Wal-Mart versus the knitters

Fascinating article about the decision by Wal-Mart in Seguin to close its fabric department, and the outraged reaction that has drawn from the local sewing and knitting aficionados who have no other place nearby to go to get their supplies. I think this encapsulates the issue:

In places like Seguin, a South Texas town of about 25,000 and a shopping hub for surrounding communities, Wal-Mart is the only game in town for fabric, seam binding, dress patterns, lace and other sewing supplies.

Independent stores closed down when they couldn't compete with Wal-Mart, and if Wal-Mart follows suit, shoppers would be forced to drive 30 to 60 miles to San Antonio or other towns for sewing needs.

[...]

Critics say cutting fabric departments in urban areas might be good business, but in rural areas, sewing, quilting and knitting remain part of everyday life.

"For a lot of people, it's their hobby. It's what Wal-Mart is just taking away from them," said Ursula Alexander, a 15-year-old Seguin High School freshman who uses Wal-Mart supplies to design purses, sew curtains or help make theater costumes.

She's working on her own letter to Wal-Mart.

Many, like quilter Janet Welsch, believe, "If they've come in and run out the locals, they have a moral obligation to continue serving."

[...]

Some see a silver-lining in Wal-Mart's departure from the fabric biz.

"In an open market, if Wal-Mart exits, then somebody else ought to be able to come in and take care of it," said Mark Alpert, marketing professor at the University of Texas' McCombs School of Business.

"In a way, there's an irony here. The same people who criticize Wal-Mart for driving out small business are now saying, 'Darn it, now you've got to keep providing this stuff.' It's actually an opportunity for small business."

Strictly speaking it is, though of course it's never that easy. Whoever might want to start up a small fabric retail business to replace what Wal-Mart takes away (assuming they do in fact do this) will face startup costs that might be daunting. They'll have to advertise, they'll have to deal with suppliers who may not want to do business with a small fry, and they'll face the nontrivial risk of failure. Maybe there is someone willing to take this risk - if I had to bet, I'd put my money on one of the ringleaders of the protest movement - and maybe they'll be able to do it in time to prevent most of their potential market from finding acceptable alternatives, like the drive to San Antonio or the Internet, and maybe there isn't. Theoretically, Professor Alpert is correct, it should be an opportunity. In practice, maybe it is and maybe it isn't.

The reason Wal-Mart was able to put whatever little guys existed beforehand out of business is what makes this venture much riskier for anybody else. Wal-Mart can afford tiny margins because of their volume. They can also afford for a fabric department to be a relative dog, performance-wise, because it's an infinitesimal piece of their overall revenue stream. A fabric department may not even need to be profitable for them to justify its existence, if the folks who come there to shop for those items stick around to make other purchases as well. Needless to say, a small business doesn't have this kind of luxury.

None of this, of course, requires Wal-Mart to take any particular action. You can talk about "moral obligations", but if they think they'll maximize shareholder value by dumping fabrics, that's as far as that discussion will go. The fabric fans have done what they can to make their voices heard, and I hope that one way or another they get a positive resolution.

Posted by Charles Kuffner on March 06, 2007 to Bidness