In 2006, months before a Walmart store was opened in the Austin neighborhood of Chicago’s West side, researchers counted 306 businesses in the surrounding area. Two years after the Walmart opened, 82 of those businesses had closed.
That some businesses, particularly small businesses, would close after a large retailer moves into the neighborhood is to be expected. But, as the researchers found, the pattern and severity of those closures was far from typical. The closer a business was to the new Walmart store, the more likely it was to close.
“No matter which direction you go from Walmart, there’s a very high rate of business closures in the immediate vicinity, and the further away you get there’s less and less,” says University of Illinois Chicago economics professor Joe Persky, one of the authors of the study, which was just published in Economic Development Quarterly.
Farther out from the store, about four miles or so, the rate of closure is about average, or roughly 24 percent of small businesses, according to Persky. “Small businesses often close. They have a high turnover.”
But the closer a store was to the Walmart location, the greater the likelihood it would close. Persky and his colleagues found that for every mile closer to the Walmart, 6 percent more stores closed. Close in around the store’s location, between 35 and 60 percent of stores closed.