How Grocery Stores Are Failing Us

0 18

How did food deserts come into existence? What happened to all the grocery stores?

To understand that, we need to step back and start with this underlying trend: We’ve seen extraordinary consolidation in the grocery retail sector. Five companies capture 50 percent of all grocery spending in the United States. Walmart alone captures one out of every four dollars that Americans spend on food. There are forty-two metro areas where Walmart captures more than 50 percent of grocery spending, and there are a number of them where it’s more than 70 or 80 percent.

Walmart grew in the food sector by engaging in practices that violate antitrust laws but that we haven’t prosecuted in many decades. One of the ways it grew was by selling groceries at a loss in order to drive smaller competitors out of business—a practice known as predatory pricing. Walmart made up the lost grocery revenue on other merchandise, but family-owned, independent grocers and small chains didn’t have that option. They couldn’t match those prices and operate in the red like that. If you’re a small company, you can do that for only so long before you go under. Walmart can do it indefinitely. So a lot of local grocery stores and small chains were forced to close.

Many of these stores were located in low-income neighborhoods and very small towns. As they went under, those communities were left without a supermarket. People then had to travel to another part of the city, or to a suburb, or to a distant town to find a Walmart or another supermarket—or get by on what they could purchase at convenience stores and fast-food outlets.

“Reinvigorating our antitrust policies, revisiting land-use policies, and rethinking capital and funding are all critical to solving the issue of food deserts.”

There are two factors behind the persistence of food deserts today. On the one hand, the big supermarket chains don’t particularly want to be in these small rural towns and low-income urban communities. That’s not only because these neighborhoods are low-income but also because, in the case of urban neighborhoods, these chains don’t want to have to figure out how to wedge one of their stores into a small lot in a city. They’d rather establish a store out in the suburbs, which they can do much more easily. And they also aren’t particularly interested in these communities.

At the same time, the family-owned grocers who are interested in these locations have been squeezed out, marginalized, or even driven out of business by the big chains. For entrepreneurs who would want to come in and start a grocery store in a community like this, the biggest barrier is being able to get a loan. The bank looks at them and says, “You’re an independent grocer and you want to go into a low-income community. That’s two strikes against you. We don’t think that’s a safe bet.”

So: The big chains have the capital to serve these communities, but they’re not interested. And the local grocers that would like to serve these communities face a lot of barriers to capital access because of the market power of Walmart. This has left many areas with no full-service grocery stores at all. (And the local stores that survived Walmart are now falling to dollar stores: Dollar General, Dollar Tree, and Family Dollar.)

- Advertisement -

Leave A Reply

Your email address will not be published.