« Repugnance is Repugnant | Main | Trudie and Prudie meet »
Why are there no grocery stores in poor neighborhoods?
Well, there are some, you will find Ralph's all over Los Angeles. But why aren't there more? (This query is posed here, here, and here, among other places.) Factor #1 in my view is lack of cars. Living in an inner city has its downsides, to say the least, but at least you don't have to buy a car. Yet the modern grocery store is designed for car transport, both how you get there and how you get the groceries away and of course the radius of advertising. With fewer cars per capita the tendency is for smaller, more local stores, which is precisely what we see in poor neighborhoods. Not surprisingly poor people are most likely to have cars in LA, and thus most likely to have grocery stores there as well. For that matter real grocery stores are not all that common in wealthy but relatively carless parts of major cities, such as Manhattan.
Crime is surely a factor as well, what do you all think and what other natural experiments come to mind?
Posted by Tyler Cowen on November 16, 2007 at 10:02 AM in Food and Drink | Permalink
Comments
Grocery stores tend to be much larger than a typical store and the price of real estate is high when you don't have many options vs the suburbs where you could build anywhere and have people drive to it.
The flip side to this is the various grocery delivery services (Amazon Fresh comes to mind, the various local grocery stores are trying it out as well) can only really work in dense urban areas.
Seattle's going to get a grocery store downtown which hasn't had one in over 25 years. There is a Ralph's (small) and the Pike Place Market (kinda fun). A Whole Foods moved in just north of downtown as well.
Posted by: BlogReader at Nov 16, 2007 10:41:15 AM
I think crime is probably a greater factor than you give credit. Margins at a grocery store are extremely slim (i think 1-5%), so any theft is far more damaging to its ability to continue operating than, say, an electronics store with margins of 20%.
Also, I'm not exactly sure how you go from claiming there are no grocery stores in poor neighborhoods to sayig that poor people are most likely to own cars and therefore have grocery stores. The logic doesn't really flow for me.
Posted by: Brian at Nov 16, 2007 10:43:12 AM
In the Hyde Park neighborhood of Chicago--the UofC's relatively prosperous neighborhood, surrounded by poor neighborhoods--the answer may soon turn out to be "incompetent management on the part of the grocery co-op board." See ChiTrib here.
Posted by: ALB at Nov 16, 2007 10:47:45 AM
There are tons of grocery stores where I live in Manhattan. They're smaller than the suburban ones, but there are two within a block of me in each direction. They just happen to deliver to get over the carless problem.
Posted by: Mo at Nov 16, 2007 10:48:01 AM
There are tons of grocery stores where I live in Manhattan. They're smaller than the suburban ones, but there are two within a block of me in each direction. They just happen to deliver to get over the carless problem.
Posted by: Mo at Nov 16, 2007 10:48:27 AM
It has not been very many years (10 or 15) since chain grocery stores began to take credit cards. Prior to that, shopping at a supermarket required cash or a check. AND small grocers were obliged to run a line of credit for their customers, which was a key factor for poor people to eat from payday to payday.
The various writers about the lack of supermarkets in poor areas agree that it takes time for a big chain to alter its policy of store location. Perhaps now that credit cards are both more widely distributed among the poor (I think) and all supermarkets accept them this reason will be removed. Has anyone checked on the smaller stores in poor neighborhoods now -- are they still serving as a sort of loan source? Do more poor people have credit cards that could be used this way?
Please note: I think running up a credit card bill at the supermarket is highly disfunctional, I'm not saying it solves any problems, just proposing one factor in observed data.
Posted by: mae at Nov 16, 2007 10:49:18 AM
It's interesting to see the effects on pricing that having fewer grocery stores in poor neighborhoods creates. With less substitutes grocery stores are able to actually charge more per item in poor areas. This seems like it would create a big incentive for competition to come in and absorb the above normal profit. The reason it doesn't I think has to do with crime. Crime is worked into the store's costs.
Posted by: justin at Nov 16, 2007 10:52:22 AM
In East Palo Alto, CA, near where I live, there was no grocery store within the city limits for many years. I think that may have changed recently, however. Fear of shoplifting is the reason why no-one was willing to open a grocery store in the area, which is infamous for a high rate of crime.
When I was working for a grocery store in high school, in an affluent area, the management was incredibly paranoid about shoplifting. If they are so paranoid in an affluent area, one can only imagine how paranoid they would be in areas that have high rates of crime, which are almost always poor areas.
Grocery operates on very thin profit margins, much thinner than any other type of retail, and shoplifting is a huge deal for stores.
Posted by: Tyler Blalock at Nov 16, 2007 10:57:52 AM
1. Mo, hate to break it to you, but there aren't any parts of Manhattan that count as a gritty inner city any more.
2. The outer parts of Brooklyn, however, like East New York, do, and are woefully underserved by grocery stores.
3. Supporting the car theory: there's a large Pathmark grocery store with a decent selection of food and decent prices at Atlantic & Flatbush. It's on top of a large subway interchange that connects out to the outer parts of the borough, like East New York. It's the busiest grocery store I've ever seen – and there’s always a huge scrum of gypsy cabs and livery vehicles outside, to take people home with what are often monumentally huge grocery purchases.
Posted by: D. Barnes at Nov 16, 2007 11:00:20 AM
D. Barnes,
I know. I didn't claim that Manhattan counts as gritty inner city. My comment was in response to this statement by Tyler (emphasis mine):
For that matter real grocery stores are not all that common in wealthy but relatively carless parts of major cities, such as Manhattan.
Posted by: Mo at Nov 16, 2007 11:08:50 AM
Mo, you're right, my apologies. We're in violent agreement.
Posted by: D. Barnes at Nov 16, 2007 11:20:41 AM
To think outside of crime and size, Most grocery store chains have a common design or just a couple of designs. They all have the high mark up, higher profit centers like Bakery, flowers, fresh fish, etc.
The business plan of same store plan, same profit centers, same employment practices just do not work as well in a neighborhood that is poor.
Some grocery store chains such as H.E.B. in San Antonio used to allow local manager to adjust product lines, market schements, and layout to fit the neighborhoods. Thus, an HEB in poorer South San Antonio carried different products and in a different floor plan than the HEB in richer, much whiter Alamo Heights.
Posted by: superdestroyer at Nov 16, 2007 11:21:06 AM
I lived in central Tokyo (within the Yamanote line) for a number of years. There shopping appeared to be built around foot and car, and shops were small, though some were small supermarkets. Homes were small also, so individuals in effect stored their food in local shops, dropping by every day or so to replenish their larders. Much of this seems analogous to the pattern in older US cities. In addition, until the passage of the Large Scale Store Act, the small retailers in Japan had effectively blocked the creation of larger shops. This too has its parallels in the US with some cities apparently trying to block the entry of Walmart.
Posted by: Acad Ronin at Nov 16, 2007 11:26:21 AM
I disagree with some of the facts here. Grocery stores are quite common in the wealthy parts of manhattan--there are 3 within two blocks of me at 96th & Broadway. Even if this is an outlier, of the several places I've lived in Manhattan none have been more than a couple blocks from a major grocery store. In the poorer neighborhoods, however, you can go for blocks and blocks with nothing. Furthermore, what grocery stores exist do not obviously offer delivery, which is a common service for large orders in wealthier neighborhoods (due to the car dilemma posed above).
Philadelphia agrees more with your statement of facts; the large supermarkets are all very far from my home in one of the wealthier areas. However, West Philly has one supermarket next to the Penn campus and that's it.
These are anecdotes, but so are Tyler's; I think that ultimately I disagree with Tyler's set of facts. Obviously I disagree with the conclusions.
Posted by: at Nov 16, 2007 11:31:38 AM
It's not just ownership of cars, it's parking. Nowhere to park and it's a hassle to drive downtown anyway.
Mostly what I see are a bunch of small independent "markets" that carry a limited selection of foods. Oftentimes, they will cater to the population (Hispanic, Asian, Middle East, etc).
Another thing I notice, the more rural the area, the larger the store. Out in the country, you have the massive Wal-Mart with the grocery store. Suburbs, you have the chain grocers (revenue maximizers) along with your "high end" grocers (product differentiation). Uptown, you have the boutique grocers with limited parking and building space. Downtown, it's the corner market stores the size of a gas station with no parking.
Probably a correlation between many factors, most of which I'm assuming will be availability/price of land.
Posted by: Jarick at Nov 16, 2007 11:43:09 AM
I once had a neighbor who was CEO of a major grocery chain. He quite openly (and off the record) discussed their pricing policy with me. Margins were very thin, although the chain was consistently profitable. He said they had no problems charging different prices in different markets. However, charging different prices in the same market caused big problems, because consumers found out pretty quickly what was going on. Since inner city stores have higher costs than suburban ones (crime, security, pilferage), it was generally not profitable to operate them. He said that, in large markets, they would open one or two inner city stores, simply for PR purposes, but that they never made money on them.
Posted by: Ned at Nov 16, 2007 11:49:13 AM
The last of the big box grocery chains left Detroit last summer. Too much 'slippage', ie, theft, and 'difficulty in staffing'. The main problems in poor neighborhoods are due to poor people, not the other way around.
see:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070705/METRO/707050349
Posted by: eric at Nov 16, 2007 11:51:20 AM
Don't know the answer but I do know that Lucky Supermarkets had its headquarters in Oakland, California, and maintained a number of older stores there up through the mid-1990's, when Albertson's bought the chain. The stores were relatively small by today's standards. Within a few years, most were closed because they were not profitable.
Posted by: Randy (Internet Ronin) at Nov 16, 2007 11:54:54 AM
Just to add a data point: I never heard about this here in the Netherlands, and as far as I can tell the poor areas in my city have no specific lack of supermarkets. This might be a Dutch phenomenon (people here use bikes to go supermarkets, the rich even more than the poor), but I used to live in UK in the poorest part of the city, and there were more supermarkets han I ever saw in Holland, ranging from miniature Pakistani shops to a 50-checkout-desks Tesco's and a Lidl. ( The Lidl is, just like the Aldi, a German low-cost supermarket concept aimed squarely at poor people)
If there are no grocery shops in your poor areas, where do people shop?
Posted by: GreatZamfir at Nov 16, 2007 12:02:34 PM
Why are there poor neighborhoods in the most prosperous country in the world?
Posted by: Pritesh at Nov 16, 2007 12:04:51 PM
When I lived in Nashville in mid-1990s, I had an Arabic friend who had recently opened a small grocery store with a couple of partners in a very poor area. I went to visit him and see his store one day, and in the half-hour I was in the store chatting, he caught a teenage girl shoplifting redhanded. He let her go with a warning that he would tell her mother, who he apparently knew, if he caught her again, but she seemed totally unremorseful. He told me this happened multiple times daily.
Posted by: Thelonious_Nick at Nov 16, 2007 12:09:45 PM
"Why are there poor neighborhoods in the most prosperous country in the world?"
Why are there billionaires in one the poorest countries in the world?
Posted by: Dennis Mangan at Nov 16, 2007 12:09:59 PM
One grocery store manager told me that a prohibitive problem is the cost of plate glass insurance. People expect a grocery store to have a huge amount of glass frontage -- indeed, that's how people recognize grocery stores. Glass insurance rates vary tremendously by neighborhood.
A side effect of this is that people perceive poor neighborhoods as having even fewer such stores than they do, because what stores there are have atypical storefronts.
Posted by: Grant Gould at Nov 16, 2007 12:26:19 PM
"Why are there poor neighborhoods in the most prosperous country in the world?"
Well for one thing they are only relatively poor.
Posted by: Floccina at Nov 16, 2007 12:38:32 PM
Do people in these neighborhoods sell groceries from cars trunks? This could also keep grocery stores away as these underground economy marketers would not pay taxes and so could have lower prices.
This is only tangentially related, but a black friend of mine told me that you could buy black market antibiotics in the poor majority black neighborhoods in our city.
Posted by: Floccina at Nov 16, 2007 12:49:10 PM
