6 ms·

Isn't this a roundabout way of saying that, absent government coercion, consumer preference tends to be towards buying cheaper groceries at a big consolidated s

Isn't this a roundabout way of saying that, absent government coercion, consumer preference tends to be towards buying cheaper groceries at a big consolidated store a drive away, than a more expensive nearby store? Isn't the real boogieman here rules (zoning, parking requirements, etc) and subsidies (oil industry) than mean we all live in diffuse single-use residential communities and have to have cars to get to work/school/shop, whether we really want them or not?

lapcat 2y ago
> Isn't this a roundabout way of saying that, absent government coercion, consumer preference tends to be towards buying cheaper groceries at a big consolidated store a drive away, than a more expensive nearby store? This seems to be missing the point, which has nothing to do with consumer preference. When Robinson-Patman was enforced, suppliers had to offer the same deal to all grocers, so prices were the same at the nearby stores. When it was no longer enforced, the big chains used their market power to extract special deals from suppliers, and thus, "Squeezed by the big chains, suppliers were forced to offset their losses by raising prices for smaller retailers"
- legitster 2y ago
  > When it was no longer enforced, the big chains used their market power to extract special deals from suppliers, and thus Sentences like this make me realize nobody writing about these problems has any actual experience in the grocery industry. Grocery store margins are insanely thin. The relationship you have is backwards - suppliers and distributors have insane leverage over grocery stores. Massive brands essentially lease the aisle space from the stores. And stores have to stock the products consumers want because if they can't find the soda they like, they might never shop at that store again. The only leverage grocery stores offer is volume pricing. Frito Lay would much rather move a truckload of product a day through a Safeway than drive around and stock tiny bodegas.
  - lapcat 2y ago
    > suppliers and distributors have insane leverage over grocery stores. > The only leverage grocery stores offer is volume pricing. This is directly contradicted by the article: "Congressional hearings and a federal investigation found that A&P possessed an advantage that had nothing to do with greater efficiency, better service, or other legitimate ways of competing. Instead, A&P used its sheer size to pressure suppliers into giving it preferential treatment over smaller retailers. Fearful of losing their biggest customer, food manufacturers had no choice but to sell to A&P at substantially lower prices than they charged independent grocers—allowing A&P to further entrench its dominance." "That move tipped the retail market in favor of the largest chains, who could once again wield their leverage over suppliers, just as A&P had done in the 1930s. Walmart was the first to fully grasp the implications of the new legal terrain. It soon became notorious for aggressively strong-arming suppliers, a strategy that fueled its rapid expansion."
    - legitster 2y ago
      Yeah, I am saying this author does sound like they have any grocery experience or talked to anyone who does. The A&P case was from the 1930s. It goes without saying that the grocery industry is a lot different today than it was. Robinson-Patman was a pretty obscure law, and it probably wouldn't have had much effect either way on preventing the rise of the supermarket chains despite much of the conjecture in this article.
      - em-bee 2y ago
        i am skeptical. in germany, big supermarket chains squeezing suppliers is still a problem today. i see no reason why this should be any different in the US.
        legitster 2y ago
        It depends on the chain. Aldi's, Trader Joe's exclusively use white label brands, so they have complete control of their suppliers. Walmart and Costco are big enough to have their own logistics. But for most other supermarket chains, it's the suppliers that dictate the price. The stores essentially lease out their shelves directly to the distributors or manufacturers.
- haroldp 2y ago
  > When Robinson-Patman was enforced, suppliers had to offer the same deal to all grocers The law made it so no one had the position to squeeze suppliers for lower prices and as a result, consumers paid more for groceries. If the suppliers were shifting their costs unduly to small retailers, then there was a market for new suppliers. If retailers were a monopoly they would have raised prices, and that hasn't happened. The grocery market remains VERY competitive, with stores popping up and closing down all the time.
  - lapcat 2y ago
    > If retailers were a monopoly they would have raised prices, and that hasn't happened. Huh? Where have you been the past few years?? The price of groceries has gone way up, and this might have even determined the outcome of the Presidential election.
    - haroldp 2y ago
      Prices went up in 2023 following a massive spurt of deficit spending by the government devaluing the currency, and major supply line disruptions and realignments. If sidelining Robinson-Patman is the reason prices went up, then why did it take 40 years?
  - em-bee 2y ago
    If the suppliers were shifting their costs unduly to small retailers, then there was a market for new suppliers where should these new suppliers come from? and how should they compete? by offering lower prices? how? farming has a cost that can only be lowered through massive scale. to get massive scale, suppliers need to sell to big chains where they face the same problems the existing suppliers already have.
  - Rury 2y ago
    > The law made it so no one had the position to squeeze suppliers for lower prices Not quite. The law made it so that suppliers couldn't offer better deals to one of its customers over another. But retailers could still squeeze suppliers by going with another supplier if another supplier had better prices. In other words, the law didn't make suppliers a monopoly, there was still competition between suppliers, it just prevented suppliers from shifting a disadvantage onto their smallest customers.
legitster 2y ago
Yes. The article even tacitly admits the solution to the food desert problem is by... making groceries more expensive. >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.
- techfeathers 2y ago
  It doesn’t say that prices have to higher, food suppliers could meet the requirements by providing the same low prices they provide to big businesses to small retailers.
  - deleted 2y ago
    [deleted]
  - em-bee 2y ago
    as the article states the problem is that the big supermarket chains dictate prices to their suppliers. that is, the suppliers can't afford to lower prices for everyone, but they are forced to to lower prices for the big chains because they also can't afford to lose the sales from the large chains. germany has the same problem. what needs to stop is the abuse of the dominant position of the large chains.
whoiscroberts 2y ago
No, it’s a roundabout way of saying that when government bureaucrats decide to stop enforcing a law passed by congress, grocery corporations will actively work to grow larger and close stores in Black neighborhoods. Don’t retroactively assign preference to the mother who walks to the grocery store a block away only find it is closed and was forced to take a bus to Walmart, that mother was not exercising a preference. The preference was clear prior to the ceasing of enforcement. The article said the prices were only 1% higher at the local chains, the customer were exercising presence by choosing to pay 1% more…
- haroldp 2y ago
  > grocery corporations will actively work to grow larger and close stores in Black neighborhoods If black neighborhoods are underserved, go make a fortune in black neighborhood grocery stores or their suppliers.
  - deleted 2y ago
    [deleted]
  - mindslight 2y ago
    Have you discovered a proof of P == NP, or are you just choosing to assert it to go on a message board commenting spree completely disconnected from the real world? If markets worked the way you are implying, then the problem would already be solved. In reality, the inefficiencies matter a lot.
    - haroldp 2y ago
      > In reality, the inefficiencies matter a lot. Which is how big stores attract customers with lower prices, provided they already have cars to get to them.
      - mindslight 2y ago
        I was talking about inefficiencies due to "free market" optimization being a mere heuristic that finds local optima rather than global ones. So it can be completely rational for individual customers to be basing their purchasing around such a dynamic, to the point where even adding some energy (eg investment capital) can't get the optimization unstuck, while still having longstanding structural inefficiencies when looking at the larger scale.
observationist 2y ago
This is false - if people have the option, they prefer the locally grown, locally owned and operated smaller stores that might cost more, or farmer's markets, or ethically sourced food. If a consumer has low income, or is in a food desert, they don't have the option, and the economics of Walmart mean that there's no way for such a small business to compete unless you're basically running it as a charity, or you're doing something (possibly) on shaky ethical grounds to make up the difference. We could fix these things by legislating big box stores, preventing effective collusion and hostile pricing, protecting smaller businesses with tax breaks, higher taxes on megacorps, and so forth. It is, in fact, possible, for megacorps to coexist with successful small businesses and this hostile and rank antagonism from big companies doesn't have to happen. They just lose out on .005% potential profit, so it's better to lobby for (and obtain) unchecked influence and dominion over American markets. Community management and regulation plays a part, but food deserts represent a captured audience or market, so the primary goal is to shut down any possible "competition" no matter how little they actually impinge on profit, effectively disallowing competition. Throw in Amazon's racket, and the whole idea of an American "free marketplace" is more of a sick joke than any sort of principled reality. You will buy your mass produced stuff from China and Nestle and Coke and Walmart, and you will like it. If you don't like it, good luck, because you've been priced out of leaving unless you're willing to be broke.
- haroldp 2y ago
  > if people have the option, they prefer the locally grown, locally owned and operated smaller stores that might cost more If the close store is the same price, then for sure, everyone will prefer what's nearby. If it is one hundred times the price (hyperbole) then everyone will take the drive. At some point of price differential is the current situation where people who are already forced to have cars will frequently take the drive for less expensive groceries. It's prima fascia the case.
pitpatagain 2y ago
The article claim is not that bigger stores used their pricing power to get cheaper deals and passed that savings along to consumers who then preferred them and their lower prices. The claim is that the large grocery chains are able to use their pricing power to demand prices that squeeze suppliers, keeping the difference for the grocer, not for the consumer. Their ability to do this has increased the more consolidated the grocery store chains have been allowed to become, giving them much more power versus their suppliers.
- haroldp 2y ago
  This is very silly, and the evidence for it is in the world all around you. Walmart is cheaper for most things. If they did not in fact pass the cost on, then there is the idea for your startup business: a grocery supplier to small neighborhood retailers.
  - deleted 2y ago
    [deleted]
  - pitpatagain 2y ago
    My comment is not whether the article's claim re this particular market inefficiency is empirically correct, only that it doesn't logically simplify to "if larger stores couldn't get preferential deals, prices for consumers would be significantly higher." That depends on a lot of things. Grocery suppliers are, eg, agricultural producers who need to offload whole crops of perishable goods. The industry is full of well known market failures, examples of monopsony buying power, etc, so an argument from an idealized market I don't find very persuasive.
  - ocschwar 2y ago
    Walmart is cheaper for the customer (modulo the expense of driving to a Walmart). But Walmart is also a lot cheaper for Walmart. One delta is larger than the other.
    - haroldp 2y ago
      Walmart has been making around 2% profits for a decade. Do you think that Walmart is less than 2% cheaper than small neighborhood grocery stores?
xivzgrev 2y ago
No it has nothing to do with location and everything to do with price. If large companies are allowed to flex their purchasing power then people go where the cheaper prices are. But there are limits, people only drive so far. So once a big chain has driven everyone else out they can charge what they want or maximize profits by extracting value (see comment on Unsafeway). Free market is good as long as monopolies can’t form. And unfortunately with local businesses that happens due to geographical constraints. We’ve seen it with groceries, next you’ll see it with plumbers (see all the massive PE roll ups going on now). This was an eye opening article. I had no idea we already had a law on the books for this. It’s just…unenforced.
- haroldp 2y ago
  Disagree. If most people lived in dense mixed-use neighborhoods where they could walk from home to 90% of the destinations they needed (work, school, groceries, restaurants, entertainment, dentist, etc) they wouldn't need to own a car, and the nominal difference in price between a small corner grocery and a distant chain mega-chain store wouldn't be enough to compel they to buy, park, fuel and maintain one. Restrictive single-use zoning makes this type of community effectively illegal, despite it being a big consumer choice winner in places where it is allowed. Perhaps instead of a coercive fix for a problem caused by a coercive fix, we should strike at the root and allow people to buy what they want in the first place?
  - piva00 2y ago
    It's exactly how I live in Sweden, even though I'm in a suburb some 15km away from the centre of Stockholm, living in a house by the forest, I still have the option to go into the closest by independent grocer at the metro station or to the bigger grocer some 5-8 min away by bike. When I need something quickly I just pop by the nearest grocer, they also have a different variety than the larger one further away. If I need to buy some more expensive items then I know it's worth it to bike further away. It's a good balance, I have options and both grocers seem to be doing fine (the independent one is even expanding, new freezers/fridges, opened a whole new section for cheese, etc.). Even though it's a suburb it's quite compact, and well planned. There are some 3000 apartments around the station (walking distance no longer than 10 min), while I live further out closer to the forest and lake (about 20 min walking) in a town house, there are many other town houses and some 5-10 min away from me there are some villas. Population of this suburb is around 13-14k people.
tzs 2y ago
There was no substantial change in zoning, parking requirements, etc or oil subsidies between the when local stores were competing quite well with the big consolidated stores and the time when the local stores started disappearing and the big consolidated stores become dominant, so those cannot be the explanation.
- haroldp 2y ago
  I don't doubt that the change in regulation enforcement mentioned in the article precipitated the shift away from small grocery stores. But the effects of bad zoning have been building for 100 years since Euclid v. Ambler. And it obvious that living in large tracts of single-use residential zones all but requires car ownership. If you already have a car, and all homes and all businesses are surrounded by seas of parking, then going to a large consolidated store is a financial win for a consumer rather than a burden.

lapcat 2y ago

> Isn't this a roundabout way of saying that, absent government coercion, consumer preference tends to be towards buying cheaper groceries at a big consolidated store a drive away, than a more expensive nearby store? This seems to be missing the point, which has nothing to do with consumer preference. When Robinson-Patman was enforced, suppliers had to offer the same deal to all grocers, so prices were the same at the nearby stores. When it was no longer enforced, the big chains used their market power to extract special deals from suppliers, and thus, "Squeezed by the big chains, suppliers were forced to offset their losses by raising prices for smaller retailers"

legitster 2y ago
> When it was no longer enforced, the big chains used their market power to extract special deals from suppliers, and thus Sentences like this make me realize nobody writing about these problems has any actual experience in the grocery industry. Grocery store margins are insanely thin. The relationship you have is backwards - suppliers and distributors have insane leverage over grocery stores. Massive brands essentially lease the aisle space from the stores. And stores have to stock the products consumers want because if they can't find the soda they like, they might never shop at that store again. The only leverage grocery stores offer is volume pricing. Frito Lay would much rather move a truckload of product a day through a Safeway than drive around and stock tiny bodegas.
- lapcat 2y ago
  > suppliers and distributors have insane leverage over grocery stores. > The only leverage grocery stores offer is volume pricing. This is directly contradicted by the article: "Congressional hearings and a federal investigation found that A&P possessed an advantage that had nothing to do with greater efficiency, better service, or other legitimate ways of competing. Instead, A&P used its sheer size to pressure suppliers into giving it preferential treatment over smaller retailers. Fearful of losing their biggest customer, food manufacturers had no choice but to sell to A&P at substantially lower prices than they charged independent grocers—allowing A&P to further entrench its dominance." "That move tipped the retail market in favor of the largest chains, who could once again wield their leverage over suppliers, just as A&P had done in the 1930s. Walmart was the first to fully grasp the implications of the new legal terrain. It soon became notorious for aggressively strong-arming suppliers, a strategy that fueled its rapid expansion."
  - legitster 2y ago
    Yeah, I am saying this author does sound like they have any grocery experience or talked to anyone who does. The A&P case was from the 1930s. It goes without saying that the grocery industry is a lot different today than it was. Robinson-Patman was a pretty obscure law, and it probably wouldn't have had much effect either way on preventing the rise of the supermarket chains despite much of the conjecture in this article.
    - em-bee 2y ago
      i am skeptical. in germany, big supermarket chains squeezing suppliers is still a problem today. i see no reason why this should be any different in the US.
      - legitster 2y ago
        It depends on the chain. Aldi's, Trader Joe's exclusively use white label brands, so they have complete control of their suppliers. Walmart and Costco are big enough to have their own logistics. But for most other supermarket chains, it's the suppliers that dictate the price. The stores essentially lease out their shelves directly to the distributors or manufacturers.
haroldp 2y ago
> When Robinson-Patman was enforced, suppliers had to offer the same deal to all grocers The law made it so no one had the position to squeeze suppliers for lower prices and as a result, consumers paid more for groceries. If the suppliers were shifting their costs unduly to small retailers, then there was a market for new suppliers. If retailers were a monopoly they would have raised prices, and that hasn't happened. The grocery market remains VERY competitive, with stores popping up and closing down all the time.
- lapcat 2y ago
  > If retailers were a monopoly they would have raised prices, and that hasn't happened. Huh? Where have you been the past few years?? The price of groceries has gone way up, and this might have even determined the outcome of the Presidential election.
  - haroldp 2y ago
    Prices went up in 2023 following a massive spurt of deficit spending by the government devaluing the currency, and major supply line disruptions and realignments. If sidelining Robinson-Patman is the reason prices went up, then why did it take 40 years?
- em-bee 2y ago
  If the suppliers were shifting their costs unduly to small retailers, then there was a market for new suppliers where should these new suppliers come from? and how should they compete? by offering lower prices? how? farming has a cost that can only be lowered through massive scale. to get massive scale, suppliers need to sell to big chains where they face the same problems the existing suppliers already have.
- Rury 2y ago
  > The law made it so no one had the position to squeeze suppliers for lower prices Not quite. The law made it so that suppliers couldn't offer better deals to one of its customers over another. But retailers could still squeeze suppliers by going with another supplier if another supplier had better prices. In other words, the law didn't make suppliers a monopoly, there was still competition between suppliers, it just prevented suppliers from shifting a disadvantage onto their smallest customers.

legitster 2y ago

Yes. The article even tacitly admits the solution to the food desert problem is by... making groceries more expensive. >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.

techfeathers 2y ago
It doesn’t say that prices have to higher, food suppliers could meet the requirements by providing the same low prices they provide to big businesses to small retailers.
- deleted 2y ago
  [deleted]
- em-bee 2y ago
  as the article states the problem is that the big supermarket chains dictate prices to their suppliers. that is, the suppliers can't afford to lower prices for everyone, but they are forced to to lower prices for the big chains because they also can't afford to lose the sales from the large chains. germany has the same problem. what needs to stop is the abuse of the dominant position of the large chains.

whoiscroberts 2y ago

No, it’s a roundabout way of saying that when government bureaucrats decide to stop enforcing a law passed by congress, grocery corporations will actively work to grow larger and close stores in Black neighborhoods. Don’t retroactively assign preference to the mother who walks to the grocery store a block away only find it is closed and was forced to take a bus to Walmart, that mother was not exercising a preference. The preference was clear prior to the ceasing of enforcement. The article said the prices were only 1% higher at the local chains, the customer were exercising presence by choosing to pay 1% more…

haroldp 2y ago
> grocery corporations will actively work to grow larger and close stores in Black neighborhoods If black neighborhoods are underserved, go make a fortune in black neighborhood grocery stores or their suppliers.
- deleted 2y ago
  [deleted]
- mindslight 2y ago
  Have you discovered a proof of P == NP, or are you just choosing to assert it to go on a message board commenting spree completely disconnected from the real world? If markets worked the way you are implying, then the problem would already be solved. In reality, the inefficiencies matter a lot.
  - haroldp 2y ago
    > In reality, the inefficiencies matter a lot. Which is how big stores attract customers with lower prices, provided they already have cars to get to them.
    - mindslight 2y ago
      I was talking about inefficiencies due to "free market" optimization being a mere heuristic that finds local optima rather than global ones. So it can be completely rational for individual customers to be basing their purchasing around such a dynamic, to the point where even adding some energy (eg investment capital) can't get the optimization unstuck, while still having longstanding structural inefficiencies when looking at the larger scale.

observationist 2y ago

This is false - if people have the option, they prefer the locally grown, locally owned and operated smaller stores that might cost more, or farmer's markets, or ethically sourced food. If a consumer has low income, or is in a food desert, they don't have the option, and the economics of Walmart mean that there's no way for such a small business to compete unless you're basically running it as a charity, or you're doing something (possibly) on shaky ethical grounds to make up the difference. We could fix these things by legislating big box stores, preventing effective collusion and hostile pricing, protecting smaller businesses with tax breaks, higher taxes on megacorps, and so forth. It is, in fact, possible, for megacorps to coexist with successful small businesses and this hostile and rank antagonism from big companies doesn't have to happen. They just lose out on .005% potential profit, so it's better to lobby for (and obtain) unchecked influence and dominion over American markets. Community management and regulation plays a part, but food deserts represent a captured audience or market, so the primary goal is to shut down any possible "competition" no matter how little they actually impinge on profit, effectively disallowing competition. Throw in Amazon's racket, and the whole idea of an American "free marketplace" is more of a sick joke than any sort of principled reality. You will buy your mass produced stuff from China and Nestle and Coke and Walmart, and you will like it. If you don't like it, good luck, because you've been priced out of leaving unless you're willing to be broke.

haroldp 2y ago
> if people have the option, they prefer the locally grown, locally owned and operated smaller stores that might cost more If the close store is the same price, then for sure, everyone will prefer what's nearby. If it is one hundred times the price (hyperbole) then everyone will take the drive. At some point of price differential is the current situation where people who are already forced to have cars will frequently take the drive for less expensive groceries. It's prima fascia the case.

pitpatagain 2y ago

The article claim is not that bigger stores used their pricing power to get cheaper deals and passed that savings along to consumers who then preferred them and their lower prices. The claim is that the large grocery chains are able to use their pricing power to demand prices that squeeze suppliers, keeping the difference for the grocer, not for the consumer. Their ability to do this has increased the more consolidated the grocery store chains have been allowed to become, giving them much more power versus their suppliers.

haroldp 2y ago
This is very silly, and the evidence for it is in the world all around you. Walmart is cheaper for most things. If they did not in fact pass the cost on, then there is the idea for your startup business: a grocery supplier to small neighborhood retailers.
- deleted 2y ago
  [deleted]
- pitpatagain 2y ago
  My comment is not whether the article's claim re this particular market inefficiency is empirically correct, only that it doesn't logically simplify to "if larger stores couldn't get preferential deals, prices for consumers would be significantly higher." That depends on a lot of things. Grocery suppliers are, eg, agricultural producers who need to offload whole crops of perishable goods. The industry is full of well known market failures, examples of monopsony buying power, etc, so an argument from an idealized market I don't find very persuasive.
- ocschwar 2y ago
  Walmart is cheaper for the customer (modulo the expense of driving to a Walmart). But Walmart is also a lot cheaper for Walmart. One delta is larger than the other.
  - haroldp 2y ago
    Walmart has been making around 2% profits for a decade. Do you think that Walmart is less than 2% cheaper than small neighborhood grocery stores?

xivzgrev 2y ago

No it has nothing to do with location and everything to do with price. If large companies are allowed to flex their purchasing power then people go where the cheaper prices are. But there are limits, people only drive so far. So once a big chain has driven everyone else out they can charge what they want or maximize profits by extracting value (see comment on Unsafeway). Free market is good as long as monopolies can’t form. And unfortunately with local businesses that happens due to geographical constraints. We’ve seen it with groceries, next you’ll see it with plumbers (see all the massive PE roll ups going on now). This was an eye opening article. I had no idea we already had a law on the books for this. It’s just…unenforced.

haroldp 2y ago
Disagree. If most people lived in dense mixed-use neighborhoods where they could walk from home to 90% of the destinations they needed (work, school, groceries, restaurants, entertainment, dentist, etc) they wouldn't need to own a car, and the nominal difference in price between a small corner grocery and a distant chain mega-chain store wouldn't be enough to compel they to buy, park, fuel and maintain one. Restrictive single-use zoning makes this type of community effectively illegal, despite it being a big consumer choice winner in places where it is allowed. Perhaps instead of a coercive fix for a problem caused by a coercive fix, we should strike at the root and allow people to buy what they want in the first place?
- piva00 2y ago
  It's exactly how I live in Sweden, even though I'm in a suburb some 15km away from the centre of Stockholm, living in a house by the forest, I still have the option to go into the closest by independent grocer at the metro station or to the bigger grocer some 5-8 min away by bike. When I need something quickly I just pop by the nearest grocer, they also have a different variety than the larger one further away. If I need to buy some more expensive items then I know it's worth it to bike further away. It's a good balance, I have options and both grocers seem to be doing fine (the independent one is even expanding, new freezers/fridges, opened a whole new section for cheese, etc.). Even though it's a suburb it's quite compact, and well planned. There are some 3000 apartments around the station (walking distance no longer than 10 min), while I live further out closer to the forest and lake (about 20 min walking) in a town house, there are many other town houses and some 5-10 min away from me there are some villas. Population of this suburb is around 13-14k people.

tzs 2y ago

There was no substantial change in zoning, parking requirements, etc or oil subsidies between the when local stores were competing quite well with the big consolidated stores and the time when the local stores started disappearing and the big consolidated stores become dominant, so those cannot be the explanation.

haroldp 2y ago
I don't doubt that the change in regulation enforcement mentioned in the article precipitated the shift away from small grocery stores. But the effects of bad zoning have been building for 100 years since Euclid v. Ambler. And it obvious that living in large tracts of single-use residential zones all but requires car ownership. If you already have a car, and all homes and all businesses are surrounded by seas of parking, then going to a large consolidated store is a financial win for a consumer rather than a burden.