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With Walmart, Savings Come at a Price

Green: Money and Sustainability Working Together Part 6 of 10: Growing Food Locally

tl;dr: Walmart ends up hurting small towns, not helping them

You may have heard the saying "Be careful what you wish for because you just might get it." Sometimes, the best day of a small town's existence will turn into its worst. That day is when a nameless big box superstore, oh, let's call it Schmalmart comes into town. People invariably fall in love with the incredibly cheap prices of goods made by child labour in Asia. Not to mention that the local mom-and-pop stores can't come close to the prices that Schmalmart charges for produce. As the local residents become addicted to the low costs of everything from lettuce and diapers to baseball helmets and Halloween decorations all in one location, the smaller stores cannot compete and ultimately go out of business. Now Walmart (we can dispense with the pretence of not naming names, right?) has a complete monopoly as the only grocery store in the area, which isn't a bad thing, right? I mean they have the best prices around! Well, here's the problem. Walmart has lower profit margins because it can employ something called economies of scale. They make less per transaction, but they have far more transactions than anyone else until those transactions don't cover the cost of doing business in certain small towns. Walmart created a specific kind of store to compete with small-town grocery stores, called Walmart Express. These are smaller stores that were specifically designed to cater to the small-town market or specific neighbourhoods. Many of these locations were chosen because small-town officials wooed Walmart to come. They offered deals too good for Walmart to resist, and the next thing you know, a brand new Walmart Express arrives! This experiment apparently has failed because all 160+ Walmart Express locations have either closed or are scheduled to close by the end of this year. Walmart frequently closes "underperforming" stores, but in the case of the Walmart Express stores, those stores underperformed because they shouldn't have been there in the first place. What happens then is that Walmart simply leaves, looking for greener pastures and I'll explain what greener pastures look like momentarily. The impact of Walmart Express's departure on that small town is that it now has no grocery store at all, and its residents now have to drive to another town to get their produce. And, unbelievably, do you know where they go? You guessed it, to the closest Walmart, the exact same chain that put them in this situation in the first place. Simply unbelievable. It's almost like a corporate abusive relationship.

Many towns desperately want a Walmart. This is because many towns are run by very short-sighted people. They will give tax breaks and incentives galore to have the privilege of Walmart coming in and injecting that boost to the local community of all those minimum wage part-time jobs that they create! In the spirit of objectivity, residents will enjoy savings at Walmart more than at other options, which is a benefit, but at what cost? Short-term gain all too frequently ends up costing so much more in the long run. Here is a list of some of the benefits that Walmart has been given by municipalities to come to their town or city:

Free or Reduced Price Land

Infrastructure Assistance

Tax Increment Financing

Property Tax Breaks

State Corporate Income Tax Credits

Sales Tax Rebates

Enterprise Zone Status

Job Training and Worker Recruitment Funding

Tax Exempt Bond Funding

General Grants

There are some estimates that Walmart receives over $6 billion in government subsidies every year. When you look at the overall impact of a "Walmart economy", this number might actually be pretty low. This is because many Walmart employees are paid such low wages and since they aren't full-time employees, they need to go on government assistance in the form of welfare and food stamps. By the way, that cost is borne by us, the taxpayers. So not only are your local government officials often "selling the farm" to get Walmart into town, but you bear the additional cost of subsidizing the employees that end up working there. This is not a very sustainable method of getting goods to homes by anyone's definition except for Walmart's. Also, those hidden costs start adding up pretty quickly and can exceed whatever short-term savings are presented to the residents. And remember, this requires Walmart to stay, which is no guarantee.

I said I would explain what greener pastures look like to Walmart, so let's look at that now. A greener pasture is any nearby municipality that can offer better deals in the form of tax breaks and incentives than they are getting now. Walmart feels no sense of loyalty to remain in a town where they pushed out all of the competition. Walmart uses the model popularized by Jack Welch of GE, which is to get rid of the bottom 10% every year. To be fair, Walmart is not the only company that employs this strategy. Pro sports teams move to any city willing to build them a new stadium, so it's not like Walmart is unique in its tactics. However, what is harmful is the vacuum that they leave behind because residents in a Walmart-less town don't walk or take their bikes to the nearest location. Nope, they hop in their vehicles and drive to the next town over. This creates unnecessary carbon emissions. Frequently, if there is a replacement that pops up, it is one of those dollar stores - Dollar General, Family Dollar, Dollar Tree, etc. and the impact of those stores replacing what Walmart offered is hardly any better.

Like many things in our lives, the food supply chain, as incredible as it is, can be very fragile at times. We have faced several shortages recently that highlight this, the most recent one as of this blog post is the Great Egg Shortage of Winter 2023. Egg prices skyrocketed, largely due to the fact that the US had to cull 50 million chickens last year due to bird flu. Losing that many chickens at one time does tend to impact supply in a big way. The vast majority of those chickens were located at superfarms, with 52.6% of all egg production coming from just 10 companies. The largest egg producer is Cal-Maine foods, with over 46 million chickens. When you have a market dominated by few players, and then distribution controlled by even fewer entities, what ends up happening is that the consumer is the one who ends up experiencing the discomfort of higher prices. In order to protect consumers, competition has always been something that has been encouraged in this country. If there is no competition present, then we find ourselves in a monopolistic environment where one company has absolute control of supply and pricing.

For a long time in this country, we hated monopolies. The government would famously break up companies that were simply too large and had too much power. Many experts argue that Walmart is still technically an oligopoly because they only enjoy 20% of the overall US market share of grocery stores. As you can see from this 2020 chart of top grocery stores by sales below, while Walmart may have competition, the next true grocery store - Kroger, lags far behind it. In a truly competitive environment, higher costs can be shouldered by both the companies and the consumer, making the experience less painful for all involved. However, in a monopolistic or oligopolistic scenario, who do you think is going to incur the higher cost, the few companies that offer those goods or you, the consumer? Well, I think you know the answer since you're the one paying five times the normal price for eggs or orange juice, beef, lettuce, etc.

Small towns should be investing in enhancing local food production and distribution. Whether that comes in the form of direct programs like community gardens and co-ops or providing tax breaks for establishing permanent farmers' markets, we have an opportunity to be less reliant on big-box stores for at least some of the goods that we consume on a regular basis. At Greenheart Partners, we are developing a module called Urban Gardening, which teaches people how to grow things like herbs, tomatoes, onions, and other vegetables from their home, whether it be in a small garden outside, or using window boxes or patio planters to grow their own produce. We are not the only ones doing work in this space. There are many towns that have programs that are solving the food desert problem with collective gardening initiatives. We'll talk about this more in a future post in this series about Sustainability Equity and Justice.

Look, I know we can't grow our own Triscuits locally. I also understand that it's not easy to grow pineapples in North Carolina. However, if we are growing other things like apples, corn, potatoes, etc. locally, then we can afford to pay higher prices for things that we can't produce on our own. The cost of a dozen eggs coming from a local producer might be more than the carton at Walmart, but the local producer might not be exposed to the same issues that the mega-corporation is facing either. Growing local and buying local protects communities. It consists of neighbours taking care of each other, encouraging those mom-and-pop stores, and tackling challenges like scarcity together. Those shop owners are the constituents of the same local government officials determined to put them out of business, which makes no sense whatsoever. Maybe it isn't intentional, but offering incentives to Walmart hurts the very people local politicians are supposed to protect and serve. Yet, most people don't seem to be bothered by this in the least. Or at least, they aren't bothered until it happens to them.

Despite local government apathy, sustainable food initiatives are happening, but imagine the growth that they could experience with support and funding from municipal officials! Unfortunately, the excitement that is generated when the rumour of a big box store coming to town travels from house to house far exceeds the interest in listening to a proposal to convert an abandoned warehouse into a community garden. City officials see the immediate benefit of lower prices when Walmart comes in, and all they see in local growing initiatives is money upfront but no immediate results, ie. massive risk. The crazy thing is that there is no evidence that this risk is excessive. Do you want proof of this? Look at the boom in restaurants citing local providers in their menu specials. No bistro has a sign saying "Asparagus proudly offered to you by Walmart."

Small towns have to stop falling in love with big box retailers because the result of our reliance on them is literally destroying the charm of small towns and preventing our ability to have some sense of control over how we get our food. Instead of wishing for Walmart, how about we all start working toward a world where almost all the food we need comes from our own community.

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