Thursday, December 14, 2017

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A public failure for a successful grocery chain

DC area entrepreneur Gary Cha owns a successful small chain of grocery stores called Yes! Organic Market. His business model is based on identifying neighborhoods that are not well-served by other grocery stores and opening up locations to provide residents with fresh produce and healthy food in their neighborhoods. Until his most recent location in southeast DC, Cha had never received subsidies for opening his stores. Rather, he chose locations with the duel objective of making a profit and providing his customers with access to groceries.

His most recent store, however, received a $900,000 subsidy to open in a location in DC’s Anacostia neighborhood that is not well-served by current grocery stores. After two years, the location is closing. Cha is very remorseful about the closure, and has lost about a million dollars of his own money in the effort. Cha and others have attributed the southeast location’s problem to the site’s access. As he told Washington City Paper:

“East of the river, I think, is a great place to do business,” he says. “And I think if I find another location with easier access, I may be the first going back there.”

The demand is there, he’s sure. Ever the self-critic, Cha just believes he needs to step up his game. “I know there’s a need for grocery stores,” he says. “I have to be a better businessperson. I just have to be better.”

While Cha places the blame fully on himself, it might also be worth placing some of the blame on the process with which this store opened. Unlike the other locations which Cha invested in privately, this one was subsidized. His other locations are still in business from his 14th Street location, with a Whole Foods now just down the street, to his Brookland location in an area that still does not have many grocery options. His business model relies on charging a premium for food that is not otherwise available in the neighborhood, but as he said, opening in the Anacostia location would have been too great of a risk without public money. This is not to say that all businesses that receive subsidies will fail, but this one example provides for support for free enterprise over subsidies for businesses that seek to meet public policy goals.