Don't feel guilty shopping Wal-Mart

By DAVID MOON, Moon Capital Management
July 4, 2004

I used to have a rule that I would never buy food from a place that sold tires.

Never say "never."

On a single visit to Wal-Mart last week, I bought a case of water, a pair of shoes, two bicycles, a trampoline and two pounds of Swiss cheese I can't get anywhere else in town.

Yeah, yeah, yeah; I know its stores are ugly, nearby neighborhoods hate them and small businesses are supposedly becoming extinct because of this evil empire.

I don't care. And I have a lot of company. Someone is spending $750 million a day at Wal-Mart.

But people are still shopping at little stores, as well.

The day after my Wal-Mart retail orgy, I visited the Village Hardware store on John Sevier Highway. I hate going to Lowes for only a couple of items or if I need a to actually talk with a person other than a 15 year-old cashier. After learning of my intended use, the clerk suggested I buy a different shovel. (The shovel he suggested was less expensive.) I was buying 10 bales of straw for a hayride and they offered to loan them to me. The clerk loaded my lumber into my truck. The entire transaction took less than ten minutes.

When the need arises (and it often does), I go to Lowes and Home Depot and gorge the same way I do at Wal-Mart. Those big stores serve a fantastic purpose. But so do the Village Hardware stores of the world.

As politically correct as it may be to think so, Wal-Mart is not the economic anti-Christ. Because of their low prices, it is estimated that the Consumer Price Index is lowered a full percentage point each year. With two or three percent annual inflation, Wal-Mart reduces consumer price increases by thirty to fifty percent! For a low wage earner, that is like getting a pretty significant raise each year.

Yes, some small businesses are hurt by the competition. That is the nature of capitalism. People have the freedom to succeed and fail. Sam Walton took that risk. So did the folks who started Montgomery Ward and Service Merchandise. It's a great lesson to remember on Independence Day.

The best small businesses are the ones that attack Wal-Mart's vulnerabilities, not its strengths. A mom-and-pop retail store trying to compete on price is living on borrowed time. But niche markets and personal service have always been strong competitive forces.

Visit Emery Five and Dime. You'll find items that are nowhere else in Knoxville. Long's Drugstore isn't competing with Walgreen's. Markman's isn't a mass retailer. Spooky's Restaurant (which has moved from Northshore, by the way, and is now directly across the street from Village Hardware on John Sevier) isn't competing with Corky's. Shields Electronics isn't Radio Shack or Circuit City. And, of course, I whole-heartedly endorse Village Hardware. These businesses and scores of others like them are better as a result of the existence of the retail behemoths ' and so are consumers.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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