Los Angeles Business Journal

Giant Retailer a Big Plus for Smaller Businesses

Op-Ed By Hector V. Barreto Monday, August 20, 2012

Opponents of Wal-Mart’s planned Neighborhood Market in downtown Los Angeles are trying desperately to paint a portrait of David versus Goliath – mom-and-pop shops against Wal-Mart.

But when it comes to economic growth, small businesses and large companies actually support each other. Indeed, the entrance of a large retailer like Wal-Mart into a new marketplace is the key to helping many local vendors grow.

As a former U.S. small-business administrator, I advocated for the small businesses that are vital to this country’s economic fabric and ingenuity. We helped minority- and women-owned businesses expand and flourish, and awarded more loans to small-business owners than any previous term at the Small Business Administration.

But during my time at the SBA, I learned that small businesses cannot flourish without a strong and healthy free market that is friendly to companies of all sizes.

The positive impact Wal-Mart would have on L.A.’s small businesses can be explained by the basic law of supply and demand. When a large retailer like Wal-Mart enters a new market, it needs local suppliers to help fill its maintenance and product needs, which means surrounding vendors benefit.

According to Dun & Bradstreet, an independent firm that compiles commercial and business data, Wal-Mart spent $25.9 billion for merchandise and services with more than 4,000 suppliers in California in fiscal year 2012. The number of supplier jobs that result from Wal-Mart’s relationships with such vendors was approximately 282,000.

As the chairman of the Latino Coalition, a national organization that represents Latino interests with senior executives of Fortune 500 companies and government agencies, I am also concerned that opposition to a new Wal-Mart grocery store will hurt the ability of L.A. residents – Latinos, in particular – to find good jobs.

Too many Latinos are struggling to find work, a problem that was exacerbated by the Great Recession. As the Los Angeles Times reported in February, “the jobless rate for Hispanics hit a peak in November 2010 at 13.1 percent nationally and 14.7 percent in California.” Those rates have subsequently decreased slightly to 10.5 percent and 13.8 percent, respectively, but more needs to be done to help all state residents find work.

Good jobs

With more than 72,000 associates in California alone, Wal-Mart is proving to be a dependable source of good jobs during a difficult economic downturn and recovery.

Companies look for marketplace demand before they feel confident enough to retain and hire more employees. Wal-Mart would help spur that demand in Los Angeles and, in the process, hire employees for its own Neighborhood Markets.

The result is clear. Small businesses such as suppliers would expand, Latinos and other California residents would finally get access to more jobs and the local community would experience lower prices as a result of a free market that works for everyone.

Wal-Mart critics should drop their shortsighted opposition and look at the big picture. It would be a disservice to Californians to do otherwise.

Hector V. Barreto is chairman of the Latino Coalition in Irvine. He was an administrator at the Small Business Administration from 2001 to 2006.