Nearly all of the independent research I have seen on Wal*Mart says the same thing. In the long run, retail in the city with the Wal*Mart improves. However, businesses trying to compete directly tend not to be successful. The ones who benefit are selling complementary items and services, who benefit from the town's increased drawing power. Communities just beyond the Wal*Mart town suffer the worst. They don't have the same drawing power, their customers will go to Wal*Mart, and at the same time they will shop at that community's stores.
My opinion - if a Wal*Mart is going to be locating in your region, get it in your town. There is no point in fighting. If it doesn't go to your community, it will be in your neighbors. At least get the beneficial side effects (jobs, taxes, more customer traffic) rather than still have your business community ravaged without any benefits. Within your community, try to get the best site (from the community's perspective), the best design possible, and any other perks they might give. Wal*Mart will often provide financial support to downtown revitalization programs.
I am a bit of a book nut, so I like checking out independent bookstores.
There is a older independent bookstore in Walnut Creek, about a half hour away from where I work. When Barnes and Noble opened a huge, showy store right on the main street, I thought for sure that Bonanza Books would close.
They are doing fine-because they buy and sell the used books originally bought at Barnes and Noble up the street.