Tag Archives: retail

About Those Grocery Prices….

Lately, grocery prices have figured significantly in America’s political argumentation. A number of Trump voters cited them as justifications for their votes, for example. (Excuse my skeptical belief that this “reason” was generally given to mask the racism/misogyny that actually prompted those votes.)

Biden had little to do with grocery prices, but those prices are legitimately relevant to arguments about Trump’s moronic devotion to tariffs, and his threat to impose them on pretty much every country from which the U.S. imports. Every economist who has weighed in has pointed out that tariffs tax American consumers, not the countries exporting to us. And it’s hard to ignore the inevitable effect of his fixation on mass deportations, which–if successful–would leave crops rotting in American fields and set prices soaring.

Prices aren’t the only grocery problem. There’s also maldistribution– the growing incidence of America’s food deserts. A friend recently shared an Atlantic article that shed light on both issues. Titled “The Great Grocery Squeeze,” it highlighted the importance of government policy–very much including the enforcement of policy.

The concept of the food desert has been around long enough that it feels almost like a fact of nature. Tens of millions of Americans live in low-income communities with no easy access to fresh groceries, and the general consensus is that these places just don’t have what it takes to attract and sustain a supermarket. They’re either too poor or too sparsely populated to generate sufficient spending on groceries, or they can’t overcome a racist pattern of corporate redlining.

But these explanations fail to contend with a key fact: Although poverty and ruralness have been with us forever, food deserts arrived only around the late 1980s. Prior to that, small towns and poor neighborhoods could generally count on having a grocery store, perhaps even several. (The term food desert was coined in 1995 by a task force studying what was then a relatively new phenomenon.)

Affluent folks tend to think of food deserts as a feature of low-income, primarily Black neighborhoods, but it’s also a problem in very White places like North Dakota. In 1980s, almost every small town in North Dakota had a grocery store, and many had two. Now, nearly half of North Dakota’s rural residents live in a food desert.

Food deserts are not an inevitable consequence of poverty or low population density, and they didn’t materialize around the country for no reason. Something happened. That something was a specific federal policy change in the 1980s. It was supposed to reward the biggest retail chains for their efficiency. Instead, it devastated poor and rural communities by pushing out grocery stores and inflating the cost of food.

In 1936 Congress had passed the Robinson-Patman Act, essentially banning price discrimination in the industry.

During the decades when Robinson-Patman was enforced—part of the broader mid-century regime of vigorous antitrust—the grocery sector was highly competitive, with a wide range of stores vying for shoppers and a roughly equal balance of chains and independents. In 1954, the eight largest supermarket chains captured 25 percent of grocery sales. That statistic was virtually identical in 1982, although the specific companies on top had changed. As they had for decades, Americans in the early 1980s did more than half their grocery shopping at independent stores, including both single-location businesses and small, locally owned chains. Local grocers thrived alongside large, publicly traded companies such as Kroger and Safeway.

Studies tracking grocery prices while Robinson-Patman was being enforced found that large independent grocers were less than 1 percent more expensive than the big chains.

In the 1980s, convinced that tough antitrust enforcement was holding back American business, the Reagan administration set about dismantling it. The Robinson-Patman Act remained on the books, but the new regime saw it as an economically illiterate handout to inefficient small businesses. And so the government simply stopped enforcing it..That move tipped the retail market in favor of the largest chains, who could once again wield their leverage over suppliers.

Once independent stores closed, “the chains no longer had to invest in low-income areas. They could count on people to schlep across town to their other locations.”

It wasn’t only groceries–lack of anti-trust enforcement affected the entire retail sector. Between 1982 to 2017, the market share of independent retailers went from 53% to 22%.

The problem of food deserts will not be solved without the rediscovery of the Robinson-Patman Act. Requiring a level pricing playing field would restore local retailers’ ability to compete. This would provide immediate relief to entrepreneurs who have recently opened grocery stores in food deserts, only to find that their inability to buy on the same terms as Walmart and Dollar General makes survival difficult.

Policy matters. Just not in the way MAGA voters think.

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Bigotry And Business

Every day, I become more convinced that racism is the foundation of MAGA Republicanism. I do give grudging kudos to MAGA’s activism on behalf of its expansive hatreds–all evidence points to the minority status of these angry White Nationalists, but they are unrelenting–and frequently successful– in their efforts to combat any movement toward civility and inclusion.

Most of us are aware of MAGA’s successful efforts last year during Pride month to cow Target for having the temerity to carry Pride merchandise and thus mortally offending the “Christian” warriors. Those pious folks also rose up to attack Bud Light for working with a transgender person. (Somewhere, there must be an office of “watchers” ready to unleash the troops whenever some business has the nerve to market to “undesirable” folks….)

The most recent example of which I’m aware is a business called Tractor Supply.

Tractor Supply (with which I am wholly unfamiliar) sells animal feed, tractor parts and power tools. It has more than 2,230 stores nationwide, and has been recognized for its inclusiveness; Bloomberg praised it for promoting gender equality, while Newsweek called it one of the best U.S. companies for diversity.

Inclusion was evidently the company’s big sin. The haters came out in force.

The company came under scrutiny this month when conservative podcast host Robby Starbuck denounced Tractor Supply’s diversity and climate policies. An employee recently had messaged him to complain that the company was supporting LGBTQ+ groups, Starbuck told The Washington Post.
 
Starbuck visited Tractor Supply weekly to buy provisions for his farm in Franklin, Tenn., he said, but wasn’t comfortable with the company putting money toward inclusion programs.
“Start buying what you can from other places until Tractor Supply makes REAL changes,” he wrote on X on June 6.

Other customers responded to say they would join the boycott, and the company’s share price fell by 5 percent in the past month, according to the Financial Times.

Tractor Supply backed off, announcing that it will end all “Diversity, Equity, Inclusion” programs and will no longer support LGBTQ and global warming causes.

That, of course, enraged a different part of the customer base. A number of customers have indicated an intent to stop doing business with Tractor Supply, and several have issued statements indicating disappointment with the company’s willingness to buckle under. As one wrote, “Tractor Supply’s embarrassing capitulation to the petty whims of anti-LGBTQ extremists puts the company out of touch with the vast majority of Americans who support their LGBTQ friends, family, and neighbors.”

Tractor Supply is a predominantly rural enterprise, which means it faces a more formidable challenge than businesses that cater to a largely urban customer base. As a recent study has found, a growing aspect of rural identity has added to America’s political and cultural divide.

Jacobs and Shea pinpoint the 1980s as when this identity began to crystallize. In different regions, cost pressures on family farms and ranches, suburban sprawl, or water inaccessibility squeezed rural communities economically, which coincided with terrible depictions of country life in popular culture. Just as national news outlets emerged through cable and the internet, regional papers closed, and divisive national narratives enveloped local political context. Separate localized identities merged into a national common rural identity

Simultaneously, globalization shuttered small manufacturers central to communities’ economies, so younger generations moved to bigger cities, and social issues and addiction grew. For Cramer, a key component of this rural identity is a resentment from the perception of being overlooked by government. It has furthered party polarization as rural Americans increasingly vote Republican and see the world opposite from group identities associated with Democrats and vice versa. 

Rural America is whiter, older, and more religious than urban America, but the researchers found that–even after controlling for those factors– living in rural America independently added to support for the Republican party. 

One of the most conspicuous aspects of MAGA Republicanism has been the willingness of its adherents to “act out.” In addition to the more-or-less organized bands of truly dangerous crazies like the Proud Boys and other neo-fascist groups,  members of groups like Moms for Liberty and the American Family Association have become increasingly belligerent, increasingly apt to insist that the schools, libraries and businesses they patronize privilege their particular bigotries. They are primarily active in the rural precincts where Republicanism is high and the fact that they don’t represent majority opinion even there is less obvious.

It’s hard not to feel some sympathy for the businesses caught in the middle–damned by MAGA if they stick to their purported principles, and shunned by tolerant Americans if they abandon them.

And we wonder why success in retail is so elusive…..

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The More Things Change…?

It feels as if I’ve been on “lockdown” forever, and I know others are equally “over” a pandemic that is anything but over. There just aren’t that many rooms to be deep cleaned, that many books to be read, or–in my case–that many blogs to be written.

The rest of the time, then, becomes available for worrying.

I’ve been particularly concerned about what will happen to the center of my city in the wake of Covid-19. My husband and I moved to downtown Indianapolis in 1980, when things were still pretty sketchy, and we’ve celebrated the subsequent rebirth of a flourishing urban core. We’ve been excited to see new homes and apartments being built, we’ve marveled at our inability to patronize all of the new restaurants and bars (although we really tried!). We’ve worried as online retailing has reduced the number and variety of shops.  And we were heartbroken when we drove past all the boarded-up windows in the wake of the one protest that included such destruction.

Predictions about “what will come next” are everywhere. Most aren’t worth the paper they’re printed on (or the bytes they represent), but I tend to respect the scholars at the Brookings Institution, who’ve weighed in with their analysis.

The Brookings report suggests that COVID-19 will accelerate or intensify many trends that are already underway, which makes a lot of sense to me.

The report noted that retailers, along with their landlords and suppliers, were already “responding to multiple industry-wide  trends” (aka “in a world of hurt”) before the coronavirus. Trump’s tariffs hurt an industry that was already reeling from shifts in consumer demand from products to experiences, e-commerce, and the sharing economy. The pandemic is accelerating an already pressing need to embrace new models.

The report is light on specifics, but does predict that profit-sharing leases will be an “increasingly important tool to help new businesses get started, survive slowdowns, and provide a return to landlords who invest in their tenants’ success.”

The report’s predictions about food really comforted me. (Comfort food? Sorry…)

Convergence and hybridization will accelerate in food retail, which will return to be a “revitalizing force in urban life.” IKEA was already a furniture showroom, warehouse, and restaurant. High-end grocers were encouraging shoppers to have a beer. Restaurants were increasingly not just dine-in, but fast-casual or mobile food trucks. Whether through app-based delivery or prepared foods from wholesalers such as Costco, Americans will return to eating much of their food prepared outside the home. In 2017, jobs in leisure and hospitality (which includes all bars and restaurants) grew to outnumber jobs in retail trade. The pandemic is a setback, but not a reset.

On the negative side, the researchers expect that the 50- million- plus low wage workers will continue to face unsupportable housing costs– and that households that previously strained to pay rent will find it impossible. They also see worse labor market outcomes for older workers who lose their jobs.

So what does all of that portend for cities?

Some urban dwellers who have decamped to less dense areas will undoubtedly stay there permanently,  “irrespective of the many amenities and agglomeration economies urban centers have to offer.” But the researchers note that the period following the Great Recession saw major metros gain more population than their suburbs

Why was this happening in a tepidly recovering economy? A good deal was attributable to young adult millennials. Unable to find jobs and housing in large stretches of the country, they found urban centers attractive. Eventually, the economy rebounded, jobs dispersed and many young adults dispersed with them. But large metro areas still prospered even with slower growth, as Brookings’s Metro Monitor 2020 revealed.

What does this mean for the post-COVID-19 period? Much will depend on Gen Z, an educated and racially diverse generation with strong urban roots.

In other words, if Gen Z  wants and needs what urban life has to offer, they’ll opt to remain.

We will face huge challenges once the pandemic is over and Trump is (fingers crossed) a  horrific memory. We will need to restore a functioning and ethical federal government, address our enormous inequalities with social investment and a comprehensive, adequate social safety net–and continue the work of making our cities  vital, livable places to live and work.

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Counterintuitive…and Interesting

The most recent issue of The New Yorker has an interesting article about retail establishments and staffing levels.

The conventional wisdom is that in order to profit, retailers must keep costs low, and the most effective way to do that is to have as few employees as possible. As the article points out, however, “Although leanness is generally a good thing in business, too much cost-cutting turns out to be a bad strategy, not only for workers and customers, but for businesses themselves.”

The author quotes from a recent Harvard Business Review study of four large low-price retailers with much higher employee costs than their competitors. These are stores, like Costco, that pay their employees more, provide benefits, and provide more training. They also employ a lot more people.

And–counterintuitively–they make more money. They have higher sales per square foot than similar businesses with thinner staffs, and they experience much less (costly) turnover.

The article doesn’t just look at the successful retailers with larger sales staffs; it also notes examples of the reverse. When Home Depot and Circuit City slashed employees to cut costs, sales plummeted.

I’m sure there are other business practices that contribute to both the positive and negative results. But assuming the Harvard folks are right, assuming they have controlled for other factors and that they have produced sound, compelling evidence that hiring more employees (to a point, obviously) translates into greater profits, I wonder if that evidence would be enough to overcome the conventional wisdom that favors “lean and mean.”

Somehow, I doubt it.

After all, we have years and years of compelling evidence that tax cuts don’t create jobs–but politicians continue to insist otherwise.

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