The Wall Street Journal reports that Chicago is studying “whether to become the first big city to open a municipally owned grocery store.”
And while Pittsburgh did not go the full monty with its failed Hill District Shop ‘n Save a few years back, there was plenty of taxpayer dollars in the mix. It became a classic tale of government believing it knows better than the marketplace. Of course, it did not. The store failed.
(See https://www.alleghenyinstitute.org/whats-next-for-hill-district-grocery/)
As The Journal story noted last month, before Chicago does its best to proclaim it, too, knows better, it should consider the shouting-out-loud object lesson to be found in Erie, Kan.
But first, the Chicago story, a familiar tale of perhaps well-intentioned government action but certainly filled with command-economics hubris:
“[In September], 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,” The Journal reports.
“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.”
The Journal dutifully reports that “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.”
But it also cites the realities, some of which are dirty little secrets, ones that even the mention of risk the point-of-orderers being “canceled”:
“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.”
And lest we forget, more specifically, shoplifting writ large.
Back to Erie, Kan.
The city has overseen its grocery store since 2021. “(T)hings 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 the newspaper says “the challenge turned out to be bigger than officials had expected.”
“(S)ome 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 city-run market has been attempting to remedy things with a beefed-up produce section and other discounts.
Janssen, the city clerk, pressed to service when the former manager retired, “said the goal is to narrow losses to under $100,000 this year—out of the city’s total budget of $6 million—and keep improving from there.”
All this said, it’s clear that Erie Market would not be around without taxpayers’ support.
“To be sure, running a grocery store is a tough, low-margin business with tons of competition,” notes Eric Boehm, writing last month in Reason magazine. “There’s nothing shameful about a brand-new business losing money in that environment—unless that money belongs to taxpayers, many of whom probably aren’t even using the government-run store.”
Boehm reminds that the most famous failure of government-run grocery stores comes from the former Soviet Union where basic food items oftentimes were difficult to find.
“Soviet leader Boris Yeltsin’s 1989 visit to a Texas supermarket — where he was astounded by the variety and supply of goods on offer—has been credited with a significant role in the downfall of communism in Russia,” he says.
“But what’s happening in Erie, Kan., (and what could happen on a larger scale in Chicago)” — and, we would remind, what happened with the since-departed, government-commanded Shop ‘n Save in Pittsburgh’s Hill District) “is a useful reminder that the folly of government-run grocery stores is sadly not a historical relic like the USSR.”
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
