A few years ago, BET had a commentary titled “Where Are the Grocery Stores in Black Neighborhoods?” One wonders whether anyone thinks that the absence of supermarkets in predominantly black neighborhoods means that white merchants do not like dollars coming out of black hands. Racial discrimination cannot explain the absence of supermarkets in black communities.
Compare the operation of a supermarket in a low-crime neighborhood with that of one in a high-crime neighborhood. You will see differences in how they operate. Supermarkets in low-crime neighborhoods often have merchandise on display near entrances. They may have merchandise left unattended outside the store, such as plants and gardening material. Often these items are left out overnight. Supermarket managers’ profit maximizing objective is to maximize merchandise turnover per square foot of leased space. The economic significance of being able to have merchandise located at entrances and outside is the supermarket manager can use all of the space he leases.
Supermarket operation differs in high-crime neighborhoods. Merchandise will not be left unattended outside the store – and surely not overnight. Because of greater theft, the manager will not have products near entrances and exits. As a result, the manager cannot use all of the space that he leases. On top of this, it is not unusual to see a guard employed by the store.
Because supermarkets operate on a very lean profit margin, typically less than 2 percent, crime makes such a business unprofitable. The larger crime cost is borne by black residents, who must pay higher prices, receive inferior-quality goods at small mom and pop stores and/or bear the transportation cost of having to shop at suburban malls. Crime works as a tax on people who can least afford it.