by: Joel Makower
What would the world be like without Wal-Mart? It's not a simple answer.
For those who love the $312-billion-a-year behemoth retailer, the answer will likely touch on the 1.8 million jobs it provides as well as the company's low prices, which make life's necessities and luxuries more accessible to those with limited incomes (a large part of Wal-Mart's 176 million weekly customers).
For Wal-Mart haters, the answer will likely refer to the "externalities" of those low prices -- the environmental degradation caused by sourcing cheap goods, the public services (food stamps, welfare) required by low-paid employees unable to make ends meet, and the poor labor conditions under which many of its suppliers' products are made -- that aren't covered by the prices of goods sold in the stores.
Love it or hate it, a world without Wal-Mart would be a different place. But what would replace it?
That, at least, is the foundation of Michael Shuman's new book, The Small-Mart Revolution. "Small-Mart" refers to locally owned businesses that are, in aggregate, more reliable generators of good jobs, economic growth, tax dollars, community wealth, charitable contributions, social stability, and political participation, according to Shuman.
His very readable and entertaining book makes clear that this "revolution" is about "far more than fighting chain stores." In fact, he says, it is notable as much for what it stands for than what it is against. Shuman is for profit-making businesses, even big ones (under certain circumstances). He is for jobs and, presumably, some reasonable level of consumption. In fact, the only thing for which he is demonstrably against is "the vast web of laws and public policies that directly disadvantage small and local businesses" in favor of large, global ones. Oh, and the global financiers that facilitate this: It's the capital markets, stupid.
Shuman isn't the first to pitch the notion that local is beautiful. Across the U.S. and around the industrialized world, communities have been exploring alternatives to global mass-marketers for -- well, as long as there have been global mass-marketers. In the U.S., groups like BALLE, Global Exchange, the Institute for Local Self-Reliance, and Co-op America have been actively promoting the notion of "local living economies" for years. But Shuman (a co-founder of BALLE) may have coined the meme -- "Small-Mart" conjures up just the right imagery -- and articulated the vision better than anyone.
And he paints a compelling portrait of how small, local business networks can work and succeed. In Shuman's Small-Mart Nation, many of your neighbors run their own businesses, you spend more of your money on locally produced, high-quality goods and services, some of your savings sit in a local bank or credit union, and communities don't bend over backwards -- financially or otherwise -- to lure global companies to set up shop nearby. It's not that they don't want automobile factories, big-box stores, and other manifestations of globalization in the 'hood. It's just that these entities will have to compete on a level playing field when it comes to zoning, taxes, schools, policing, and other government services. If they succeed, they're welcome.
Sometimes, Small-Marts can be not-so-small. Shuman tells the story of the Hershey Chocolate Co. The $4.6 billion candy company is publicly traded, which normally makes local ownership impossible, but a local charity, the Hershey Trust, keeps ownership local by controlling 77% of all voting shares. The Trust "is effectively the heart that pumps monetary blood" throughout the region surrounding Hershey, Pennsylvannia, writes Shuman.
So, can Small-Mart replace Wal-Mart? Probably not for a while, if ever, concedes Shuman. "I believe that over time Small-Mart will reduce the size and the influence of Wal-Mart with a bunch of local alternatives," Shuman told me recently. "It will never get rid of it, and we may never want to get rid of it. At the end of the day there are some economies of scale that some global companies have that are superior to local companies."
Which, of course, is the key to Wal-Mart's success: Its laser-perfect attention to sourcing, pricing, and distribution, allowing it to leverage its size -- and clout -- as no company has ever done to keep prices dirt cheap. However, as Marc Gunther points out in his fine article in this week's issue of Fortune, those economies of scale, deployed effectively, could create positive impacts:
If each customer who visited Wal-Mart in a week bought one long-lasting compact fluorescent light bulb, the company estimates, that would reduce electric bills by $3 billion, conserve 50 billion tons of coal, and keep one billion incandescent light bulbs out of landfills over the life of the bulb.
Will that happen? In the brave new world of Wal-Mart, in which the company has recently pledged to green up its stores, its trucks, and some of its products, it could. And that could make Wal-Mart a force for good, or at least better, in the eyes of at least some of its critics.
Of course, thousands of small, local merchants could have a similar impact, should they decide to coordinate, cooperate, or simply get into the same marketing groove. And Small-Mart even offers a model. In our conversation, Shuman described how True Value and Ace, two U.S.-based hardware chains, are comprised of individual, locally owned hardware stores banded together into marketing and buying co-operatives. They allow local hardware stores to buy collectively and engage in the kind of global bargaining that only giants like Wal-Mart can do.
Says Shuman: "Sooner or later, we're going to do that with general merchandise. And when we do, the Wal-Mart hegemony is cracked. It's going to take some time, but that's what needs to happen."