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The Future of American Retail

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This topic of discussion pops up in numerous threads on this site.  For instance, you see it when discussing shopping mall closings and you see it when developers are seemingly unable to attract retail tenants to street level storefronts.  Most commenters seem to blame it on teenage loitering or ineptitude of developers, or some weird theories about obstruction from city officials.  But clearly, something much bigger is going on.  For all the talk about the coal industry, more retail workers (89,000) have been laid off since October 2016 than there are full-time coal miners (83,000) in the entire country. 

 

Is American Retail at a Historic Tipping Point?

 

Along the cobblestone streets of SoHo, Chanel handbags and Arc’teryx jackets are displayed in shops like museum pieces, harking back to the height of the neighborhood’s trendiness. But rents there are softening, and the number of vacant storefronts is rising.

 

Today, some of the most sought-after real estate by retailers is not in SoHo, but five miles away in Red Hook, a gritty Brooklyn enclave with a shipbuilding past. E-commerce merchants are vying to lease part of a huge warehouse space, spanning 11 acres, that would allow them to deliver goods the same day they’re ordered online.

 

The profound reordering of New York’s shopping scene reflects a broad restructuring in the American retail industry.

 

https://www.nytimes.com/2017/04/15/business/retail-industry.html?_r=0

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I've mentioned in other threads what I think will happen is the chain stores will consolidate to one flagship location in each metro area to capture their customers. A store in each mall in a city doesn't make sense anymore.

 

It would make sense for those chains to cluster in one specific area of town - like the downtown main streets of each city, so retail can return to what it was in the mid 1900s and before.

 

The suburban malls need to be entirely redeveloped into what ever makes sense - maybe residential, maybe office, or maybe some mixed use, but it is clear the malls that have lost the majority of their tenants are probably not going to get them back any time soon.

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Expect physical retail to survive in one form or another as part of the Lindy effect: https://en.m.wikipedia.org/wiki/Lindy_effect

 

We have like 5X as much retail space in the United States per capital as compared to any other country.  That's because retailers went after market share by putting a mediocre store in each mall instead of having just one great store in the downtown, as was the case through the 1950s.  So we could lose 80% of retail space in this country and be back to where other countries have been operating this entire time. 

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In Cleveland the obstruction from city officials is overt and well documented.  It's no secret, they shout it at passing clouds, so I'm not sure how that qualifies as a "weird theory."

 

In the bigger picture, automation marches on.  Retail is no different from manufacturing in this sense, the goal is to cut human workers out of it.  That idea is sold the same way TV was-- less reason to leave your house and deal with others!  But organized misanthropy eventually becomes economic self-termination.  Other countries have already addressed this, banning free shipping to prevent Amazon from destroying their communities. 

 

We can replace retail stores with delivery networks if we want to.  We have the technology.  We also have the technology to vaporize all life on Earth-- but that doesn't mean we should.

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"In Cleveland the obstruction from city officials is overt and well documented.  It's no secret, they shout it at passing clouds, so I'm not sure how that qualifies as a "weird theory.""

 

cough TJ Dow cough

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Maybe City officials are just concerned about teenagers loitering in front of the storefronts. 

 

Banning free shipping?  This is 'Murca buddy!  Good luck with that.

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This country banned slavery and even alcohol at one point.  Drugs have been banned for decades.  America bans things all the time.  The freedomest of freedomers will still support banning everything from flag burning to gay people.  Retail policy is a public discussion and a public decision, so it's good that we're talking about it.  Might have to do something sooner rather than later. 

 

I'm curious if anyone has done a survey based on age group.  Seems like younger generations are the driving force behind removing human interaction from daily life.  My little brother hates going to stores for anything, and flat-out refuses to for things like toilet paper. 

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For years there was no sales tax on most online ordering, which was a ridiculous loophole which helped it gain some traction.  But "free shipping" seems to be a bigger lure for people than a sales tax, even if the sums are equal.  Seem like there could be a 10% national sales tax enacted on online sales in addition to the existing sales taxes and nobody would care. 

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Consolidating retail into certain areas also has major revenue implications for local governments.  One reason we're flooded with square footage here is that each political subdivision wants its own cash cow.  Imagine if everything was home-delivered from a warehouse in Independence!  We'd have to look at regionalism more seriously, that's for sure. 

 

As for teens loitering, that's baby with the bathwater silliness.  Those teens need jobs.  Store closures leave them with nothing to do but loiter (and participate in illicit retail).  Part of the reason I'm always harping on downtown retail is the importance of a centralized entry-level employment base.

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Part of the reason I'm always harping on downtown retail is the importance of a centralized entry-level employment base.

 

Great point. I think there's a compelling argument for subsidizing it in struggling areas, at least to a certain extent.

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Consolidating retail into certain areas also has major revenue implications for local governments.  One reason we're flooded with square footage here is that each political subdivision wants its own cash cow.  Imagine if everything was home-delivered from a warehouse in Independence!  We'd have to look at regionalism more seriously, that's for sure.

It will be quite interesting to see how the retail shakedown affects local tax revenues and what strategies they employ to compensate for losses, since not every municipal govt. is likely to land its own Amazon warehouse. There are going to be a ton of empty malls and strip plazas around NEO alone that won't be filled with anything. There are only so many check cashing places and pop-up charter school "academies" to go around.

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This country banned slavery and even alcohol at one point.  Drugs have been banned for decades.  America bans things all the time.  The freedomest of freedomers will still support banning everything from flag burning to gay people.  Retail policy is a public discussion and a public decision, so it's good that we're talking about it.  Might have to do something sooner rather than later. 

 

Equating the country's ban on slavery or even alcohol to banning free shipping is stretching it quite a bit, don't you think?  I'm trying to think how a ban on free shipping would survive a legal challenge.  Is there any (more relevant) precedent you can think of?  Have we ever as a country banned some type of free service?  How do accomplish a ban on free shipping?  Federal legislation?  A constitutional amendment?  An eleventh commandment? 

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Man the thrift stores really blasted traditional retail. Until about 2000 nobody but poor people and hippies would be caught dead within 500 feet of one. You think Amazon or Wal-Marts are cheap?

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Free shipping does not come close to falling within the scope of 'business practices' the FTC has regulated.  And that's all it would be.... a regulation.  Legal challenges would question the statutory authority for such a regulation.  And, even if "we as a society" chose to enact a statute which granted such authority, it is doubtful that such a statute would survive a constitutional challenge.  So it doesn't all depend on what we choose to do as a society because we can't simply choose to ignore those limitations.  We could amend the constitution, like we did with Prohibition, but we all know that ain't happening..... especially in response to Amazon's free shipping. 

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Of course law is subject to politics so you do have a point.  But it's not impossible.  As with anything else, it all depends what we as a society choose to do.

 

 

And the wondrous "benefits" of online shopping add up to nothing at all.  People don't save the money they're saving -- they just buy more stuff they don't need.  It's not like people took the $120 they saved in sales tax on a $2,000 in annual purchases back when no online retailer was collecting state sales tax and put it in their retirement account.  Same with free shipping. 

 

 

 

 

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Free shipping does not come close to falling within the scope of 'business practices' the FTC has regulated.  And that's all it would be.... a regulation.  Legal challenges would question the statutory authority for such a regulation.  And, even if "we as a society" chose to enact a statute which granted such authority, it is doubtful that such a statute would survive a constitutional challenge.  So it doesn't all depend on what we choose to do as a society because we can't simply choose to ignore those limitations.  We could amend the constitution, like we did with Prohibition, but we all know that ain't happening..... especially in response to Amazon's free shipping. 

 

Our Constitution broadly allows federal intervention into interstate commerce.  That's why the Sherman Act still exists. 

 

https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws

 

The Sherman Act outlaws "every contract, combination, or conspiracy in restraint of trade," and any "monopolization, attempted monopolization, or conspiracy or combination to monopolize." 

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Again, do you have a comparable precedent?  Is anyone seriously proposing this as a way to help save retail?  The only similar law I can think of was enacted in France a few years ago on free delivery of books.  Amazon then charged 1 cent for delivery. 

 

In the end, I think this is a pointless direction for this discussion.  It will never be passed into law.  And if it was passed into law, that law would be invalidated on several grounds.

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Again, do you have a comparable precedent?  Is anyone seriously proposing this as a way to help save retail?  The only similar law I can think of was enacted in France a few years ago on free delivery of books.  Amazon then charged 1 cent for delivery. 

 

In the end, I think this is a pointless direction for this discussion.  It will never be passed into law.  And if it was passed into law, that law would be invalidated on several grounds.

 

I've already provided legal cites from government links, against nothing but flippant dismissal and demands for additional research, so I'm not inclined to grant you anything.  But OK let's assume otherwise-- regulatory solutions are out of the question.  What direction do you suggest?

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You... flippantly... provided links to government sites which don't provide anything close to a comparable regulation.  I'm the only one who has done so, and that was a rather toothless regulation enacted under French law.  And I'm not demanding anything, but rather requesting if you have some information or law of which I am not already aware.

 

I personally didn't start this thread to offer any direction, but rather to note that the root issues are seemingly not what many people seem to assume based on their biases.  I accept that, as society continually evolves, some things are inevitable and irreversible.  Some things will die off no matter how many regulations you enact to save them or how much money you throw at them.  I don't see that happening with retail, but I highly doubt it will ever reach its peak again.

 

A thoughtful response was the one posted by jmeck yesterday.  Perhaps this problem could indirectly lead to the very solution you have been pining for the government to somehow impose, with shopping epicenters returning to the City core for a central location.  I doubt it, but one can hope. 

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Since the rest of the world doesn't have municipal taxes or property taxes, one way to eliminate these retail fiefdoms is to switch to a different tax system. But that's not going to happen.

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A Value-Added Tax seems to work pretty well in most European countries. It certainly would make the playing field more fair for online retailers.

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I personally didn't start this thread to offer any direction, but rather to note that the root issues are seemingly not what many people seem to assume based on their biases.  I accept that, as society continually evolves, some things are inevitable and irreversible.  Some things will die off no matter how many regulations you enact to save them or how much money you throw at them.  I don't see that happening with retail, but I highly doubt it will ever reach its peak again.

 

A thoughtful response was the one posted by jmeck yesterday.  Perhaps this problem could indirectly lead to the very solution you have been pining for the government to somehow impose, with shopping epicenters returning to the City core for a central location.  I doubt it, but one can hope. 

 

No need to beat around the bush... your opening post featured a dig at my position on TJ Dow.  You're welcome to your own opinion on that, man.

 

But then you said there was no law allowing the approach I suggested here, and even if there were, it wouldn't survive constitutional muster.  I responded with the Sherman Act, a real and constitutionally valid US law, as presented by the agency empowered to enforce it.  The links I provided go into detail about everything the Sherman Act prohibits, which include costs eaten for the purpose of eliminating competitors.  If there is case law excluding distribution from that very broad prohibition, I have not seen it.  Maybe there is.  But since I already cited a statute that covers the issue in plain language, I don't understand why you keep claiming my point is legally unsound.

 

I agree the excise tax is a good idea, which is why I hit the Like button there.  Yes it's quite "thoughtful."  So are you.  Today's Downtown Akron thread discusses another approach, one with a strong record of success.  To the extent that your thesis involves pessimism over the Future of American Retail, I disagree because I think there are practical solutions to its problems.  The question is whether we should pursue them and I vote yes.

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The last few times I've ordered something from Amazon, an actual Amazon employee delivered it to me. It seems crazy that Amazon can actually start their own delivery service and do it cheaper and more efficiently than companies like UPS or FedEx that have been doing it for decades. But I guess at the end of the day, Amazon isn't a retailer, it's a logistics company.

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The last few times I've ordered something from Amazon, an actual Amazon employee delivered it to me. It seems crazy that Amazon can actually start their own delivery service and do it cheaper and more efficiently than companies like UPS or FedEx that have been doing it for decades. But I guess at the end of the day, Amazon isn't a retailer, it's a logistics company.

 

Cincinnati is very lucky to be getting the Amazon Prime Hub, even though I believe Amazon will eventually be broken up by the federal government.  Traditional retail had their chance back in the early 2000s to lobby and get what Amazon is becoming banned.  They could have lobbied to have a 10% sales tax thrown on online orders.  But they didn't do it because the old CEO's and trustees didn't get it. 

 

It's still happening with more tech stuff.  There's really no way Uber/Lyft should have been permitted to operate.  But they snuck through acting like they're a mouse.  Only a few places (like Austin) managed to ban them.  Now their cab money stays local, unlike everywhere else, where it floats away to San Francisco and funds Uber's cocaine tent at Burning Man. 

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With all the news of retail declining in the US, this is welcome news.

 

Retail store openings increase in 2017

Mark Mathews

August 30, 2017

 

As the “retail apocalypse” canard continues to grab the odd headline in the media, the data and the facts are consistently telling us quite a different story: a story of an industry in transition, but still growing. The most recent retail sales figures released by the Census Bureau were up a robust 4.2 percent year-on-year in July. Every month this year has seen a steady increase in sales over the same period last year.......

 

https://nrf.com/news/retail-store-openings-increase-2017

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The last few times I've ordered something from Amazon, an actual Amazon employee delivered it to me. It seems crazy that Amazon can actually start their own delivery service and do it cheaper and more efficiently than companies like UPS or FedEx that have been doing it for decades. But I guess at the end of the day, Amazon isn't a retailer, it's a logistics company.

 

Have you ever seen the video showing how they store things in their warehouse? Instead of compartmentalizing all of their products, they have isle after isle of random items, grouped together in cubbies. Ultimately, the pick/packers have to travel less to complete their order. I'm sure they've gone as far as to develop their software so that they know how to group items together in those cubbies which customers are likely to buy together. It's genius! I've worked at a couple warehouses before; I've never seen anything like it.

 

It seems they've basically mastered the traveling salesman problem (Google Maps alone is crazy accurate with multiple destinations) and that's a powerful API to use with logistics so even though Amazon may not have the volume of USPS, I could see how their software could easily direct drivers with the most direct and efficient routes, while...who knows how USPS still works. They probably just have the same old routine every day, making their rounds. Of course, Amazon has the advantage of being in the business of delivering products that they actually sell and make a profit off of and not delivering random junk mail/ads that nobody wants but are required to be delivered to every door.

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Good point. Amazon isn't even available outside major metro areas, yeah? If you only deliver to densely populated areas and aren't required to have someone walk to every door on the street and then back to their truck to move the truck just a little bit further and instead use routing software to get you everywhere you need to be as quickly as possible while only delivering things you're making a profit from, it seems like a no-brainer that it would work out quite well. Faster delivery, too.

 

Not sure how they would be more efficient than FedEx though. Haven't put any thought into that.

 

I'm so curious to see if/how they can pull off the drone delivery. If they can manage their own air traffic control and with drones and that is somehow legal, they could effectively reach remote areas quicker than USPS or FedEx. They'd be a great alternative to the other options for any kind of mail that is extremely urgent. Hell, they could deliver hearts and other organs for transplants!

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Amazon winds up being accused of racism actually due to their warehouses being so far out in the exurbs that they actually can't serve the core very well. Also, minorities are less likely to shop online. Amazon concentrates the service area closer to whites because that is where the majority of their shipments go and their current customers are.

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Amazon winds up being accused of racism actually due to their warehouses being so far out in the exurbs that they actually can't serve the core very well. Also, minorities are less likely to shop online. Amazon concentrates the service area closer to whites because that is where the majority of their shipments go and their current customers are.

 

"We're not racist-- money is!  We're just following the money, much like your hospital systems." 

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If they're going to accuse Amazon of that, you might as well accuse every company who moves out to the boonies or is concerned with distribution (which is the majority of them.)

 

For my girlfriend's capstone project, she did her own research and examined employment heat maps, determined where the largest employment centers for low-skill but higher paying manufacturing and distribution jobs in Metro Cleveland were and how accessible they were to poor, black, inner city neighborhoods like Hough and Slavic Village. I forgot the numbers exactly but I know it was an average of over an hour and a half each way, to get to work and back to these employment centers via public transit. With the logic that time is money, her study proved that they were better off taking a minimum wage food service job nearby. I noticed after I read her capstone, she didn't even bring up the fact that manufacturing and distribution centers often require just as many second and third shift workers who are expected to show up during times that there's no transit running, making it impossible for a lot of people who depend on public transit or rides from others, to even obtain the job that far away, even if they wanted to.

 

An amazon Fulfillment Center is opening up in North Randall, outside of Cleveland. It seems decently accessible, though.

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THe future of retail boils down to this. 5 years from now, OrangeTheory Fitness will be accompanied in the shopping plaza by an Orange Leaf Yogurt and together they will take over the retail world.

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"From a city planning perspective we’re about to have a whole lot of really big empty buildings and thousands of acres of vacant parking lots litter the landscape. We’re just not going to need all these retail buildings anymore."

https://t.co/jwbgsmZsw2


"Life is 10% what happens to you and 90% how you respond." -- Coach Lou Holtz

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Amazon winds up being accused of racism actually due to their warehouses being so far out in the exurbs that they actually can't serve the core very well. Also, minorities are less likely to shop online. Amazon concentrates the service area closer to whites because that is where the majority of their shipments go and their current customers are.

 

I always love how Amazon and WalMart are accused of being racist job killing organizations but IKEA is never, ever mentioned in the same vein. I live in a pretty diverse area here in DC but if I want to see DC region white America en masse as customers and employees I go to IKEA.

 

Agree with David. If people are accusing Amazon of being racist because the warehouse centers are in the exurbs these folks should drive the NJ Turnpike between Edison Twp. and the Atlantic City Expwy. It's warehouse center after warehouse center from hundreds of major corporations in all industries. To say this is an Amazon phenomenon is just not true.

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"From a city planning perspective we’re about to have a whole lot of really big empty buildings and thousands of acres of vacant parking lots litter the landscape. We’re just not going to need all these retail buildings anymore."

https://t.co/jwbgsmZsw2

 

That's the sunny way of putting it.  Query whether we "needed" all these retail buildings in the first place.

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SAVE AMERICAN RETAIL!!!!!! WHO CARES IF THERE ARE MORE CONVENIENT, COST-EFFECTIVE, AND EFFICIENT WAYS TO PURCHASE GOODS?!?!? THERE ARE GENERATIONS OF RETAIL WORKERS WAITING AROUND FOR THEIR JOBS BACK!!!!

 

 

 

.... Oh, sorry, that argument only applies to coal miners for some reason.

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No, it definitely applies to retail and we're just beginning to feel it.  Individual retail jobs may not be as critical to their communities, but they're everywhere, so the impact of losing them will be more pervasive.  Bottom line is we can't keep shedding jobs and expecting everything to work out.

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If you have ever worked big box or grocery stores or chain restaurants, there are always a few workers who drive insane distances to get there.  Some live way out in the country but others drive past OTHER LOCATIONS OF THE SAME CHAIN TO GET TO THE ONE THEY WORK AT.

 

 

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Amazon knows it can barely go any further with selling goods in the U.S. In the future most of their growth is going to be international or in services such as selling all the things you say to Alexa to the Russians.

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Amazon knows it can barely go any further with selling goods in the U.S. In the future most of their growth is going to be international or in services such as selling all the things you say to Alexa to the Russians.

 

Um, there's a reason they bought Whole Foods.  Walmart decimated the grocery industry when it started selling produce/food....Amazon is trying to catch up.


Very Stable Genius

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^ There are places that somehow purchase bulk lots of scratch and dent/return items from Amazon and sell them in warehouses. There used to be one in Norwood, but it closed recently. I got a $2000+ entertainment credenza for $60 because a hinge was broken. I called the manufacturer to ask if there was a way I could buy just that one hinge, and they sent me one for free. There was all sorts of crap in this place, everything from gazebos to little boxes of pencils.

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Amazon knows it can barely go any further with selling goods in the U.S. In the future most of their growth is going to be international or in services such as selling all the things you say to Alexa to the Russians.

 

Um, there's a reason they bought Whole Foods.  Walmart decimated the grocery industry when it started selling produce/food....Amazon is trying to catch up.

 

You can't add any more supermarkets to the American landscape without everyone going down. Margins are total crap in groceries and a lot of it has to be disposed of. You add another competitor and pretty soon the amount of food that gets thrown out puts everyone out of business.

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Yes, that was the "genius" of Walmart.  People HAVE to have food, and even if the margins aren't great for Walmart they got the people in the store where they conveniently had everything else waiting (at higher margins than produce).

 

Amazon's WF purchase was a direct shot at trying to compete with Walmart.  And to do so, they had to get into the grocery business.  Their attempt at grocery delivery - Amazon Fresh - hasn't gone so well (presumably because trying to deliver produce is really ****ing hard and if things get smashed, food gets ruined.  No bueno.).


Very Stable Genius

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If you have ever worked big box or grocery stores or chain restaurants, there are always a few workers who drive insane distances to get there.  Some live way out in the country but others drive past OTHER LOCATIONS OF THE SAME CHAIN TO GET TO THE ONE THEY WORK AT.

 

I had a conversation with the cashier at a CVS across from City Hall in downtown LA, and she told me she drives in from Antelope Valley, which is a solid 2+ hours away with traffic! She might be an assistant manager or something, but I had the same exact thought- why the hell don't you just get a job at a CVS out there!? She told me she wakes up in the middle of the night so she can get to the store in time to open, but thankfully that location closes at 5, so she doesn't get home too late on days where she has to close. All that for a CVS cashier wage. I truly don't get it.

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