The Effect of Large Retailers on Mom and Pop Shops

Mom and pop shops are the traditional backbone of the retail industry employing a significant amount of the populace. They are located conveniently near residential areas and have fewer operational costs.

There are fewer aspersions nonetheless that the shops have been facing survival threats from large conglomerate such as WalMart. Several types of research that have been conducted agree that the introduction of large wall mart stores has had a predominantly negative effect on mom and pop shops.

Are companies like Walmart really destroying mom and pop shops? (There seems to be a wide debate among several scholars on this subject). The answer is yes, they do, and on a large scale. The entry of the large WalMart stores brings about price
competition that is highly skewed to favor large stores because they enjoy economies of scale. Traditional mom and shops cannot afford the price wars and thus are often forced to close down as they become unprofitable.

In addition, the large stores have a differentiation advantage. Wal-Mart specializes in a wide range of commodities unlike small mom and pop shops. Consumers are usually attracted to the wide variety of products.

There is a consensus in research findings that the effect has not been two-fold. It is not all types of mom and pop shops that have been severely threatened by those entries. The significantly affected are usually groceries, bakeries, fresh produce
such as milk and pastries.

The reason why these types of shops are severely threatened by Wal-Mart stores entry has to do with the sourcing policy of the supermarket. Wal-Mart prefers a one on one supplier agreement with farmers, and other manufacturers of ingredients in those departments while for reasons of financial capacity, mom and pop shops rely on middlemen to get supplies.

Traditional kiosk shops are nonetheless not entirely threatened by the large Wal-Mart stores, and research conducted by several independent sources has shown little effect on the traditional convenient kiosks.

There is, however, some aspersions to these findings. Some researchers have pointed out that in the last three years; there has been a surge in profits made by mom and pop shops. As more people congregate into residential areas, the need for personalized experience and convenient buying has skewed competition to the advantage of these small shops.

The views are also expounded in the realization that traditional mom and pop shops have adopted several survival strategies such as e-commerce and delivery services. Their effect can be exemplified in the latest attempt by large stores such as Wal-Mart to put up small convenient stores in several hoods.

Nevertheless, the decline of mom and pop shops due to theentry of the large wall mart stores cannot be denied either. The small shops that have kept up competition have often found themselves on the receiving end of the large stores, marketing and sales strategies, such as loyalty cards, coupons, and discounts.

Several states and countries like Uruguay, in an attempt to protect these mom and pop shops, have introduced several regimes that seek todelimit the entry of large stores. These laws are also in existence in Europe. The protection of these small shops is an important welfare practice to protect the average population and retail investor from the obvious onslaught from these large retailers like Wal-Mart.