The Local Economic Impact of Wal-Mart
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The Local Economic Impact of Wal-Mart By Michael J. Hicks

Chapter 1:  The Chain Store Historically Considered
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Large orders help to cut down overhead expenses for the manufacturer; production can be standardized and economical machine processes introduced. Then again, the large order enables the manufacturer to anticipate his production schedule and he, in turn, is able to buy his raw material on a large scale and at a substantial saving. (p. 101)

The leading chronicler of chain stores in the 20th century provides a clear description of the role of local and firm scale economies. Lebhar explains that, although individual stores can operate with large volumes of goods,

Most of the advantages the chains enjoy may be traced directly to the fact that the business is conducted through more than one unit because most of those advantages come from volume, and the volume the chains are able to attain depends mainly upon the number of stores they operate. (Lebhar, 1952, p. 7)

This passage foretells some of the current research on Wal-Mart, which is modeled as interaction between economies of scale of the individual establishment (store size) and the interaction of either scale economies in transportation and oversight or scale economies in international trade.1

The growing transportation and information networks in the United States during the early 20th century were fertile fields for this type of retail innovation. By the time Wal-Mart’s founder, Sam Walton, was born in 1918, chain stores had become ubiquitous. Indeed, Springfield, Missouri, the place that Walton describes in his earliest memories, was home to a number of chains. In 1923, a Springfield native became president of United Cigar stores, which was one of the largest chains in the nation.2