Wal-Mart claims to be saving U.S. families $260B this year. Does the evidence support this claim?

This week I visited my folks, who happen to live in Bentonville, Arkansas* -- better known as the home of Wal-Mart. The company's Home Office sign makes a bold claim: "So far this year, we've saved families $260,553,508,784." (It's actually more, since the displayed total steadily increases as you drive by, and I took this photo on Wednesday.)

Yes, that's $260 *billion*. Pretty bold statement, even for a company with such massive revenue (on Nov. 13, Wal-Mart announced quarterly net sales of $97.6B, with $61B coming from Wal-Mart U.S.). But they offer evidence to substantiate their claim: The mega-retailer has commissioned Global Insight to study its economic impact in the United States. You can download the 2007 research update here (Global Insight 2007 Price Impact Study).

Producing evidence. Wal-Mart's announcement describes how it's tallying these savings. Basically, they did what any other self-respecting corporate behemoth would do: Sponsored research. "In 2005, Global Insight, a leader in economic and financial analysis, analyzed Wal-Mart’s national and local impacts in terms of jobs, wages, prices, consumer buying power and GDP.... [T]he continued reduction in prices due to the presence of Wal-Mart and the growth in consumer expenditures over the 2004 to 2006 period translates directly into savings for consumers amounting to $287 billion in 2006. This corresponds to savings of $957 per person or $2,500 per household.... 'From the family vacation, to a daughter’s wedding, the savings American families realize at Wal-Mart bring the good things in life a good deal closer.... The new advertising tells the same story we’ve told since day one, how we’re working hard to save people money so they can live better.' The retailer will literally track the amount of savings so far this year by installing a 'savings ticker' outside of Wal-Mart’s home office in Bentonville, Ark."

From Global Insight: "In 2005, Wal-Mart commissioned Global Insight to undertake an independent research effort to analyze this issue. The goal of that research was to independently and credibly document Wal-Mart's national and local impacts in terms of jobs, wages, prices, consumer buying power, productivity, and gross domestic product.

"That report found that the existence of Wal-Mart between 1985 and 2004 resulted in a 3.1% cumulative reduction in consumer prices by 2004.... Our new study, titled The Price Impact of Wal-Mart: An Update Through 2006, looks at Wal-Mart's cumulative price impact and total cost savings as of 2006. Our findings continue to support the claim that an economy without Wal-Mart would have meant higher prices for consumers. It also concludes that the reduction in the price level due to the presence of Wal-Mart translates directly into consumer savings amounting to $287 billion in 2006—$957 per person and $2,500 per household."

The evidence is clear. I don't doubt that an economy without Wal-Mart would mean higher prices for U.S. consumers. We can quibble about the $ amount, but they do get our attention with that provocative sign, which is the *only* flashy thing you'll see when driving along Walton Blvd in Bentonville. Come to think of it, Bentonville is probably the best example of what Wal-Mart has done for the U.S. generally, especially small-town America. I've visited northwest Arkansas many times over the past 25+ years. The Bentonville-Rogers area has been transformed from a relatively unsophisticated place to enjoy the outdoors (with beautiful natural features, such as rivers, lakes, and limestone caves) to a reasonably cosmopolitan place with a few outstanding restaurants, access to good shopping, and things like a W "aLoft" hotel -- in the span of only a few years. All because of... Wal-Mart.

Comments

[Tracy Allison Altman]

Marktropolis, I couldn't agree more. I didn't intend for my post to make me sound like a Wal-Mart apologist... because I'm definitely not. In fact, I'm working on a post for today about the flip side of the Wal-Mart effect: Things like diminished quality of life beyond lower prices on stuff people didn't need in the first place.

[Marktropolis]

OK, so Walmart is saving folks some money. I think the bigger issue (especially in these economic times) is the impact on the communities the stores live in. What's the impact community wages? Down. What's the impact on small businesses? Shuttered. And what's the impact on Walmart's lack of benefits on the larger community? Unknown.

I like evidence too. I just want to make sure we're asking the right question before we collect it. Does it really matter that Walmart is saving customers money? Is that all that really matters?