Question

From an economic efficiency standpoint, what response would you give to people who lament when a big box store such as Lowes or Wal-Mart enter a small town and drive the small mom-and-pop stores out of business? Why?

Answer 1

Big box stores such as Walmart and Lowes run on the economies of a scale. This means that with an increasing production, per unit costs are reducing. Thus, the quality products are available to customers at a reduced rate. Also there is a practice of organized retailing, access to more products and better distribution systems in these big stores, Thus, from an economic efficiency viewpoint, they provide greater returns to consumer.

Although there are sufficient empirical evidences quoted in research to show that Big boxes and small mom and pop stores can exist in a profitable coexistence and thus these small businesses are not entirely driven off the market. Contrary to it, in some countries, it is even performing better than what it was doing before the arrival of these big chains.