There are a lot of things that make a city great. Like human-sized design, and a variety of buildings, lots of different businesses that support a vibrant community, a unique cultural identity, a distinct sense of place … having places where it’s just nice to sit. But y’wanna know what the opposite of all that is? A Big Box store.
Big Box stores are named that because they look like big boxes. They’re single-story, windowless, boring, ugly-ass buildings, made from the cheapest possible materials. Even the smallest Big Box stores are enormous, usually more than 50,000 square feet, and they’re surrounded by even bigger parking lots. And when a Big Box store gobbles up a bunch of land, it also ruins the land around it – encouraging sprawl, stroads, and car-centric infrastructure that makes it dangerous or impossible to walk anywhere. You know, the opposite of the stuff that makes a city great. These eyesores are littered all over North American suburbs. People like them in part because they’re easy to drive to, but also because they sell a lot of stuff at pretty cheap prices. Which sounds great until you realize the way they achieve their everyday low prices is by literally bankrupting cities.
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While Big Box retail is ubiquitous today across the US and Canada, it wasn’t always like this, and the dominance of the Big Boxes was not a foregone conclusion. Before the 20th Century, if you needed something from the store, you would walk to your local shop and ask a clerk behind a counter for what you needed. Then in the 1900s, this model shifted to “self-service,” and people were allowed to get items off the shelf themselves, which led to the rise of large department stores like Woolworths, but they existed alongside a wide variety of stores in traditional walkable neighbourhoods.
One of the regulations that kept the large stores in check was the Robinson-Patman Act of 1936, that prevented retailers from getting volume discounts on their stock. Meaning that small mom and pop stores were generally making the same margins on each item as the larger corporations. But in the 19 50s and 60s, those regulations stopped being enforced, which meant that stores like Walmart, Target, and K-Mart could buy large quantities of items from manufacturers at discounted prices, and then sell them cheaply, or worse, sell them below cost as “loss leaders.” Bulk discounting is of course essential to the Big Box business model.
Big Box stores make their money through huge sales volumes as opposed to higher margins on each item. But in order to profit off volume, they have to have space for a lot of inventory. And that’s why the box has to be so big – they need room for all that stuff. Around the same time, America was rapidly suburbanizing.
And it turned out that those new homeowners loved having property, but didn't really enjoy paying property taxes. So politicians, afraid of losing those sweet suburban votes, resisted increasing residential property taxes. The most infamous example is California's Prop 13, which put strict limits on residential property tax increases. Prop 13 and laws like it have had a lot of disastrous impacts on cities, but what's important here is that it forced cities to rely more on sales tax revenue and commercial property tax. So in an effort to juice those tax numbers, cities started incentivizing big stores that would have big tax bills, and sell in high volumes. But what’s crazy is that while a single Big Box store may pay an impressive-looking tax bill each year, they actually pay less per acre than even a rundown, neglected downtown.
I’ve talked about this before in my video about the research of Urban3, link in the description. Their study of Asheville, North Carolina found that the per-acre property tax of a mixed-use downtown building was nearly a hundred times that of a suburban Walmart store. And per-acre is the measurement that matters here, because the more acreage your store takes up, the more stuff the city has to pay for – miles of roads to get there, water and sewage pipes, electrical infrastructure, signage, traffic signals, flood prevention infrastructure, etc.
Urban3 makes these maps that show the per-acre property tax revenue of various cities, and the old downtown, as well as any traditional walkable neighbourhoods, are immediately visible as giant spikes. The costs to the city scale per acre, so unless the taxes also scale per acre, the city loses money. Suburban big box stores generate very little property tax revenue compared to the amount of infrastructure needed to support them, so cities end up effectively subsidizing Big Box retailers from other sources of revenue. Usually the tax revenue from traditional small businesses. And there’s more to a Big Box footprint than just the building itself.
North American zoning laws require a minimum number of parking spaces based on the square footage of a building. And since Big Box stores are gigantic, they are legally required to have gigantic parking lots. Big Box stores and their parking moats require a lot of land, so they usually only make financial sense in greenfield locations, on the edge of cities. Which means that unlike shops in traditional neighbourhoods and downtowns, where some people could walk, cycle, or take public transit to get there, pretty much everybody who works or shops at a Big Box store needs to drive, which creates a lot of car trips. But ultimately it’s the city that has to pay for all that traffic, by widening lanes or building new highways downstream of those Big Box developments.
What’s worse is that Big Box stores don’t just generate less per-acre property tax revenue, they also destroy businesses in those denser, local shopping districts. That’s because the literal business model of these discount Big Box stores is to run local stores out of business. Walmart’s corporate goal is a 30% market share for every new market that it enters – and they can’t do that without driving smaller shops out of business. And then that’s more local businesses that aren’t paying property tax. So the city is trading the tax revenue from businesses in traditional neighbourhoods and downtowns, places that have been around for decades and require very little in the way of maintenance costs, for much smaller per-acre tax revenues in car-dependent suburbs, where there are massive maintenance liabilities for all the new infrastructure that was built to support them.
And Big Box retailers use every trick possible to pay even less in property taxes, and they employ people whose job it is to fight property valuations, to argue that their buildings are worth less than they really are. One of the shadiest ways they do this is something called the “Dark Store” theory of value, a name that you’d think would make an accountant stop and say to themselves, "are we the baddies?” The Dark Store theory of value says that Big Box properties should be assessed as vacant buildings, and not as, you know, operating businesses that are making money right now. The actual argument they’re making is that their buildings are so big, so ugly, and so cheaply-made that they are actually not usable at all, once the Big Box store moves out, and so they should be assessed as functionally worthless. This sounds crazy, but it’s real.
In Marquette, Michigan, the hardware store Lowe’s went to court over the assessed property values of one of their stores. They argued, “Unlike many other commercial properties, free standing ‘big-box’ stores … are not constructed for the purpose of thereafter selling or leasing the property in the marketplace.” And therefore, they should pay less property taxes. That means Big Box stores can make a plot of land worth less than if they had just built nothing there at all. And this is a commonly-used tactic for all major Big Box retailers including Home Depot, Target, and Costco. These Big Box buildings are only built to last about 15 years, which is why it’s common to see an older building shut down while there’s a new location farther down the road. If you liked planned obsolescence in your technology, you’re going to LOVE it in your buildings.
A small business will proudly state that they've been in the same location for years, or even generations. They'll put historic photos on the wall showing how the neighbourhood has changed around them, Because being a part of the local community is an important aspect of many small businesses. But Big Box retailers don't care at all about the local community. They just want to go wherever they can make the most money And if that means packing up and leaving their garbage buildings behind, then that's fine by them, as long as their competitors can't use them. If they own the building, they make sure this happens with “deed restrictions” that state that when they abandon one of their crappy buildings, whatever business moves in after them legally can’t be one of their competitors. But since Big Box stores sell pretty much everything, almost all retail is technically “competitive” and so they can't open up on those sites. However it’s been more common lately for retailers like Walmart to lease their buildings, instead of buying them. When they decide to move to their next location they won’t break their lease. They’ll just leave it there, vacant. Better to pay a lease on a building with zero value than to allow a competitor to move in.
But even when they do allow the lease to lapse, there’s very little that can be done with the building. There’s only so much self-storage and laser tag that can move in to prop up a city’s budget. As a side note, Spirit Halloween is a business that takes advantage of these big box vacancies by subletting disused retail space at insanely low rents for about six weeks per year. They’re like the vultures of retail that feed off of the dead carcasses of fallen Walmarts. And when the store packs up and leaves to build a newer location down the road on even cheaper land, the city is stuck paying for the roads, pipes, signage, and other infrastructure that used to support that building … forever.
So since nobody else can use the building, it's becoming increasingly common for municipalities to renovate these Big Boxes into municipal spaces, like libraries. This is always reported as a good thing, because the city turned an old building into something more valuable for the community. Isn’t this great? But these Big Boxes aren’t meant for these kinds of uses, and it costs the city millions to renovate them. In the end the city loses out on property tax, loses out on infrastructure maintenance, loses out on renovation costs, and ends up with an oversized library building in a commercial area that’s totally inaccessible to anybody who can’t drive. Y'know, like all the children and teenagers who might want to use a library. It would be better if cities just built the libraries within the city, near public transit, and close to where people live, instead of throwing more money into subsidizing the toxic business model of Big Box stores in the suburbs and trying to clean up the mess after they leave.
This is even worse in small towns because that business model of market domination and destroying competition means that when the Big Box store skips town, there’s nowhere to buy food. This grocery store had been serving the town of Oriental, North Carolina for 40 years, but when Walmart opened nearby, they drove them out of business. Then less than two years later, Walmart decided their store wasn’t profitable enough so they closed it down. So the town had no grocery store and no pharmacy. One resident was quoted, “If you take into account what no longer having a grocery store does to property values here, it is a significant impact for us.” That’s right! When Walmart arrives, your city gets less property taxes. And when they leave … they take your property values with it.
In fact, when you take into account all of the costs associated with maintaining a Big Box store, they actually cost cities more than they bring in. A study in Ohio estimated that a store like Walmart produced a net annual loss of 44¢ per square foot. For the smallest Big Box stores, which take up about 50,000 square feet, that’s over $20,000 a year. Per store. And it gets even worse when you factor in secondary costs. In Port Richey, Florida, the Walmart store was responsible for almost half of all arrests. This required the police to hire more officers, which ended up costing the city more than the amount that Walmart paid in property tax. And this is only one of many examples, I’ll leave some links in the description. All of this is making North American cities worse. Funds that should go towards maintaining roads and city services, and a vibrant downtown are now spent supporting a big soulless box on the outskirts of the city that’s built to crumble within the next 15 years.
So given all of this, why would any city allow a Walmart or other Big Box retailer to open at all? Some of this is delusional, politicians thinking that their situation will be different, some of it is due to active lobbying from Big Box retailers, but a lot of it is just very short-term financial thinking. Fundamentally, American cities are broke, due to decades of car-centric suburbanization. See my Strong Towns video about the Growth Ponzi Scheme for details, but in short, car-dependent places like this are not financially solvent.
The amount of money required to maintain these places, is more than the city can charge in property taxes. So in order to pay for the debts incurred by the previous decades of car-centric development, the city needs to bring in as much new growth as possible, even if it just kicks the can down the road. A Big Box store will bring in more sales tax revenue, there’s no denying that. So the city pays to build new roads and water pipes, and whatever incentives the Big Boxes retailers are asking for, but they also get a big bump in new tax revenue as soon as the stores are open, which looks like a win. A Big Box retailer could also be an “anchor tenant” in a new shopping development. People may drive there for the Walmart, but they’ll also shop at other stores while they’re in the area. And this does happen, which makes it look like the city is improving. The problems with these suburban development projects, such as the lost jobs at small businesses and the degradation of the traditional neighbourhoods, comes much later, and it’s not always obvious that the Big Box stores are to blame. And since the infrastructure maintenance costs, and the higher costs of services, also come much later, for several years, a new Big Box development seems like a win.
Strong Towns has shown, across many different cities that they’ve worked with, that improving traditional neighbourhoods, like Main Street downtown, always results in a better long-term payback for the city than car-centric Big Box developments in the suburbs. But fixing the cracked sidewalks and broken lighting downtown doesn’t have the same political cachet as bringing Walmart to town. Politicians like announcing the opening of a Big Box store, because they can use the big numbers to make it look like they’ve created lots of new jobs and brought lower prices to residents. And the voters love it. Plus, they get to cut a ribbon with those big scissors, which is why most of them got into politics in the first place. Well, that and the bribes of course. And in 15 years, when the Big Box closes down, most of those elected officials will be gone anyway, so they don’t need to worry about the long-term impacts of any of these projects. So cities don’t just allow Big Box stores to open, they actively encourage it.
Every year, US cities give out an estimated $65 billion in subsidies to attract Big Box stores, and the major retailers will play cities off of one another to see who will offer the biggest benefits. Subsidies for Big Box stores could be deeply discounted property taxes, lifting of expensive regulations, city-sponsored site preparation, job-creation tax credits ... They’ll sometimes be called investment subsidies, sometimes called development incentives, but no matter what you call them, they mean the mega corporations that own Big Box stores don’t have to play by the same rules as local businesses. The U.S. Small Business Association says that for every $100 spent at a small business, $48 stays in the community. But with Big Box mega-chains, that number is only $14.
That’s because local businesses use local services. When you buy from a local retailer, they’ll use that money to pay their employees and other expenses of course, but they’ll also employ other local businesses. A local retailer will use a local accountant to do their taxes. They’ll use a local marketing firm to print their signs and flyers. When the owner decides to buy a douchey sports car, he’ll buy it from a local car dealership. And local businesses are more likely to source their products locally as well. A local coffee shop is more likely to get their coffee from a local roaster. Their milk from a local dairy farm. Their pastries from a local bakery. Their weird knick knacks from a local retired grandma. And all of those local businesses will also use other local businesses themselves, meaning that more money stays in the local community. But when you shop at a Big Box store, most of the money you pay immediately leaves your city, your state, and possibly even your country.
These are massive stores with huge amounts of inventory. So they have to source their products in huge volumes and that can’t be done locally to every store. Heck, about 60% of Walmart products are made in China, so that money immediately leaves the country. And other than their employees at that store, they don’t pay anyone local. They don’t use local marketing firms or local accountants. These are huge corporations so they have a whole team of accountants that all of their stores use. Walmart’s accountants are in Bentonville, Arkansas. So unless you’re in Bentonville, that money has also left your community. And what’s worse is that those accountants are paid to find every tax loophole available, which is why they decided that the best place for Walmart’s profits is 22 shell companies in Luxembourg. And there aren't even any Walmart stores in Luxembourg. Did you know that public transit is free in Luxembourg? All trams, trains, and buses across the country are completely free to use, even for tourists. It’s really nice, and I’ll make a video about it someday. Wouldn’t it be nice if your city had free public transit, instead of a Walmart?
This kind of tax avoidance isn't possible for local businesses. Even if they could employ the tax experts who know how to do this stuff, they couldn’t take advantage of it anyway, because a company needs to have massive profits and a worldwide presence in order to make these tax loopholes worth using. It’s just another way that megacorps can undercut the prices of local businesses, while starving cities and governments of any tax revenue. And you might be thinking, well, at least they create a bunch of local jobs by employing so many people. But here’s the thing. They also don’t do that. A recent study found that five years after Walmart enters a given county, total employment falls by about 3 percent. So they create fewer jobs than they destroy. And the jobs that they do create are very low-paid and often part-time. So these employees pay little or nothing in the way of income tax. But here’s the really messed up part. In small towns and suburbs, Walmart strategically drives local shops out of business with targeted low prices and loss leaders, to the point where they become one of the only employers in town. And then, they pay their employees such low wages, for so few hours, that those employees qualify for food stamps, or what’s now called the Supplemental Nutrition Assistance Program or SNAP.
This is a US government program that provides a payment card that can be used to buy essential food for low-income individuals and families. Only certain retailers, approved by SNAP, can accept this card as a payment. And guess which businesses are always approved retailers? Yeah, it’s the Big Box stores. Walmart alone takes more than a quarter of all SNAP dollars. So Walmart pays their employees so little that they need the government to buy their groceries, and then Walmart sells those groceries to their own employees, profiting off of those government programs. When you dig into it, it’s absolutely insane how many direct and indirect government subsidies these giant retailers manage to get, while they contribute so little back to governments and local communities. It would be beautiful if it wasn’t so cartoonishly evil.
Big Box stores crush their competitors with low prices and loss-leaders, but they achieve their “everyday low prices” by avoiding property tax and offloading externalities on cities, creating a deficit that the downtown businesses ultimately end up paying. And you are paying for this, too. These Big Box retailers are able to exist because your taxes subsidize them, even if you don't shop there. When they take money from your city, they are ultimately taking money from you. Big Box stores make everyone poorer. Well, except their shareholders of course. And there are also some politicians who are very happy that Big Box retailers have significantly increased the amount they’ve spent on lobbying and campaign contributions over the past two decades.
So what’s the alternative to this garbage? Well, it’s interesting to look at the European equivalent of a Big Box store, the hypermarket. Hypermarkets can be found in the suburbs of many European cities, but they're not nearly as destructive as American Big Box stores, and they've never become as pervasive as Big Box stores are in America. European countries have regulations in place that make it harder to use the bulk discounts to run small retailers out of business, and “loss-leaders”, those products sold below cost, are totally illegal. And with respect to urban planning, there are just generally sane laws in European cities about where hypermarkets can be built, how the infrastructure is paid for, how many parking spaces are required, how they are connected to existing public transit, and how property taxes are calculated.
Walmart tried to enter the German market in the late 90s, but failed and left a few years later, after losing out to local retailers like Aldi and Lidl. Because fundamentally, Walmart can’t compete without its ability to build on dirt-cheap land and leach money from the city, which is a big reason as to why they failed in Europe.
Although the funniest reason for their failure is that Walmart requires its employees to smile at customers, which German customers found to be kinda creepy. And German employees thought that the corporate chants that all Walmart employees are required to do each morning was weird and cultish. Because it is! We should not be normalizing mandatory corporate chants. But a bigger issue for German employees was that Walmart hates labor unions and actively fights unionization at every turn. But unions are very strong in Germany and other parts of Europe, and those countries refused to enable Walmart’s union-busting tactics.
And the craziest part is that, despite all this, groceries are still typically cheaper in Germany than they are in the US. Though the Germans don’t have over 9000 different flavours of Oreos so, checkmate Europe. And finally, researchers who analysed Walmart’s failure also concluded that Germans weren’t as interested in the one-stop-shopping experience of a Big Box store. And why would they? They have vibrant city centres which are more pleasant to be in, with a wide variety of specialty retailers, and it's often more enjoyable and more convenient to walk from shop to shop to buy different things, instead of having to drive to the outskirts of the city, where a Big Box store would need to be.
This used to be the culture in North America as well, and while it will be difficult, cultures can and do change. North American cities need to emphasize keeping money in their own communities. And yes, individually choosing to shop small whenever you can is part of that, but relying on people’s personal choices to fight Big Box stores is going to work about as well as asking everyone to please drive less to fight climate change.
Of course the most important thing cities can do is to stop offering huge incentives for Big Box stores that have proven time and time again to cost cities money in the long run. And instead, offer development incentives and protections to the kinds of businesses that do the opposite.
North American cities need something that our friends at Strong Towns refer to as an “Import Replacement Strategies,” which is basically a plan for prioritizing new businesses that are going to keep as many dollars circulating in the local economy as possible. Cities also need to refocus their spending into the downtown areas they abandoned. Make it easy to walk from store to store, make it a place people actually want to spend time. And make it legal to build housing there again. A cluster of smaller, locally-owned stores serves largely the same purpose as one gigantic store that sells everything, but it generates way more revenue for the city, costs taxpayers less, and plus it looks a lot nicer than this.
Governments also need to review the legislation and the tax codes that allow Big Box stores to discount pricing so much that local stores can’t compete. It will be hard to put the genie back in the bottle, but the way to help people shop at smaller stores again is by making pricing competitive. And you can’t do that when mega-conglomerates can benefit from economies of scale in a way local stores can’t
Cities might have to re-acclimate their citizens to shopping downtown instead of at a Big Box store. If someone has spent 20 years shopping at Target, they might be resistant to doing it any other way. But that’s not an inherent preference. Cultures change. Younger people in America are already rejecting driving, and doing it much less than older generations. There are people out there who don't want to shop at a Big Box store, it’s just their only option, so we should make it easier for those people to shop somewhere else.
I really wish we could completely abolish Big Box stores. Is there something you hate so much that you wish it could be abolished forever? Then you might enjoy Abolish Everything!, the hilarious new comedy show where comedians argue to remove something they hate from existence, whether it’s slow walkers, office jargon, or pineapple on pizza. Abolish Everything! is a genuinely entertaining mix of comedy, debate, and audience participation, and it’s only available on Nebula, the subscription streaming service built by and for creators and their fans. Nebula has thousands of creative, thought-provoking, and just plain fun videos you won’t find anywhere else. And many of your favourite YouTubers are probably already on Nebula. Nebula has no ads, early access, and a growing library of exclusive Nebula Originals, produced just for Nebula. In fact Nebula is helping me to produce my new comedy urbanism channel, I Love the City. Every I Love the City video is available two weeks early on Nebula, before it’s available on YouTube. And every Not Just Bikes video is also available on Nebula First, without any ads or sponsorships. And by signing up to Nebula, you directly support this channel and the production of my videos. So if you’d like to support this channel, get early access, and watch great new shows like Abolish Everything! then sign up to Nebula. Use the link go.nebula.tv/notjustbikes to get 40% an annual subscription. Thanks for watching, and thanks to all of the people who support this channel on Nebula. I appreciate it.