How Should You Build A Small Town?

Building a balanced local economy is a difficult and often futile task.  Remember those days when you tried to keep a baseball bat balanced upright on your fingertips.  Economies are harder.

In January Wal-Mart announced that it was closing all the stores behind its Wal-Mart Express label.  More than 100 of those stores were in small town America and small town America is learning the lesson of lower price and stability.

Wal-Mart is the villain according to the locals, but it is not that simple.

As in Godley Texas, when Wal-Mart appears, local businesses cease.  When Wal-Mart leaves there is no grocery store or pharmacy.  Inconvenient.  When you live in a village, you do so because you like the tight community.  A 20-minute drive to a grocery store is not part of your preferred ambiance.

To be fair, no thousand person community will be fully balanced.  There are just too few resources to make that be.  There are many communities, often larger, where one of a business type can get along, but two both go broke.  There are ratios of population to business outlets that matter.  Ones that are expensive to create usually need a larger customer base.  How many small towns have an NFL team?

Oriental, North Carolina has a problem.  They now have neither a grocery store nor a pharmacy.  According to Bloomberg Business Week, Oriental mayor, Barb Venturi said, “I was devastated when I found out. We had a pharmacy and a perfectly satisfactory grocery store.”  Wal-Mart came just two years ago.

There is a good deal of pain and, by assumption, a good deal of blame to pass around.  Who should get it?

  1. Wal-Mart for launching an ill-advised experiment in micro-communities.
  2. Local government for not having created sufficient regulatory authority to prevent their arrival.
  3. The citizens for a) wanting a Wal-Mart and b) shopping there instead of with their neighbours who ran the pre-Wal-Mart grocery store and pharmacy.

Of these, Wal-Mart deserves the least blame.  Businesses must experiment to discover their best options.  Not all the experiments work out.  That’s life.  They have a reasonable plan for the employees who have lost their jobs.

Local governments often forget to consider the character of their community when enacting legislation.  If you govern a small town populated with people who like the nature and the flavour of the community, why would you not create rules that protect that.  I wonder if they could have prevented a large manufacturer from setting up shop?

Lastly the citizens.  Consumers vote for what they want with dollars.  If you put the dollars in the Wal-Mart box, you automatically do not put them in the local business box.  When the local business box disappears, you become hostage to the policies and measurements that a very large, very remote business uses to govern itself.  None of those standards involve the local community idea of Oriental, South Carolina.

Local businesses rely on local customers.  Most operate with higher prices but smaller margins.  If you value their being in your town, shop there.

Price is just one part of the cost to you.  Availability is another part.  As we now see, saving five cents on an apple cost the town the local businesses and cost the consumers a twenty minute drive to the nearest store that can serve them.  Probably at the same price their local store charged.

Understand what price means. Do not mistake it for total cost. The 5-cent cheaper apple is a false saving.

Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

Contact: don@moneyfyi.com  

This entry was posted in Decision Making, Insight to Business, Our Societal Issues and tagged , , . Bookmark the permalink.

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