BOXED OUT

03.13.16 5:01 AM ET

What Happens When Walmart Dumps You

The first knock on the retail giant was that it gutted the mom-and-pop businesses of small-town America. So what happens to those towns when it decides to leave?

What is the future of American retail? The keys might be found not only in the highly contested affluent urban areas but also in the countryside, which is often looked down upon and ignored in discussion of retail trends.

Yet these small towns, as well as middle- and working-class suburbs, have produced many of the dominant trends in American retail, from discount chains to super-stores. So, too, could these communities create a new trend, as some of the former innovators, such as Walmart, have begun to close stores, leaving some towns and villages bereft of convenient, affordable retail.

This year the world’s largest retail chain announced it was closing 154 stores, most of them “express” centers and other smaller stores that serve primarily small-town and urban markets, such as Oakland, California. The effect has been worst in poorer towns, notably in the Southeast and Appalachia, where there is little alternative retail in place.

Walmart’s move, driven by flagging sales and profits, represents a shift away from the very working-class and small-town customers who drove its rise. It also reflects a growing disinterest among retailers in serving the nation’s beleaguered middle and working classes. One in six Walmart customers, notes one University of Michigan study, received food stamps in 2013, with an estimated average household income of $40,000 or less.

In contrast, online shoppers, now a primary focus for Walmart, tend to be more affluent, with 55 percent of e-commerce shoppers living in households with incomes greater than $75,000. As Walmart and many other traditional “brick and mortar” stores have struggled with declining sales, online merchants have enjoyed an average growth of more than 11 percent annually since 2011. In this game, Walmart is clearly playing catch up.

The other big Walmart bet seems to be superstores, which compete directly with ascendant retailers such as Costco. Yet these moves are crushing for smaller towns, who are generally too small to accommodate large centers. Say what you will about Walmart—historically low wages, mediocre selection, less than attractive stores—the Arkansas-based juggernaut brought affordable products from around the world to thousands of small communities and suburbs. Before then, smaller communities often were forced to either travel great distances to more urban locations or shop at small, often overpriced local stores.

Back to the Futurem—and the Past?

Now once again small towns are threatened with becoming desiccated islands cut off from the high-precision magnificence of American retail. In some cases, they might even become “food deserts,” cut off even from reasonably priced grocery items. This includes not only small towns but some hard-luck suburbs near major cities.

No surprise then that some communities now resent Walmart for having essentially invaded Main Street, laid it to waste, and then abandoning it. Some places where Walmart have come in, such as Whitewright, Texas, a town of 1,600 in the northern reaches of the state, saw the retailer come in just last year, drive out of business some long-standing local stores, notably the longtime local grocery, and now, as part of its strategic change, leaving the town with little in the way of retail options.

Tales of “the Walmart effect” on small towns, of course, are legion. In exchange for access to more affordable goods, communities sacrificed much that was unique—the local haberdasher, the mom-and-pop mini-department stores, the one-of-a-kind hamburger joint. In the 40 years after the first Walmart opened in Rogers, Arkansas, in 1962, the number of specialty retailers declined by 55 percent nationwide. In the same time period, the number of retail chain store locations , including Walmart, nearly doubled. Research conducted at Iowa State University in the ’90s found that, after a Walmart opened in a town, sales at specialty stores—sporting goods, jewelry, and gift shops—dropped by 17 percent within 10 years.

Yet, fortunately, this may not prove to be the disaster that many predict. The new realities of retail, notably the inexorable shift toward online retail, suggests that rural communities and small towns are not as cut off as one might have expected. The ability to access Amazon in a small, remote Central Valley town in California is not much different from accessing Amazon in Los Angeles. For anyone even marginally computer literate, the retail world is more accessible than ever, but this time through a finger click than a stroll down the aisle.

The Proliferation of Channels

None of this suggests that the retreat of big boxes from smaller towns and some urban areas will be painless. Yet those who see this trend as the harbinger of the end of malls or Main Streets may be in for a surprise. Rather than die off, bricks-and-mortar shopping will change, adding new elements and moving from ever greater uniformity to more variety and differentiation, which are critical to independent business’s survival. Much of this change will take place in small towns, but also in suburban areas, which have long been the happy hunting ground of big boxes.

Why not in the big cities? One of the chief ironies of our times is that chains and their attendant sameness now define much of our most sophisticated urban core—Starbucks on every corner, global brands and restaurants serving the same trendy cuisine. The recovery of large cities, suggests New York researcher Sharon Zukin, has also made them more alike by “bringing in the same development ideas—and the same conspicuous textual allusions and iconic corporate logos inevitably affixed to downtown architectural trophies—to cities across the globe.” Efforts to make the city “safer and less strange to outsiders’ eyes”—tourists, expatriates, media producers, and affluent consumers—are making one global city barely indistinguishable from another.

At the same time suburbs and even smaller towns are becoming more diverse, and one of the chief causes of this diversity is the spread of millennials, with their own specific needs, into the peripheral areas surrounding core cities. This movement, once dismissed as inconceivable by some urbanists, is becoming more evident as census data show. And with more millennials entering their family-forming years, suggests economist Ned Kolko, this trend to suburbs and possibly smaller towns will only accelerate.

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The other great game-changer has been the rapid movement of ethnic minorities, particularly immigrants and their descendants, to suburbia. Roughly 60 percent of Hispanics and Asians already live in suburbs; more than 40 percent of non-citizen immigrants now move directly to suburbs. Between 2000 and 2012, the Asian population in suburban areas of the nation’s 52 biggest metro areas grew 66.2 percent, while in the core cities the Asian population expanded by 34.9 percent. Of the top 20 cities with an Asian population of more than 50,000, all but two are suburbs.

As ethnics and millennials gather in suburbs and even small towns, we are starting to see the emergence of new retail forms in suburban areas. Orange County, California, for example, has long been seen as an area dominated by chains, and the largely suburban county is indeed sprinkled with scores of shopping centers, some of them massive, ranging from more working-class shopping centers in such cities as Orange or Santa Ana to more elite retail centers such as South Coast Plaza and Newport’s Fashion Island.

Yet at the same time, the area is seeing the growth of new, unique retail districts that appeal to millennials, ethnics, and their descendants. Anaheim, for example, heretofore known for Disneyesque blandness, now features a thriving Packing District, a converted fruit-packaging structure now filled with numerous vendors, most of them local products such as confectionary, ethnic food and locally brewed beer. Several other projects, many in former office parks, have opened in places like Costa Mesa, drawing large numbers of suburbanites to unique agglomerations of smaller stores.

Ethnic change is also transforming the retail environment in both suburbs and smaller towns. Throughout Southern California, Chinese, Korean, Vietnamese, and Mexican markets now proliferate. New developments in places like Irvine—now roughly 40 percent Asian—are filled with ethnic restaurants, shops, and boutiques. Similar trends can be seen in the emerging immigrant hubs, notably in Dallas-Fort Worth and Houston, but also in parts of New Jersey, Westchester, Northern Virginia, suburban Chicago, and in Seattle suburbs like Bellevue and Federal Way. Even the main street in Grand Island, Nebraska, home to meatpacking plants, is lined with, of all things, Honduran, Salvadoran, Mexican, and Haitian restaurants.

At the same time, numerous suburban communities, particularly those with old downtowns dating from their agricultural pasts, have revived their own Main Streets. These areas may have a Walmart or Target nearby, or even adjacent, but now they also sport shopping, restaurant, and other cultural options, as well as an opportunity for promenading, once an important small-town activity. The list of communities doing this extends from places in Southern California—such as the old towns of Orange, Fullerton, and Laguna Beach—to older eastern towns like Montclair, New Jersey; Rockville Centre on Long Island; Naperville outside Chicago; as well as Carmel, Indiana. We may not be returning to Bedford Falls before the onslaughts of banker Henry Potter in It’s a Wonderful Life (1946), but smaller towns and suburban shopping area may prove far better able to adjust to the digital age than many suspect.

Retail’s Increasingly Diverse Future

Despite the erosion from online sales, the country’s retail structure is not about to go away. Even though overall department stores are doing poorly, as are some malls, many are also doing well, particularly in ethnic areas and more affluent suburbs. The importance of brick-and-mortar retail is still compelling enough that even Amazon may soon build its own physical bookstores; several other online sites have already done so.

Of course, not all communities or Main Streets will thrive as the Walmarts and other large chains begin to cut back. There will indeed be many communities that continue to depopulate as younger people move away, and there is little hope that large retailers will come back to such places as markets dwindle and as more shoppers order online.

Yet not all small towns, much less suburbs, face such a difficult future. Many smaller communities, particularly in attractive parts of the country, are beginning to see a wave of migration from aging boomers, who arrive with both significant cash and also often well-developed consumer tastes. Far more seniors, for example, retire to rural or semi-rural communities (PDF) than to urban districts. In certain areas—for example, Rocky Mountains towns, parts of inland California, and the hill country of Texas—may find their retail base growing, even if this means very different kinds of stores and services.

Some small towns—and suburbs even more so—will be transformed by immigrants and millennials, who may want to set up their own unique shops along the very Main Streets once targeted by firms like Walmart. In wealthier communities, this may mean more boutiques and high-end restaurants. But among less affluent areas, other institutions, such as cooperatives—300 already nationwide and another 250 on the way, as well as farmers markets—could provide some of the products that many once found at Walmart.

These changes may prove far more positive in the long run than many anticipate. A future with a slightly lower Walmart or other big-box footprint poses not just a challenge to communities once seen as unable to resist mass retailing but also a once in a lifetime opportunity. As the retail world become more digitally focused, and less big-box-dominated, there is a golden opportunity to restore the geographic and local diversity that has seemed doomed for nearly a half-century, but now may enjoy a new burst of life.