCNews.com, NBCUniversal News Group, 20 Aug. 2020, https://www.nbcnews.com/business/consumer/tale-two-pandemics-big-box-stores-rake-record-profits-while-n1237464.