The editors of the Wall Street Journal scoff at Chicago Mayor Johnson’s proposal for ending “food deserts” on the South and West Sides:
Has Mr. Johnson considered why the stores are closing? In 2016 then-mayor Rahm Emanuel stood beside Whole Foods Co. CEO Walter Robb to celebrate the opening of the new store in Chicago’s Englewood neighborhood. The two cheered greater access to fresh fruit and vegetables and a healthy anchor for the community. By 2022 it had closed.
The city had subsidized the store with $11 million in tax financing, according to local PBS news station WTTW. But that wasn’t enough. After the closing in 2022, Whole Foods said the company “regularly evaluate(s) the performance and growth potential of each of our stores” in order to “position Whole Foods Market for long-term success.”
Walmart closed four stores in Chicago because they were losing tens of millions of dollars a year, and CEO Doug McMillon said annual losses had doubled in the past five years.
The problem isn’t corporate racism. It’s crime. In 2022 Chicago reported 54,000 thefts and a mere 4% resulted in an arrest. Of the 8,730 retail thefts, there were 1,450 arrests, or less than 17%, according to Wirepoints and the Chicago city data portal.
Chicago’s arrest rate for retail theft fell to 16.6% in 2022 from 42.5% in 2019. Retailers say there is little they can do when groups of people walk into their stores, grab arm-loads of merchandise and walk out with impunity.
No doubt Chicago’s government will bring its legendary efficiency to the grocery business, though we hope it does better than it does running the failure factories that are its public schools. But we wonder what Mr. Johnson will do to prevent theft at his government grocery chain. Will he consider the losses to be merely the cost of doing good socialist business?
The answer, of course, is in the statistics they produce above. When the city’s crime resolution rate is as low as it is, it isn’t providing the security that is its most basic mission. Mayor Johnson’s stores won’t be stores at all. They’ll be empty shelves with occasional deliveries that are bought and/or looted quicker than they can be replaced.
Ordinary Times, f/k/a The League of Ordinary Gentleman, had an interesting Q&A from someone in the grocery business recently. One of the interesting points is the grocery business operates with profit margins around 1 to 3 percent, and some stories are not making a profit at all. His explanation for why they don’t close is the chain wants to maintain market share, long-term leases, avoid bad press, or hope a competitor departs first.
https://ordinary-times.com/2023/09/12/a-real-problem-for-retail-a-shoplifting-q-and-a/
Presumably many groceries that have opened in marginal areas in the last 10-20 years did so with government subsidy. Those subsidies might also act like a lease, by incentivizing continued operation for a certain amount of time, or aggravate bad press from closure. Johnson might find chains willing to sell their store to him for fair market price.
Yes, I was aware that the grocery business operated with extremely narrow margins. That’s better than the negative margins that the city-operated “stores” (really more distribution centers) would see.