What Walmart’s pullback from Chicago says about Corporate America’s limits
A line of Chicago mayors heavily courted Walmart over the last two decades, brushing aside community protests. And Walmart welcomed the opportunity to show cities it could be a strong corporate partner.
But now, Walmart is pulling back from Chicago.
The largest retailer in the country announced plans this week to close four of its eight stores in the city, citing growing financial losses. Three are in predominantly Black and low-income neighborhoods, and their closures with little warning mean residents — including elderly citizens and people without reliable transportation — will have to travel further to buy groceries and pick up their medications.
“These stores lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years,” Walmart said. Despite years of different strategies, the company said, it did not see a route to profitability for these stores. Walmart, which made $20.6 billion in 2022, did not specify why losses were growing in Chicago.
City leaders “used a lot of political capital and their trust were questioned, Now it’s kind of like, ‘I told you so,’” said Chicago Alderman-Elect Ronnie Mosley, who will represent a Chicago ward where one of the Walmarts is set to close. His predecessor, who is retiring, was a major proponent of drawing Walmart to Chicago.
Mayors and key political leaders had pushed to draw Walmart, despite protests from small businesses, labor groups and community activists. Critics pointed to studies that suggested a Walmart presence could push out mom-and-pop stores and drive down wages, as it had in smaller towns.
But, at the time, officials argued opening Walmarts would provide jobs, economic development and convenient places to shop for affordable groceries and pharmacy services in some of the city’s low-income communities.
Meanwhile Walmart, which rose mainly in rural and suburban areas, also fought hard to enter Chicago. Walmart saw it as a twofold opportunity: broaden its customer base while proving to skeptical officials in other cities that it was a strong corporate partner.
‘I told you so’
The closures are another example of the shortcomings of local governments and even national political leaders betting on leading chains to provide key public services and fill gaps.
If government couldn’t provide for a populace in desperate need of jobs and fresh foods, the thinking went, for-profit corporations would.
But in Chicago, that’s not what happened. A 2012 study of Walmart’s impact in Chicago found businesses closer to Walmart were significantly more likely to close than similar businesses farther away — and the number of jobs lost by nearby retail competitors essentially offset the number of jobs created at the new Walmart stores.
This is a particular issue in predominantly minority, low-income areas that experience economic neglect, and other chains have recently shuttered stores in these areas as well.
Whole Foods closed in Chicago earlier this year, along with CVS, Aldi and Save A Lot. In 2019, Target closed two stores, angering residents. Chains like Dollar General and Family Dollar are expanding in low-income areas, but they don’t sell fresh groceries.
Unlike local government, which is theoretically accountable to voters, companies answer only to their shareholders and don’t have an obligation to stay in communities if they aren’t making a profit.
Whether it’s handing over responsibility for providing public bathrooms to Starbucks and McDonald’s or vaccines and basic health services to CVS and Walgreens, the public is left vulnerable when these companies’ business priorities change or they close locations.
“We have asked business to solve problems that we don’t want government to solve anymore,” said Bryant Simon, a professor of history at Temple University who studies the role of Corporate America and government. “We’re happy to have them do it and then shocked when they act like a business again.”
Solving ‘food deserts’
A similar strategy to rely on national chains to help remedy so-called “food deserts” was a focus on the national level during the Obama administration. It too fell short.
Walmart, Walgreens (WBA), SuperValu and other store executives joined Michelle Obama at the White House in 2011 to announce a pledge to open a combined 1,500 stores in communities that have limited access to nutritious food by 2016.
But that effort stalled. The Associated Press found in 2015 that leading chains built just 250 new supermarkets in these areas.
“The assumption there is a single player in the nation that will work in every market is proving to not be true,” said Liz Abunaw, who founded Forty Acres Fresh Market, a startup grocer, in response to the lack of fresh food options on Chicago’s West Side. “Even in Chicago, the solutions differ by neighborhood.”
Placing a big chain in the middle of a struggling neighborhood is not an effective strategy alone, she said, and more holistic solutions are needed, including improving housing, jobs and public transportation: “It’s not one thing. All of those things go together.”
There also can be unintended consequences to chains opening in neighborhoods. Companies sometimes open, small retailers close – and then the chain closes, leaving a bigger void in some cases than when it first came in.
“The idea that Walmart did the city a great favor by moving in is highly debatable,” said David Merriman, a professor of public policy, management and analytics at the University of Illinois Chicago and co-author of the study of Walmart’s presence in Chicago.
Instead of relying on large companies to strengthen local economies, some experts say, another solution could be designing policies that better support smaller, family-owned supermarkets, co-operatives, and farmers’ markets such as Yellow Banana and ChiFresh Kitchen in Chicago.
“Their loss is one of the main reasons that communities lack grocery stores and other basic retail in the first place,” Abunaw said.
Dashed hopes in Chicago
Despite stiff resistance from unions, grassroots groups and some local leaders in Chicago, Walmart has been embraced by the city’s last three mayors as an economic development model.
In 2006, Chicago Mayor Richard M. Daley issued a rare veto to override a City Council bill that required big-box stores such as Walmart to pay workers a $10 minimum wage. In 2013, Mayor Rahm Emanuel cut the ribbon on a new Walmart in an underserved neighborhood, saying it was “another example of a company seeing an alignment of what is good for their bottom line with what is good for our neighborhoods.”
In 2020, Mayor Lori Lightfoot held a press conference with Walmart CEO Doug McMillon to announce the company would expand its investment in the city following local and national protests over George Floyd’s murder by police.
But the company struggled in Chicago. Its mammoth superstores, which are designed for people to drive to and make big shopping trips, have been less suited for city residents who tend to make smaller but more frequent trips to supermarkets.
Walmart tried opening smaller stores, known as neighborhood markets, that serve mostly groceries — but these lower profit margins than other merchandise like electronics or clothing. Walmart is closing neighborhood markets around the country, and three of the four stores closing in Chicago fall into that category.
In Chicago, Walmart is closing in both low-income and high-income areas, a sign that it’s struggling across the city. But it’s the stores in low-income areas that will feel the loss most.
“We are in an area where CVS and Walgreens have closed,” Alderman-Elect Mosley said. “Walmart has become the de-facto” store and the closure is “traumatizing.”
“Walmart is leaving and they may be doing what’s best for them,” he said. “Now I have to figure out with our community what’s best for us.”
Face it, they are closing because of crime and security. Shoplifting and safety for employees and customers is why they are leaving and the Democratic leaders have turned a blind eye to it.