business news in context, analysis with attitude

The Wall Street Journal has a story about Erie, Kansas, a community of 1,000 people that started operating its own store in 2021.

"At the moment, things aren’t going especially well," the Journal writes.  "Erie Market … is losing money almost every month amid stiff competition from a Walmart 15 miles away and a Dollar General across the street. The store has slashed prices, cleared the shelves of expired items and put in a salad bar to try to bring more people through the door.

"But leaders aren’t giving up.

"'Without a grocery store, what are we going to do? It would kill this small town and it’s hard enough to keep it alive as it is,' said Erie City Council member Jason Thompson, a Republican who owns a trash-hauling business."

According to the story, "When Erie took over its grocery store in 2021, things went fairly well for the first year, said Jamie Janssen, Erie’s city clerk. The store made a profit for five of the first 12 months and lost only $18,000.

"But some of the initial enthusiasm for the store, which residents had supported in a poll, started to wane, and as Covid-19 eased, more people started shopping again at the Walmart in Parsons, about 15 miles away. Erie Market lost $132,000 in 2022, with only one profitable month. The store, across the street from a Dollar General, also failed to capitalize on its fresh vegetables and meats, letting those sections start to look drab and some merchandise go out of date, Janssen said. The losses have continued this year."

The Journal goes on:

"Erie is among a handful of cities across the U.S. that have taken over or started up grocery stores as a way to stave off decline and make it easier for residents to get access to fresh foods. All of them are small, but that could soon change.

"Last month, Chicago, population 2.7 million, launched a study on the feasibility of opening a municipally-owned grocer to get more fresh foods and spur economic development in a number of mostly low-income neighborhoods.

"Chicago, which has lost six groceries on its South and West sides in the past two years alone, aims to take advantage of a new $20 million state fund designed to address what are known as food deserts across Illinois. Studies show that lack of access to fresh foods can have big impacts on health outcomes and rob neighborhoods and entire towns of economic vitality.

"The departing stores in Chicago have cited poor margins and crime among reasons they have pulled out, prompting the Chicago Tribune’s editorial page to argue that the city won’t have any better luck than savvy national retailers."

KC's View:

While I respect Erie's efforts - and certainly understand why Chicago is considering this course of action - the hard question that needs to be asked is whether it makes economic sense for communities to operate stores that don't  - and maybe cannot - break even.

Community pride is a wonderful thing, but apparently in Erie it stops just shy of the front door to Erie Market.

(It is instructive that the community does not consider Dollar General to be a competitive grocery store.  (Love to see pictures of that store to see if it is a typical - which is to say, unimpressive - Dollar General.  If there are any MNB members in the Erie vicinity, I'd be happy to post them if you'll take some.)

The question is, would it make more economic sense to run shuttles to the Walmart 15 miles away?  Or open a delivery depot to which Walmart could deliver groceries ordered online?

As for Chicago, the city is big enough and the potential customer base large enough that it is at least possible that, if the right person were hired to run this enterprise, and given latitude to operate effectively, it could work.  Maybe.  (A big maybe, I concede.)