The Impact of Small Businesses VS Big Business on Local Economies



Posted on Tuesday 29th of July 2014 by
Manish Khanna

It is sometimes difficult to determine the overall effects of having large chain retailers in an area or neighborhood versus smaller mom and pop or specialty shops. However, there are farther reaching effects than just noise and traffic concerns. Larger chain stores also affect jobs, the environment, consumer convenience, as well as price and selection options to the consumer.

Jobs

Often large chain stores are looked at favorably in smaller communities because they provide jobs, selection, and usually reasonable pricing for local residents that may have been missing prior to the super store’s arrival. In a good economy this is a positive for small rural areas lacking enough jobs or local products to fill the community’s needs. Unfortunately this also affects the local economy in a negative manner. Large chain stores have greater buying power to provide lower prices than small local businesses can, and in doing so end up putting local small businesses out of business eliminating the competition and making the community dependent upon the large chain. This becomes an even bigger issue when the economy has a down turn and lay-offs begin. A couple of good examples of this are:

  • Alcoa Point Henry Aluminum Smelter – The Point Henry facility’s closing in August of 2013 eliminated 1,000 jobs in the Geelong community. Although the Geelong community does not truly classify as a small community with more than 215,000 residents, the loss of manufacturing from companies such as Alcoa, Shell, and Ford has prompted the community to transition its economic reliance to other industries like biotechnology, health, education, retail, tourism, and research. The remaining manufacturing jobs in this area have also transitioned to aerospace, while expanding into niche markets like wine production, seafood processing and aquaculture. Geelong’s willingness and ability to transition to other industries was key in their community’s survival of the industrial exodus. However, some small communities may not possess the resources or educated man power in order to make this type of conversion.
  • Toyota Closing its’ Australian Plants – Toyota’s decision to close their Australian manufacturing plants is expected to hit the economy and job situation on a wide scale. The direct impact of this is supposed to put 2,500 workers out of work and the trickle-down effect is estimated to impact jobs within the automotive industry that number in the tens of thousands.

Although these examples are of the manufacturing industry, they illustrate how much of an impact a community can feel when dependent upon a single source of income whether it is retail, manufacturing, farming, or the auto industry. According to a publication in 2004 by Public Watch, large super markets end up eliminating an average of 276 jobs when they move into a small community instead of increasing jobs as the super market chains would lead residents to believe.

Communities that maintain a competitive small business status quo to balance out the impact of bigger businesses entering into their local economy can bounce back much more easily than those communities who become dependent on one source of income. This not only provides more job stability in times of low economic trends, but it maintains healthy competition that keeps pricing and selection in check.

Environmental Impact

All businesses have an impact on the environment whether they are large or small; through traffic, waste disposal, air emissions, noise, etc. Although companies are now taking their carbon footprint more seriously they continue to have a significant impact on their local community’s environmental conditions. Something as simple as dumping leftover food into the trash will affect greenhouse gas levels; according to the New South Wales official web site, NSW.Gov. Au, the food production life cycle is responsible for roughly 23 percent of Australia’s total greenhouse emissions; second only to power stations.

Larger stores mean mass production in order to keep the shelves filled. This is most easily seen in how large grocery chains affect farming communities. In order to increase harvesting yields, farmers who are selling to larger grocery stores will adapt farming processes that are sometimes harmful to the land and potentially to those who eat these harvests. An example of this is genetically modified seed or GMO crops. Crops and seeds are genetically modified in order to produce larger produce and more abundant crops. UCSC reports that GMO practices will negatively affect the land in several ways:

  • Cross Pollination – Pollen from modified plants will spread to indigenous and unmodified plant life contaminating the unmodified plants with the genetic modifications.
  • Insect Resistance – Insects will become resistant to the genetic modifications that have specifically been done to the plants and seeds in order to deter these same insects. This has been seen in both corn and cotton.
  • Super Weeds – Cross pollination will create super weeds that are resistant to pesticides and insecticides that can take over fields and negatively affect crop growth. These super weeds become invasive killing off other plant life in the area.

Noise pollution is another concern when comparing large industry retailers to smaller local shops. Typically larger retailers truck in bulk quantities of products whereas smaller local retailers usually use local resources for their products and have much smaller shipments of the items that need to be trucked in. This difference in volume inventory management increases the amount of noise produced from truck deliveries in what is generally considered the “off” hours, such as late night or early morning deliveries. Added traffic from consumers traveling farther distances to shop at larger retailers for better pricing and selection also increases the overall noise, traffic and pollution factors.

These same vehicles that increase the noise pollution factor directly affect the air quality through their emissions; add to the traffic emissions the retailer’s emissions from doing business, such as fumes from in-house cooking, exhaust from heating and air conditioning units, etc. and the air quality has been directly negatively affected from the introduction of the large retail business.

Noise pollution is more serious than simply being annoyed by the intrusive noise. Besides hearing loss some of the negative health effects of noise pollution according to health.gov.au, are:

  • Lower School Performance
  • Hypertension
  • Sleep Disorders
  • Immune Disorders
  • Annoyance

Pollution and ecological issues are also an economic concern, since it is quite expensive and labor intensive to reverse the effects of pollutants. Some environmental contaminants cannot be reversed which can have an adverse economic effect on smaller communities. A prime example of this would be farming communities that rely on the land for production of their product. If the land is contaminated with pesticides, “Super Weeds”, or over farmed then these communities would lose their ability to produce their product and in turn lose their income.

Consumer Convenience

On the more consumer positive side of the debate over whether larger retailers are better to have than smaller retailers, consumer convenience is a huge positive. Larger retail stores are able to offer the consumer thousands of products at much lower prices than small independent retailers can.

Additionally, most larger retailers provide an online shopping option to their customers, which provides consumers with not only a wider selection of products, manufacturers, and models, but it also gives consumers options to have products shipped directly to the location they want the product to go, this is especially handy for gift items; or to shop the old fashioned way in the store.

The debate over which is better for a community, large businesses or small businesses, has many facets to consider. Both large and small businesses make their own impact on a community in their own way whether it is through employment opportunities, environmental impacts, or selection and services. When communities are planning their zoning and expansion strategy it is important that these impacts be carefully considered in order to maintain the community culture that is ultimately desired.