Editorial: Chicago can’t force an unprofitable grocery store to remain open

Anyone closing a grocery store in a nonaffluent Chicago neighborhood is in for a world of criticism.

When Amazon announced it was closing its Whole Foods store in Englewood last year, an angry Mayor Lori Lightfoot called the decision a “gut blow.” And last month, when Walmart said it planned to close three of its locations on the South and West sides (plus one on the North Side), despite having highlighted its commitment to the city in 2020 as part of a pledge to advance racial equity, it was widely accused of hypocrisy.

After all, Walmart CEO Doug McMillon said in 2021: “Chicago will be an example of what’s possible when we leverage business, government and community organizations for the good of all.”

Things did not work out that way. Walmart knew it was going to get a lot of blowback, so it proactively explained itself in a long April 11 blog post. “Collectively,” the company wrote, “our Chicago stores have not been profitable since we opened the first one nearly 17 years ago — these stores lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years.”

It went on to say it had done its best.

“Over the years, we have tried many different strategies to improve the business performance of these locations, including building smaller stores, localizing product assortment and offering services beyond traditional retail. ... We have invested hundreds of millions of dollars in the city, including $70 million in the last couple years to upgrade our stores and build two new Walmart Health facilities and a Walmart Academy training center. It was hoped that these investments would help improve our stores’ performance. Unfortunately, these efforts have not materially improved the fundamental business challenges.”

That detailed explanation notwithstanding, Walmart was blasted.

Lightfoot accused the company of “unceremoniously abandoning these neighborhoods” and implied it was no longer a good-faith partner of the city.

The situation hardly is unique to Chicago. In San Francisco, Whole Foods also announced last month that it was closing “temporarily” a flagship downtown store in the city’s Mid-Market neighborhood, citing “worker safety,” words that tend to go over better these days than lack of profitability. It said it would only consider reopening the store, which had only existed for a year, if worker safety could be ensured. But even though Whole Foods did not explicitly complain about lack of profitability, the two factors obviously are linked. If the employees of a store do not feel safe, then neither do the customers.

All of these closings were unfortunate for those who relied upon them, but let’s be clear on one thing. You can’t force a public company that sells groceries to operate an unprofitable store for the long term and eat the loss.

Neither Whole Foods nor Walmart is a nonprofit, social service organization. They have to be responsible to both their shareholders and their employees.

With that in mind, the city needs to think carefully before it dangles major incentives to third-party developers with the idea of creating strip malls to attract major national chains. If Chicago is going to rely on investment from for-profit companies, it has to partner with them to help them thrive. And that, of course, starts with public safety for baristas, checkout staffers and baggers.

Frankly, it would often be a better return on the dollar, and a better service to neighborhood residents, for the city actually to run grocery stores itself rather than blow money on initial incentives.

The flashy openings with developers and politicians and the unrealistic expectations of a generally costly store like Whole Foods making things work in Englewood clearly have not worked out as hoped. That’s not to say it was not worth trying, or even trying again, albeit in a smarter way. But instead of merely reiterating that these stores should serve their communities, local politicians should focus on how to help them avoid losing money.

Not all the problems are due to a simple lack of business, of course. Walmart is not playing to its historic strength with a small-format store in an urban location, lacking the expansive parking and ease of delivery you can find in suburban locations. Others, including both Target and CVS, have figured this out better, although Target has closed its share of stores.

Recently, however, attention also has focused on a grocery chain called Save-A-Lot, which is enjoying an Englewood lease subsidized for the next several years by Amazon, which was (depending on your point of view) either trying to mitigate the bad publicity from its Whole Foods exit or do the right thing by the community.

That privately held chain, founded in downstate Cahokia in 1977, fully converted its some 900 locations in 2020 to licensee operations. The former Whole Foods site is run by a company called Yellow Banana, which is unpopular with some Englewood residents and officials, who protested the arrival of the Save-A-Lot store ahead of its planned grand opening this month. Some said they would have preferred an Aldi in the space.

We’re sure Aldi, not to mention many of its rivals, would be happy to do business anywhere it can make it work. All Chicagoans deserve access to fresh foods, and residents are right to hold Yellow Banana to its promise of upgrading the selection and the ambience inside its stores, just as the city is obligated to ensure it follows all food safety regulations.

But a grocery store with a lower cost structure than huge national chains is, in fact, a benefit to everyone here.

Yellow Banana cannot do much unilaterally about the soaring price of food, nor should be it charged with that obligation. But a busy, more affordable and efficiently run operation that does good business and takes only a reasonable profit has a far higher chance of succeeding and serving its customers over the long term.

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