Wal-Mart’s Inability to Build Stores in Wealthy Counties

Let’s play fact or fiction:

- Over the past several years, Wal-Mart has been focusing on international growth as domestic growth becomes harder and harder to maintain. (Fact)

- Wal-Mart is having success during the economic downturn because shoppers - even ones with incomes over $65,000 per year - are sacrificing quality for savings. (Fact)

- Wal-Mart will retain and even expand the number of affluent shoppers once the economy recovers. (False)

We’ve been talking to you lately about Wal-Mart’s “urban problem” - or it’s inability to build stores in America’s biggest cities. Similarly, Wal-Mart is still struggling to reach America’s high-income shoppers.

Wal-Mart executives believe the retailer will keep higher income shoppers after the recession ends, but Wal-Mart simply doesn’t have enough stores based in some of America’s wealthier communities.  Does Wal-Mart really think that shoppers making more than $65,000 will continue to drive 10 or 20 extra miles to get to a Wal-Mart once the recession is over?

A stock broker from New Jersey tells RetailWire that he is almost embarrassed to shop at Wal-Mart now and will go elsewhere soon:

I really hate shopping in the store because the lines are always too long at the checkout but the prices are so low on groceries. In the past we would normally shop at Wegmans or King’s for just about everything but it’s hard to justify spending twice as much on ice cream at one of those stores when we can come here. Of course, when the market picks up again, we’re probably not going to be so concerned with saving $10 or $20 by shopping here when there are so many more choices at Wegmans.

According to the 2007 American Community Survey, the average income of the 10 poorest counties over 250,000 people was $34,671. The average income for the 10 wealthiest counties over 250,000 people was $95,251. In these same counties, Wal-Mart has built more stores in the poorest counties by a 57-38 margin. (And that’s taking into account several low-income areas in major cities where their growth has been severely limited.)

Wal-Mart once believed that it could build one supercenter per 50,000 people and they are close in some of these areas. The median number of residents per one Wal-Mart store in the poorest counties is 53,971. In the wealthiest counties it is 149,889. Therefore, Wal-Mart’s saturation rate is almost three times as high in the poorest counties.

When analyzing where Wal-Mart has built its stores one thing is clear: Wal-Mart is disproportionately represented in poorer counties. Wal-Mart Watch polling has consistently showed that Wal-Mart’s business and labor practices negatively affect their ability to enter some of America’s wealthier communities. The richest counties - as defined by median family incomes - still tend to fight Wal-Mart’s entry into their communities. If Wal-Mart cannot enter these areas, will they ever reach the more affluent shoppers they covet?

Below you will find two charts showing Wal-Mart store growth in America’s top 10 richest and poorest counties (250,000 minimum population.) Using the median number of people per store is a generally accurate reflection of Wal-Mart’s saturation rate in these areas. This is only a small sample, but it clearly shows Wal-Mart inability to grow in some of the richest and fastest growing areas of the country.

Source: Income, Earnings, and Poverty Data From the 2007 American Community Survey (August 2008)
http://www.census.gov/prod/2008pubs/acs-09.pdf

Posted by Brendan Gaffney on Friday, June 12, 2009

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