It affects employees’ wedges, existence of smaller businesses, and the trading relationships between countries. This discovery is relevant because it addresses the important economic issue of large retail markets superiority. In addition, even if Walmart decides to relocate, the effect of its initial arrival last long afterwards. Moreover, Walmart has always controlled compensations to workers in such a way other competitor shops might feel forced to reduce salaries for their workers in response (Meyersohn, 2019). According to the Law of Demand (Cowen & Tabarrok, 2018), with the decrease in price, the demand for the goods increases, meaning that people would come more often to the store and buy more merchandise, leaving other shops without consumers. Thus, Walmart is able to sell goods at much lower price compared to its competitors. Because of its size, the company can set the price it pays to the distributors at scale other retail companies cannot afford. Walmart has more than 4700 stores located in the US, with almost 600 Sam’s Club stores (Kenton, 2019). The possible explanation for the Walmart effect is the scope and scale of the company’s buying power. People coming there for low prices tend to visit other smaller shops nearby. On the other hand, Walmart introduces other businesses when moving to the town. The increased Chinese import eliminated almost 80 percent of the jobs which is 314500 manufacturing jobs.
The manufacturing field and its employees were affected the most. Moreover, the Walmart-based trade deficit with China resulted in nearly 400000 jobs losses in the US. Nearly $25 million contributed to the sales redistribution that accounts for almost $660000 loses in salary per year (Scott, 2015). According to Christopher Fowler, a Puget Sound Sage research conductor, when Walmart comes to the community, it reallocates sales that result in the difference between wages of local markets and of Walmart’s (as cited in Business News Daily). The discovery of this effect is important because Walmart affects the economy significantly in a positive and negative ways. Fishman goes beyond the pros and cons for local companies and examines the effect on consumers. This term was created for the first time in the 1990s, but Charles Fishman, an American author, wrote a book “The Wal-Mart Effect” in 2006 that tells about how the American economy is affected by this large retail company (Kenton, 2019).
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