When Walmart Comes to Town: What It Means for Small Businesses

A notice goes up at the edge of town: a rezoning hearing for a big new store. Within a week, three people have told the owner of the diner down the road the same thing. "You'll be fine. They'll bring people." A fourth says, "You're finished."

Both can't be right, and the research says neither is certain. What it does say is useful, because it tells an owner what to look at. This paper covers what three studies found, how to tell which kind of business you are, and a quick way to size up what the new store might add to your sales before you spend a dollar on a guess.

This paper names a retailer because the research does. Groundwork has no affiliation with Walmart or any business named here. Nothing here predicts what any store will do to any town.

The short answer

A big new store can take sales from the small shop that sells what it sells, and it can send traffic to the shop that sells something else. Which one happens to you depends on three things: what you sell, how close you are, and how much of the new money is really new. The rest of this paper shows how to check each one.

What the research found

The studies disagree. One large study of U.S. counties found that after a Walmart opened, the county ended up with about 150 fewer retail jobs than it otherwise would have, roughly 3%. For every Walmart job, about 1.4 other retail jobs went away. ^[1] A second study found a small gain: about 100 retail jobs in the year a store opened, fading to a net gain of about 50 over the next five years. ^[2] They use different methods, so nobody can promise you either result.

They agree on where the damage lands. A third study followed the small stores themselves. It found slower job growth at nearby single-location stores and small chains, but only when the big store was close and sold the same kind of thing. ^[3] Size didn't decide it. Distance and category did.

What nobody counted. All three measure jobs at businesses that were already there, and they were published between 2005 and 2010. We found no study that counts new restaurants, repair shops or salons opening near a new store, so "they'll bring people" is a reasonable guess, not a result.

So what: don't ask whether a big store is good or bad. Ask how close it is and how much of what you sell is on its shelves.

The Groundwork Store Check

Sort your business into one of three groups. Some businesses sit in two: a convenience store can gain from traffic and lose everyday-goods sales to the new store.

These groups are Groundwork's working framework, built from the findings above. They are a way to organize your thinking, not a measured result, so check them against your own street.

Size up the new money in five lines

Most of what a new store can add for neighbors comes from its workers' paychecks. Here is a quick way to size that up for your kind of business.

This example is hypothetical. The figures are invented and the percentages are assumptions, not findings.

A planned store will employ 300 people at $35,000 a year. A restaurant owner guesses:

1. Paychecks: 300 × $35,000 = $10.5 million
2. 90% gets spent, not saved or taxed: $9.45 million
3. 5% of spending goes to eating out: $472,500. (Federal data puts food away from home at about 5% of average household spending: $3,945 of $78,535 in 2024. ^[4])
4. 60% of that stays in town: $283,500
5. Half of it is new to the area, because many workers already live and eat here: $141,750 a year

If the restaurant needs $750,000 in sales, new paychecks cover about a fifth. Change just the last two guesses to 40% and 30% and the number drops to about $57,000, under a tenth. Either way, most of the sales have to come from somewhere else.

So what: don't sign a lease on paychecks alone. The new payroll is a starting point, not a plan.

What to do this week

• Find out if it's real. Check your city's planning and zoning agendas and permit records. An announcement is not a building.
• Find your group. Use the Store Check above. If you sell what they sell, add up how much of your sales that is.
• Look at who's already near you. The Census Bureau's free Business Builder shows businesses and customers around any address. ^[5]
• Plan for less and later. Run your numbers with no help from the new store, using the free break-even and cash runway calculators. Our paper 15 Numbers Every Small Business Owner Should Know explains both. ^[6]

Groundwork's final assessment

A big store can hurt the shop that sells what it sells, and help the shop it sends traffic to. Which one you are depends on what you sell, how far you are, and how much of the new money is really new. Find your group, run the numbers with and without the store, and decide with your own figures.

Put Groundwork to work for your business

Groundwork's Competition Checkup ($200) shows who is ranking near you, what they promise and where the gaps are. The Business Blueprint ($1,495) builds a plan covering competition, pricing, operations and growth, with a 30-day action plan. Every Groundwork project is fixed-price. We are not accountants, lenders or real estate brokers; for a lease or a loan, talk to a licensed professional.

Anticipated Questions

Does a Walmart hurt local small businesses?

It can, but the research doesn't say it always does. One study found about 150 fewer county retail jobs, another found a long-run gain of about 50, and a third found the harm landed on nearby small stores in the same category. Your category and distance matter more than the headline.

Do new businesses open near a new Walmart?

We found no study that measures it. Restaurants, fuel and car care could follow the traffic, but that's a guess, not a result. Check your local numbers.

Which small businesses are most likely to benefit?

Those the store sends traffic to without selling the same thing: restaurants, coffee, fuel and some services. Whether any of them gains depends on location and on how much of the new spending is truly new.

How do I know if my business is exposed?

Ask how close you are and how much of what you sell is also on its shelves. The evidence points to harm for nearby stores in the same category and much less for stores in other categories.

Is Groundwork affiliated with Walmart or the researchers cited?

No. The studies are cited as published. Groundwork has no affiliation with Walmart, the Census Bureau, or the researchers named.