Retail Chain Stores Add Economic and Social Value

I almost missed this commentary in the Washington Post (June 10, 2011) by Marc Levinson extolling the virtues of retail chain stores. This article, based on his forthcoming book The Great A&P and the Struggle for Small Business in America (due out in August), debunks myth after myth, but the most important one may be the idea that the mom and pop grocery store somehow provided more variety and value than the chains. Chains provided more variety and lower prices while paying their workers more on average! As Levinson writes:

“In a world without chains, giant manufacturers would have even more power than they do today. A small store has little bargaining leverage. If it wishes to sell Campbell’s soup, it must pay whatever price the Campbell Soup Company demands. If it chooses not to stock the product, the manufacturer will not shed a tear. A chain such as Wal-Mart, with hundreds or thousands of stores, can demand that suppliers bargain because the chain has the marketing muscle to promote a competing brand instead. Loss of the chain’s business could cost a supplier serious money.

“Most of all, a world without chain stores would be less efficient. Chains’ large orders allow for lower costs at every stage of a product’s life, from manufacturing to transport to warehousing to retail. Like it or not, a world of independent stores was a world of high operating costs, and American shoppers paid high prices for that inefficiency at the cash register. Perhaps that’s why Americans were only too glad to abandon Mom and Pop when, a quarter-century after Congress tried to hobble the chains, the discount revolution arrived with the opening of the first Kmart, Target and Wal-Mart stores in 1962.”

Another useful book on the benefits of big-box retailers is The Wal Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy by Richard Vedder and Wendell Cox.

There is an important role for small retailers to play in communities and the economy, but that role doesn’t necessarily pre-empt the value of chain stores and big-box retailers.