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> 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

by 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.

by lapcat 2y ago

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.