How did food deserts come about? What happened to all the grocery stores?
To understand this, we need to take a step back and start with this underlying trend: we have seen extraordinary consolidation in grocery retail. Five companies account for 50 percent of all food spending in the United States. Walmart alone captures every fourth dollar Americans spend on groceries. There are 42 subway areas where Walmart covers more than 50 percent of grocery spending, and there are some where it is more than 70 or 80 percent.
Walmart grew up in the food sector through practices that violate antitrust laws, but which we haven’t followed in many decades. One of the ways to grow was by selling groceries at a loss to drive smaller competitors out of business – a practice known as predatory pricing. Walmart made up for the lost grocery revenue on other goods, but independent grocers and small family-owned chains didn’t have that option. They couldn’t reach these prices and are thus in the red. If you’re a small business, you can only do this so long before you go down. Walmart can do it indefinitely. Many local grocery stores and small chains had to close.
Many of these businesses were in low-income areas and very small towns. When they went down, these communities were left without a supermarket. People then had to travel to another part of town, suburb, or a distant city to find a Walmart or other supermarket – or get by with what they could buy in convenience stores and fast food outlets .
“The revitalization of our antitrust policies, the revision of the land-use policy and the rethinking of capital and financing are crucial in solving the problem of food deserts.”
There are two factors responsible for 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. This is not only because these neighborhoods are low income, but also because, in the case of neighborhoods, these chains don’t have to figure out how to wedge one of their businesses into a small lot in a city. They’d rather start a business in the suburbs, which is a lot easier for them to do. Nor are they particularly interested in these communities.
At the same time, family-owned grocers interested in these locations have been ousted, marginalized, or even put out of business by the big chains. For entrepreneurs looking to open a grocery store in such a community, the biggest obstacle is getting a loan. The bank looks at you and says, “You are an independent grocer and you want to go to a low-income community. That’s two blows to you. We don’t think that’s a sure thing. ”
So, the big chains have the capital to serve these communities, but they’re not interested. And the local grocers who want to serve these communities face many barriers to capital access because of Walmart’s market power. This has left no full service grocery stores at all in many areas. (And the local stores that survived Walmart are now falling into dollar stores: Dollar General, Dollar Tree, and Family Dollar.)