Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Wal-Mart Effect

What it is:

The Wal-Mart effect refers to the economic impact of a large discount retailer on a local market.

How it works (Example):

The Wal-Mart effect, named for the large discount retailer, is used to describe the crowding out and shuttering of smaller, local businesses trying to operate in the same market as a big box store. By virtue of its ability to leverage extremely high volumes of merchandise, large retailers are generally able to offer much lower prices. In other words, a large retailer can buy goods from suppliers at lower per-unit prices than smaller local stores due to its comparatively higher volume of inventory.

Why it Matters:

Despite the low-cost benefits to the individual consumer, the Wal-Mart effect is widely criticized for its social repercussions. As a large retailer crowds out local businesses, residents often find the effects detrimental to the community's culture and way of life. To this end, municipal governments often pass resolutions preventing the entry of large retailers in an effort to protect the local economy.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...