How did food deserts come into being? What happened to all the stores?
To understand this, we need to step back and start with the following trend: We have seen remarkable consolidation in the food retail sector. Five companies accept 50 percent of all food consumption in the United States. Only Walmart catches one in every four dollars Americans spend on food. There are forty-two subway areas where Walmart accounts for more than 50 percent of grocery consumption, and has more than 70 or 80 percent.
Walmart has grown in the food sector by engaging in practices that violate antitrust laws, but that we haven’t prosecuted in decades. One way it grew was to sell groceries at a loss to drive smaller competitors out of business – a practice known as predatory pricing. Walmart made up for lost grocery income with other goods, but family-run, independent grocery stores and small chains did not have that option. They could not measure up to these prices and thus operate in the red. If you’re a small company, you can only do that for so long before you fail. Walmart can do that indefinitely. So many 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 passed, those communities were left without a supermarket. People then had to travel to another part of town, to the suburbs, or to a distant city to find Walmart or some other supermarket – or go through what they could buy at grocery stores and fast food stores.
“Reviving our antitrust policy, reviewing land use policies, and reviewing capital and financing are crucial to addressing the food desert issue.”
There are two factors behind the survival of food deserts today. On the one hand, large supermarket chains do not 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 urban neighborhoods, these chains do not want to have to figure out how to squeeze one of their stores into a small plot in the city. They would rather establish a store in the suburbs, which they can do much easier. They are also not particularly interested in those communities.
At the same time, family grocers who they are interested in these locations, large chains have squeezed out, marginalized, or even driven away business. For entrepreneurs who would like to enter and start a grocery store in a community like this, the biggest hurdle is the possibility of credit. The bank looks at them and says, “You are an independent grocery store i you want to go to a low-income community. Those are two blows against you. We don’t think it’s a safe bet. ”
So: Big chains have capital to serve these communities, but they are not interested. And local grocers who would like to serve these communities face many barriers to accessing capital because of Walmart’s market power. As a result, many areas do not have food stores at all. (And local shops that survived Walmart they are now falling into dollar stores: General Dollar, Dollar Tree and Family Dollar.)