Supermarket closings are the latest blow to South and West side neighborhoods

The closing of three South Side Walmart stores in the spring disheartened residents who already face limited options for fresh produce, meat and pharmacy goods. It was the latest blow to neighborhoods that earlier had lost two Target stores and, more recently, the Whole Foods in Englewood.

"The Black community has lost trust in grocers," says Melody Winston, senior executive of Living Fresh Market in Forest Park, who aims to expand in the city. "They don't know who is going to stick around and who won't."

In light of the recent round of corporate store closings, is it even possible to operate profitable supermarkets on the South and West Side sides? Why is this so difficult, and what does it take?

Operators face substantial headwinds. Many Black and Brown communities have lost population, and median income has stagnated, says Mara Devitt, senior partner at retail consultancy McMillan Doolittle. These stores have fewer opportunities to sell fancy, high-margin foods such as $8 crackers and $12 blocks of cheese. If safety becomes an issue for customers, staff and delivery people, additional investment for security is required. "If the return on investment looks better in another location, the retailer will go there," Devitt says.

The closing of the Whole Foods store in Englewood brought the issue to a head. Not only did the neighborhood lose a marquee store brand, but in its place came Save A Lot, which has a reputation on the South Side for unfriendly stores where a shopper might encounter spoiled lettuce, a dirty freezer case or an expired date on meat.

"You can't take me from a Bentley (in Whole Foods) to a Pinto," says Ald. Stephanie Coleman, 16th, who represents Englewood. The Englewood Save A Lot lease was acquired by Ohio-based Yellow Banana, owned by a Black investor group. In 2021, the group took over 38 Save A Lot stores in five states. It operates eight in Chicago.

Yellow Banana has lined up $26.5 million in financing to upgrade South Side stores and reopen one in Auburn Gresham. Some residents are skeptical, as the stores have yet to improve after two years of new ownership. But the operator still has a chance to prove itself in Chicago.

Supermarket operators in these disinvested communities face obstacles, but they can be successful. The Aldi chain shows that it's possible, with its small store footprints, low operating costs and no-frills formula. It runs 33 stores in Chicago including more than a dozen on the South Side. Independent operators say there's room for stores that forge close ties with their communities, providing jobs, special services and events.

STORES LEAVE 'BECAUSE THEY CAN'

An analysis of neighborhood demographics sheds light on the problem.

In Englewood, where the 2016 opening of a Whole Foods was hailed as a breakthrough, the population declined through the pandemic. The median household income of $34,557 is roughly half the Chicago median of $65,781, according to data compiled by McMillan Doolittle. The unemployment rate is 17.1%.

In Kenwood, where Walmart closed one of three South Side stores, the population is more stable, but the median income of $41,918 is still well below the city median. Theft rates in the Englewood and Kenwood neighborhoods have been on the rise since 2019, according to data tracked by McMillan Doolittle.

Announcing the closings that also affected Chatham, Little Village and Lakeview, Walmart said its Chicago stores haven't been profitable since the first one opened 17 years ago. The stores lost tens of millions of dollars a year, and annual losses doubled in the past five years, the company said.

In retail, grocery has the narrowest of profit margins, well under 1%, notes Rob Karr, CEO of the Illinois Retail Merchants Association. That makes the job hard enough. But executing in neighborhoods with lagging disposable income makes it all the more difficult, he says, adding, "What is the size of the market basket?"

Walmart still operates city locations. Its store in the Pullman industrial park is busy thanks to its proximity to Interstate 94. And the store on North Avenue in the West Side Hermosa neighborhood has survived. Although the neighborhood has lost population, the median income of $56,881 is close to the city level, according to McMillan Doolittle. The theft rate in the neighborhood is well below that of Kenwood and Englewood.

The South Side closings leave a bitter taste. The stores left "because they can," says Coleman, the City Council member. She noted that the Walmart announcement came during the transition in city government. "If they were going to leave, that was the perfect time," she said.

There are still Jewel and Aldi stores on the South Side. But residents may have to travel farther or order online if they have access to the technology. Delivery fees add to the cost of an online order. It's a stark contrast to North Side, Near West and suburban neighborhoods, where residents typically have a choice of Jewel, Pete's, Mariano's, Whole Foods and Trader Joe's within a few miles.

A case in point: Oak Park and River Forest have seven supermarkets, including three Jewel Osco stores that also serve neighboring Austin, which with a larger population has no full-service grocers. "Austin is shopping in Oak Park," says Elizabeth Abunaw, an entrepreneur who runs farmers market stands in Austin and is planning a full-service supermarket on Chicago Avenue in Austin.

The stores benefit from serving customers in two neighborhoods, and Austin residents still gain access to fresh food. But that equation doesn't help revitalize the Far West Side community.

'A HORRIBLE REPUTATION IN THE BLACK COMMUNITY'
The loss of national chains leaves smaller, less-capitalized independents, who often struggle to stay profitable. "Grocery infrastructure takes a lot to maintain," Abunaw says. Over time, she notes, business owners face expensive repairs. If the business isn't generating enough income to cover the cost of the upgrades, they figure it's not worth it. "The stores get run down, people stop shopping there and they end up closing," she adds.

To succeed, supermarkets need the backing of a vertically integrated supply chain, says developer Leon Walker, who built the Englewood Square shopping center with Whole Foods and other national chains. "You need the buying and pricing power that comes with quantity," he says.

Before the arrival of Walmart and Target, it was primarily the Aldi and Save A Lot chains that dominated on the South and West sides. They competed with limited formats and low prices but still had the backing of a large distribution network. While the Save A Lot stores suffered from neglect, Aldi has been winning customer loyalty, Walker says.

"Save A Lot has had a horrible reputation in the Black community for a decade," says Asiaha Butler, co-founder and CEO of the community group Resident Association of Greater Englewood, or RAGE. Members of a 16th Ward committee on grocery stores surveyed five Save A Lot stores and photographed dirty fixtures, moldy fruit and packages past their expiration dates.

That has the potential to change, following Yellow Banana's acquisition of Chicago Save A Lot locations from the Missouri parent company that has shed its retail stores to concentrate on wholesaling. Residents are exasperated that the stores haven't shown improvement, even basic cleanups, since they were taken over in 2021.

Yellow Banana's defenders say improvements take a while, noting that the group swallowed 38 stores at one time.

LaForce Baker, vice president of community impact at World Business Chicago, helped the company apply for a $13.5 million community development grant through the Department of Planning & Development. Tax credits and other funding provide a total of $26.5 million for store remodels. "I understand why people feel the way they do about the Save A Lot brand," Baker says. "But it takes a few years to get stores redone. People should give it a chance."

Yellow Banana executives declined interview requests. In a statement, the company said that its focus, amid challenging, inflationary conditions, has been to ensure the right mix of products at the best value. "We've also been working diligently on our plans to completely reshape the Save A Lot shopping experience in our locations through extensive remodels and the opening (or reopening in some cases) of stores in areas where few other fresh, affordable grocery options exist and where other national chains have exited," the statement read. The company added that it's working with the city to get the remodels underway in the coming months.

One South Sider willing to cut Yellow Banana some slack is Carlos Nelson, CEO of the Greater Auburn Gresham Community Development Corp. He's worked with Yellow Banana executives over the past two years to reopen and "reimagine" a shuttered Save A Lot store at 79th and Halsted streets.

During the pandemic, the community teamed with the Greater Chicago Food Depository to distribute food and essential goods through the store. During that time, Nelson was introduced to attorney Michael Nance, co-founder of the investment firm that launched Yellow Banana, who discussed buying and reopening the store. The Auburn Gresham revamp subsequently became part of Yellow Banana's larger expansion in Chicago.

Auburn Gresham had the luxury of time to plan the reimagined store, which will include murals by local artists and feature products from local vendors, Nelson says. But he acknowledges that Yellow Banana has stumbled in Chicago, partly because it didn't have local decision-makers in place. "When they ran into problems in Englewood, they didn't know how to engage the community," he says.

With the departure of national chains, farmers markets and independent operators are striving to fill the demand for heathy food. In Garfield Park, Angela Taylor coordinates shipments of produce from a network of community gardens that are sold at a market based at The Hatchery, a nonprofit food and beverage incubator. "There's nothing here except mom-and-pop shops and gas stations," says Taylor, wellness coordinator for the nonprofit Garfield Park Community Council. "We're a food island."

In Austin, Abunaw has been navigating the city permit process to open a full-service market, Forty Acres Fresh Market, on Chicago Avenue west of Central Avenue. Abunaw moved to Chicago in 2012 and one day found herself in Austin, where she was surprised to find no amenities such as ATMs, pharmacies or supermarkets. "I decided I wanted to open a low-cost, fresh produce market on the West Side — on Chicago Avenue because that's the street I wound up on."

Since 2018 Abunaw has been supplying produce at farmers markets, pop-up stores and neighborhood events as well as through home delivery. A variety of grants gave her the working capital to expand. In 2020 she teamed with Westside Health Authority to purchase a former Salvation Army building at Chicago and Waller avenues. Abunaw has scouted stores on the West and South sides and hopes to avoid the formats that are bare bones and transactional. "You go in, buy groceries and come out," she says. Compare that to a Pete's Fresh Market, she says: "It's like stepping into the Wizard of Oz. Everything's in color. Mountains of fresh food. You want to dive into it."

Melody Winston plunged into the supermarket business in 2021 after a grocer in her family's Forest Park mall closed. Winston's father, Bill Winston, founder and pastor of Living Word Christian Center, recommended that the family take it over "to serve this community and others the way they should be served," as she puts it.

The expansion required a crash course in the supermarket business. Winston toured 17 stores in two days during a visit to her supplier in Kansas City, Kan. She's been upgrading the store, Living Fresh Market, in preparation for a September relaunch. She aims to differentiate her store with pickup service for seniors, cooking classes and training for food entrepreneurs. Eventually she plans to expand to South and West Side neighborhoods and provide the personal touch that corporate-owned chains are unable to offer.

Winston, who grew up in Chatham, has scouted some of the closed Walmart stores but says she needs first to fine-tune the Forest Park store. "I want to get this one right first," she says. "Give me six more months."