The Impact of Big Chains Leaving Urban Centers

Monday - December 18 2023, 09:48 UTC - 11 months ago

As city centers become gentrified and more attractive to large chains, they are also becoming more expensive and thus prices every year. This leads to a contraction of retail stores in inner cities that is lopsidedly affecting lower-income neighborhoods. Analysts say the best solution is to strengthen small businesses and provide access to online shopping so that bigger chains pullback is not so detrimental.

Holiday shopping is in full swing, but city dwellers may have fewer options for buying in person than they did a few years ago. That’s because many large chain stores are pulling out of central cities. This trend has been building for several years. Target made national headlines in 2018 when it closed its store in a predominantly Black Baltimore neighborhood after just 10 years of operation. COVID-19 sped things up by cutting foot traffic in city centers and boosting online commerce .

Target has closed additional stores in Chicago, Milwaukee, New York, San Francisco, Seattle and Portland, Oregon. Walmart, CVS, Rite Aid and Walgreens have also closed many urban stores. Closures have spread to many suburbs and small towns. Retailers saddled with high debt, overexpansion, shoplifting losses, slumping sales and online competition are shedding stores fast. But this contraction lopsidedly affects city dwellers, who often lack the shopping options and price competition suburbanites enjoy .

Many news reports, particularly from conservative outlets, have blamed lawlessness and weak leadership by progressive city governments. In my view, however, there’s another important factor: flawed corporate strategies. The concept of letting shoppers serve themselves dates back to 1879, when Frank W. Woolworth opened his first store in Utica, New York. Its successors grew into the F.W. Woolworth chain of "five-and-dime" discount dry goods stores, which became fixtures of hundreds of cities, suburbs and small towns in the early 20th century .

Food stores followed suit in the early 1900s, beginning with the Alpha Beta chain in California in 1914 and Piggly Wiggly in Tennessee in 1916. Instead of having clerks gather customers’ orders from store shelves, these stores let shoppers loose in the aisles, then allowed them to pay at the end of their visit. This approach seeded the meteoric rise of "big box" stores like Walmart and Target in the mid-20th century .

With their low manufacturing costs, streamlined logistics, minimally staffed stores, national advertising and vast inventories, big-box chains drove many small retailers out of business – and most Woolworth stores, too. Self-service came to rule the suburbs, where big chains could build mega-stores with plenty of parking. But they were rare in central cities for most of the 20th century, except for a few affluent enclaves, such as West Los Angeles or Chicago’s North Side .

Generally, these chains avoided poor neighborhoods and many downtowns altogether. As shoppers increasingly gravitated to suburban malls, many urban neighborhoods became retail deserts, with few vendors meeting local needs. Those that endured, often run by small-scale entrepreneurs, typically were businesses that offered a single type of product, such as grocery stores, delicatessens or pharmacies .

Chains discover downtowns Harvard management professor Michael Porter drew attention to the lack of retail services in densely populated urban neighborhoods in a seminal 1995 article, "The Competitive Advantage of the Inner City." Economic development, Porter argued, was key to revitalizing the inner cities. A wave of gentrification in the past two decades has made inner cities attractive to chains, many of which have opened profitable shops in these newly revitalized neighborhoods .

However, due to growing rents and labor costs, there has been a pullback in recent years. Today, a vast swath of central cities is once again underserved or abandoned by large chain stores, once again leaving many lower-income neighborhoods which lack other shops to get their supplies and goods. Analysts say that for cities, the way to address this is to strengthen small businesses, afford all neighborhoods with grocery stores, drugstores, fitness centers and other facilities .

To make shopping easier for those living in retail deserts, the solution may lie not in big stores, but in online shopping. Governments can provide access to technology and training to residents in these neighborhoods, as well as to small businesses, which can still do their business online. This way, they can offer the services that larger chains do but at a fraction of the cost.