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Is Walmart’s March into Cities Helping or Hurting?

Having saturated the rural landscape, shuttering local stores in small town America along the way, now, in the wake of stagnant sales and increased competition, Walmart desperately needs to expand into urban markets.

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And what better urban market than one full of eight million people? While the big box retailer is eager to enter the Big Apple, challenges loom large. Given the negative reputation Walmart has earned for being hostile to workers among other problems, many New Yorkers are skeptical, to put it mildly.

To counter the opposition, Walmart is positioning itself as the solution to urban food deserts – areas where finding real food is next to impossible. But as Anna Lappé has eloquently argued, the big box chain isn’t the answer: “Let’s be clear, expanding into so-called food deserts is an expansion strategy for Walmart. It’s not a charitable move.”

Research Shows Walmart Kills Both Jobs and Food Access

Now a report released last month by Manhattan Borough President Scott Stringer concludes that not only would bringing Walmart to Harlem spell disaster for labor, but it could also make an already dire food access problem there even worse.

Based on data from Chicago’s negative experience, the report found that within two years of a Walmart store opening in New York:

- Between 48 and 66 fresh food retailers could go out of business, representing a net loss of between 56,500 to 82,000 square feet of food retail within a one-mile radius;

- Closure of these stores would represent a loss of 50 to 57 percent of the fresh food retail square footage added in recent years by New York City’s incentive program;

- All of this would negate more than $4 million in public finance investment and four years of effort to improve fresh food access in the area.

As Stringer explained, Walmart shouldn’t be undermining city programs to improve fresh food availability: “Walmart would be a bane, not a boon, to the health food economy of Harlem – or any other New York City neighborhood.”

Moreover, previous economic analysis has shown that Walmart’s promise of jobs doesn’t pan out either. In a report from last summer called “The Walmartization of New York City,” researchers at the City University of New York concluded that, “despite Walmart’s promises of jobs and lower prices for the community, the longer term impact is actually the opposite.”

Assuming Walmart opened the 159 stores needed to reach 21 percent grocery market share in New York City (the same proportion the company enjoys nationally), the impact would be a net loss of almost 4,000 jobs, and a loss of more than $453 million in wages per year for all remaining workers.

What about the new Walmart jobs? According to the report, 4,279 new low-wage Walmart workers would have to “rely on social services to make ends meet, costing New York taxpayers over $4 million per year” in health care benefits alone. This, in a city where the mayor has asked for $2 billion in budget cuts.

Current Walmart Locations Confirm Bleak Outlook

Other areas of the country have already had real world experiences to back up these projected findings. According to New York’s Food for Thought report, of all the employers in Ohio, Walmart has the greatest number of associates and dependents enrolled in Medicaid, which in 2009 cost taxpayers $44.8 million.

Similarly, a 2004 study found that for each of California’s whopping 44,000 Walmart employees, taxpayers had to spend $730 on health care and $1,222 on other forms of state and federal assistance such as (ironically) food stamps.

In 2006, Walmart entered Chicago and recently convinced local officials to approve two additional locations, including (after a long battle) on the city’s South Side. How have things fared so far in the original Chicago location? Not so well.

A three-year study released by Loyola University Chicago in 2010 revealed that Walmart had not enhanced retail activity or even employment opportunities. In fact, “the probability of a local retailer going out of business during the study period was significantly higher for establishments close to Walmart’s location.” Specifically, researchers found that a nearby business had about a 40 percent chance of closing over a two-year period – not very good odds.

If You Can’t Beat Them, Buy Them

Of course Walmart paints an entirely different picture, and is spending a ton of money to hide these sobering facts in a massive PR campaign. According to the Walmartization report, in the first half of 2011 alone, the company spent $2.1 million lobbying in New York, as much as they spent there in the past four years combined. There’s even a dedicated website complete with a “fact-checker” and the heartwarming tagline, “Helping NYC Save Money and Live Better.”

Philanthropy is another time-honored corporate tactic, often used to buy silence from critics, curry favor with community leaders, or, in this case, grease the wheels to gain entry into a reluctant-but-lucrative market.

In December, Walmart announced a combined gift of $250,000 to five various New York City charities, including a home food delivery service and a soup kitchen. Of course $250K is chump change to a company whose net sales topped $405 billion in 2010, but to these five groups it no doubt means a lot. Moreover, in its press release, Walmart made sure to point out the company’s “more than $13 million” in donations in New York City since 2007. (Similarly, Walmart pledged to donate $20 million to Chicago charities.)

But Walmart will need a lot more than a few million dollars in tax-deductible contributions to make up for all the job losses, decrease in available fresh food (and even increased obesity) that could befall New Yorkers.

Other cities should also brace themselves, as the company is opening four stores in Washington, D.C. later this year, with additional area sites planned. Other locations on the agenda include Boston and San Francisco. But mostly the company is keeping quiet about its urban expansion agenda, at least publicly. Last year in Boston, the company was said to be “quietly chatting up city officials” while scouting neighborhoods.

I shudder to think of the consequences to American’s already suffering urban populations if Walmart succeeds in duplicating its rural retail takeover. What to do about it? Support the United Food and Commercial Workers, which has an important campaign called Making Change at Walmart. See also the Big Box Tool Kit, which is chock-full of news and practical resources. Communities can work together to fight back, we just have to act before it’s too late.

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Michele Simon is a public health lawyer specializing in industry marketing and lobbying tactics. She is the author of “Appetite for Profit: How the Food Industry Undermines Our Health and How to Fight Back” and president of Eat Drink Politics, a consulting firm. Her website is Appetite for Profit.

© Food Safety News
  • http://www.mcedp.org Teresa

    Thank you from the bottom of my heart! Big box stores~ particularly WalMart truly do restrict consumer choice when they are the “only game in town.” Keep fighting the good fight!

  • Lorenzo Lopez, Walmart

    My name is Lorenzo Lopez and I’m with Walmart’s corporate communications team. I thought it was important to post a comment about Walmart serving as a solution to food deserts.
    We’re committed to providing our customers with healthier and more affordable food choices. The commitment includes reformulating everyday packaged food items and saving customers money on fruits and vegetables, as well as giving communities increased access to grocery options by bringing stores to areas with limited or no access fresh, affordable food. In July of 2011 we committed to opening up to 300 stores serving USDA food deserts by 2016, reaching about 800,000 people in under-served urban and rural areas. Just as important to mention, these stores will also bring more than 40,000 jobs.
    Unfortunately, the studies referenced in the article fail to show how our stores often serve as magnets for other new businesses in the communities we serve. Actually, Chicago is a great example of the positive impact we can have on a community. For information about the real impact we’ve had in Chicago, just visit http://www.walmartchicago.com/loyola/ to read what others are saying about the benefits Walmart can bring and to learn about the flaws of the Loyola study.
    We know addressing food deserts will take the collective efforts of both the public and private sectors. We can help play a role and will continue our work to find solutions to this issue.

  • Barbara Griffith

    I think the reason that there seems a hatred for Wal Mart is it because it’s not Union? I happen to like Wal Mart. I live in Washington state and have been going to the Wal Mart at the Mall in Auburn ever since it opened a number of years ago. They built the new Supercenter that opened up last year. I am a member of Sam’s Club in the same Mall and I get all of my big jugs of dish soap and everything else I need there. By the way, I don’t work for Wal Mart but at least I have a choice about where I can find the best buys and these smaller stores aren’t always the cheapest place to go. Now days the shopper has to be a smart bargain hunter.

  • Allen

    The high cost of low prices:
    http://www.walmartmovie.com/

  • Cyndy

    In my WalMart the pre-packaged foods (mostly junk food) are cheaper than the fruits and vegetables, so in my opinion, this doesn’t help the people who are on limited incomes to eat healthy. I priced a bag of oranges in my local WalMart and they were over $1 more than my local grocery store. Also, you have to pay a membership fee to join the Sam’s Club, so again, if you don’t have the money to begin with, how in the world can you afford a membership fee. BTW, BJ’s Warehouse is cheaper in their membership fees.

  • LoraJ

    If Walmart wants to really help NY and any other ‘food desert’ they have the money to open stores that pay their workers and their suppliers a living wage – but they don’t because they are greedy greedy greedy.
    NEW YORK CITY – PLEASE PLEASE PLEASE hold out and keep NY Walmart free!!!!!!! It’s not in your best long term interest.

  • tb

    I’m no fan of walmart, but they do have fresh foods, maybe not the best, but they aren’t processed. It’s also interesting to see the writer mention the unions.

  • JDG

    I am not a Walmart shopper nor do I own their company stock, but I completely support their growth efforts.
    What the economically ignorant Michele Simon (the author) doesn’t realize is that when a company like Walmart comes to town with lower prices and puts others out of business, the local economy goes through a market correction. It’s not pretty, but the remaining resources (labor force, physical assets, and land) can be put to more efficient use in society, which can take a couple years. If they want to stay in busines, they can reduce their prices, reduce their costs, improve their products, or all three.
    “Similarly, a 2004 study found that for each of California’s whopping 44,000 Walmart employees, taxpayers had to spend $730 on health care and $1,222 on other forms of state and federal assistance such as (ironically) food stamps.”
    How is that Walmart’s fault? They pay above the federal minimum wage for entry level positions. Nothing is stopping you, Michele, from opening your own grocery store and paying employees double the wages of Walmart. Put your money where your mouth is and make a real change in society instead of being a paper-pushing lawyer/activist.
    “In December, Walmart announced a combined gift of $250,000 to five various New York City charities, including a home food delivery service and a soup kitchen. Of course $250K is chump change to a company whose net sales topped $405 billion in 2010.”
    You are the only person I know of that looks down on a $250k donation….Unreal. It’s only one donation to one city and I’m sure it’s more than you’ve ever donated.
    “What to do about it? Support the United Food and Commercial Workers, which has an important campaign called Making Change at Walmart.”
    Bingo! Michele Simon is a shill for the unions and that’s all we needed to know. When unions lose members after their fat labor contracts shutter the doors of a business, she loses money and supporters.

  • Janet Camp

    @JDG
    Your screed is very short on facts and way over the top in bombast. I may not always agree with everything Ms. Simon says, but she is hardly “ignorant”. Why is supporting living wages and benefits for workers “shilling” for unions?
    It seems odd that you supposedly do not shop at or own stock in WalMart–why ever not?
    Many of us who would take more of a middle path on the box store issue fail to see why WalMart cannot invest some of its profit in better benefits and wages rather than charitable donations which are seemingly targeted to groups that oppose their growth strategies. If people make a living wage, they won’t need charity, don’t you think?

  • http://casualkitchen.blogspot.com/ Dan @ Casual Kitchen

    I’m no fan of Wal-Mart either but I do smell a logical fallacy in this article. If you open a store in a true food desert, there shouldn’t be any food stores there to drive out of business, right? Or have we been worrying about food deserts that don’t really exist?