This is the same blame-the-consumer mentality I was talking about above, and it still makes no sense.
Exactly how much patronage does any one individual have to provide to a given store so that it can stay open? And exactly how is any individual supposed to determine that information when making a decision about where to shop?
You can’t legitimately blame consumers for not doing enough for the local stores they claim to want, when there’s no practical way for them to determine how much they actually need to do.
Would it help clarify matters if I mentioned that this scenario exactly describes what happened (is still happening) in my home town? (With the exception that the butchers, not the bakers, were the first to go.) First we had one small supermarket, then the number one chain took it over and expanded it, then the number two chain opened one at the other end of town. Concurrently with these events, smaller high street stores began to close - not because nobody was shopping in them, but because fewer people were spending less money in them. Once the butchers were all gone, there was that much less reason for people to go down the street rather than park their car and buy everything in one place. Now, each time I go home, another shop front is standing empty.
Which brings up the question of what constitutes “consumer choice”. Yes, people who are in the supermarket anyway, a little time-pressured, maybe wanting to get home and watch the cricket and/or with a screaming child attached to their knee, will decide to just get what they need there and head back home most of the time. This does not constitute a carefully thought out choice about what they want their high street to look like. It is a spur of the moment, extremely short term perspective. If you stopped that child-encumbered cricket fan and told him that he’d made the same decision the past three weeks and if he didn’t start shopping elsewhere he’d be stuck with the supermarket forever, he may well decide to spread his money about. But we don’t know, because that information is not available to him.
For some reason, there seems to be a general horror at the idea that a series of small decisions, which are the best at the time, can lead to a sub-optimal situation in the long run. Is this such a surprise to people? If nothing else, it should not be a surprise that a local monopoly (or duopoly) will offer less choice to consumers than a better serviced market. One strategy which is common to retailers in the UK, having established a local monopoly, is to cut down on the number of brands offered, replacing (say) the number three and four brands with their own private label goods. This takes away consumer choice - there was and is a demand for the third and fourth brands, but it cannot be satisfied locally, so people make the choice from what is available to them. It doesn’t mean it’s what they want.
I don’t know the UK, so I can’t speak for the UK consumer. Still, it sounds as if your real beef doesn’t lie with the sup0ermarkets, but with your fellow food-buyers.
Enough to stay in business. Yes, it seems vague. But there’s no magic number. It all depends on his costs, the size of the local market, market penetration, etc. If someone gave us some numbers, we could take a decent guess as to what any given store needs to survive.
A good argument. However, what you’re assuming here is essentially that people are too stupid to make good choices. And I don’t aree with that. The mere fact that you don’t like their choices is not a reason to say they ought not to have that choice. But, as to the numbers presented in the OP, it strongly suggested that in fact, several specialty stores would remain open. It tried to suggest some kind of snowball effect, but mathematically would have strengthened the remaining specialty stores.
It’s not market fundamentalism: it’s the observed effect of people’s habits and patterns. There are plenty7 of dead products and stores to show that when even the largest ad most powerful retailers stop providing value, they die. If better competition shows up, low-value stores die. It’s not nice, but it is fact. Price is one of the most powerful forms of competition, but it’s not the only one.
Its not (it never is) about what people want or say they want. All that matters is what they do. Sure, they may say they want a commercially active downtown. But if they choose not to support it, then they apparently don’t want a commercially active downtown as much as they want cheap goods or whatnot.
If you ask about what people want, they’ll always say they want everything. But economics is the science not of giving people everything, but of stuydying how they choose between goods. It’s not about blame. Blame is for people who aren’t thinking about solutions.
But the point is that it is irrelevant whether you think the result is sub-optimal. No real-world result is optimal. The fact that you like one result more is irrelevant. You or someone like you will always be worse off in any given scenario. You want beter food, someone else desperately needs cheaper food more conveniently. But if the market segment exists, then it can be filled. Old butchers with limited selctions can be replaced by new speciality markets with high quality goods from around the world, as well as local delicacies. If that’s not happening, then I submit the “flaw” lies in your fellow consumers who haven’t demanded it.
The world changes. Get used to it. Try to jhold it still and you can only break it. The 19th-century model of cities doesn’t work anymore, and it’s not just because stores have moved out of the city cores.
I don’t think it can be distilled down to any such simple solution - people can only choose from what’s available and in some cases, that choice is being manipulated at a level they’re not fully conscious of.
Maybe, though, we are just all talk - we moan about the good old days when tomatoes tasted like tomatoes, but if all we can find is tomatoes that taste of damp blotting paper, we buy them anyway, when the sensible thing would be to leave them to rot on the shelves and tell the store exactly why we’re doing so.
Trouble is, it’s too easy to feel utterly helpless about it all - what’s the use of me boycotting mediocrity unless I know others are with me; I suppose it’s the reason a lot of wrongs go uncorrected for too long.
And the sadder thing is (and I know this will make me sound like an old fart) that there’s a whole new generation now, going out into the world as brand new independent adults and all they’ve ever known is oven chips and processed chicken mini-kievs; they actually don’t know what they’re missing and (because packaged foods can be knocked out at a higher profit margin than fresh ingredients), there’s little incentive for anyone in the business to enlightne them.
Maybe I just need to move to France; if the supermarkets there rejected perfectly good locally-grown produce in favour of insipid, pale imitations imported from faraway lands, the locals would burn it to the ground.
Egg-zactly. And as I’ve been remarking for three or four posts now, since consumers don’t have those numbers, they have no reliable way of selecting the optimal consumer choices to achieve their goal of keeping any given store in business. If they guess wrong about how much they need to patronize a certain store in order for it to survive—and all they can do is guess, because they don’t have the numbers—then by the time they’ve figured out that they guessed wrong, it’s usually too late.
Then I must have expressed myself completely backwards, because that is not at all what I was trying to say. Sorry about that. What I have been trying to say for several posts now is not that “people are too stupid to make good choices”, but that people don’t have the necessary information to translate the total of their desires accurately into consumer choices. Once again, what we’re dealing with here is the market failure called asymmetric information.
In other words, people are liars, or hypocrites, or too stupid to realize they can’t have everything, eh? Who’s dissing the consumer now?
Again, the problem with this kind of argument is that it requires you to believe that consumers have deliberately chosen every outcome of the consumer choices they make. So when they complain that they’re dissatisfied with one of the outcomes, you have to fall back on assuming that they’re liars or hypocrites or just plain stupid, because the outcome they ended up producing must have been what they “really” wanted.
Rather, what’s actually going on here, AFAICT, is that consumers are sometimes making choices that don’t accurately reflect what they want out of all the subsequent outcomes. Not because consumers are stupid, but because they can’t get adequate information about how their choices affect all of those outcomes.
Slight nitpick, asymmetric information isn’t a market failure, but it can certainly lead to it. You’re thinking about adverse selection, which isn’t exactly the situation that you’re describing below.
More nitpicks: “economics of the transaction” doesn’t make any sense in this context. Rather, the other party has more knowledge regarding the value of the transaction relative to the price of it. The classic example is insurers and smokers. On average, smokers live less healthy lives and don’t live as long, thereby causing more cost to the insurance industry than non-smokers. When an insurance company doesn’t know who smokes (but the buyers do, natch), the price equilibrium is set higher to account for smokers. This results in a less efficient market.
I think you’re talking about adverse selection here, or at least the looser definition of it – or even perhaps the law of unintended consequences (which was alluded to earlier); and, even if you’re not, your use of asymmetric information is incorrect. If we were to have some numbers (which we do not have, and I’ll address that below), I wouldn’t be surprised that what we are actually seeing is poor/outdated/inefficient business models, and the market punishing those high street shops which continue to employ those models.
Asymmetric information would occur here if the sellers knew that they would have to sell at a lower price, but don’t because buyers do not know that a lower price is available. Your argument also ignores brand loyalty and individual utility.
Most people may not want that knowledge. They may not want to be bogged down in the decision making. Besides, even if they did have all the information of the consequences of their actions, if Megagrocer is more efficient, offering better price and value, then all that means is that the high street market will lose business even faster.
For the purposes of this discussion, we assume simple and perfectly competitive markets, but we all know that they don’t exist in the real world. A lot of the econ threads are attacking/arguing with the basic fundamentals of econ, though they aren’t giving any reason for the (perceived) market failure. I agree that consumers don’t have the information that they want. Most of the time, though, I argue, they don’t want it. Buyer A may want Sam the Seller to stay in business on High Street, but if he cannot guarantee the same efficiency (or value) that Megagrocer can. So screw Sam, Buyer A is going to save his money and use it for other things.
There are also cases where my class examined having too much information, aka the “Curse of Knowledge.” The one example that really sticks is in contract negotiation. When a party knows more about the circumstances of another party entering into a contract, the more knowledgeable party way more often than not will take the less optimal position. There is also the issue of “common knowledge,” in that parties with common knowledge do not necessarily have common goals/expectations. My point is that in general, these things balance out. If not, there would be market failures all over the place.
Anyway, let me address this point now:
It has been quoted on this board, and in this thread many times over that while price isn’t the only the piece of information, it’s one of the most powerful pieces of information that buyers and sellers have. As many of us stated, people will vote with their feet/wallet/watch, etc. Megagrocer must be, in this scenario, providing something of value more than the high street shops because they are so easily able to take business away. Such a small change in the market equilibrium then results in the downfall of all of high street. All things being equal, high street must be super-inefficient.
But, let’s assume that your observations are true, using the same generalities and “hand-waving” you accuse me and other posters of on this board. Asymmetric information leads to adverse selection. Megagrocer is now putting out suboptimal food at higher prices. If this continues, there will be market failure. People will stop shopping and grow their own food. Or, more likely, someone will be fed up (no pun intended) with the bad food and realize the income potential for taking advantage of this market inefficiency. Will this result in a new boom in high street shops? Not necessarily, but this should alleviate the problem of sub-optimal pricing.
The clear solution is that the minority of people who want to shop in the mega-store must be forced not too, so that the OP can have tomatoes that he likes. Also, we should force someone in each community to grow tomatoes so that we don’t have to ship them long distances. The fact that they might make more money growing something else, or doing something else, should not stand in the way.
I suppose part of the reason some of us aren’t seeing the problem is that we are seeing the exact opposite thing occuring here in the US.
Not so much that supermarkets are closing down, but that supermarkets are offering much better selection and quality than they did 20 years ago, and specialty shops providing high-end goods are springing up everywhere.
Specialty shops CAN compete with supermarkets, supermarkets CAN provide high-quality goods for a low price. Consumers here in the US are getting much better quality food than they did a generation ago, consumers demand high-quality produce much more than they used to.
Maybe the UK never had supermarkets before and small shops just have no idea how to compete against modern business practices. But the reality is that many times small shops offer poor selection, high prices AND poor quality. There’s no reason the small grocer has to offer good tomatoes, they want to make a profit just as much as the supermarkets and are perfectly willing to sell crap if it makes money. The supermarket may not always provide high quality goods but neither do many mom and pop stores. Are supermarkets really such a new business model in the UK? It isn’t like supermarkets here in the US are hugely profitable, they are notoriously low-margin businesses that have to sell huge amounts of merchandise at very low profits.
I just don’t understand the ridicule and animosity (as well as the blatant and deliberate misrepresentation of my views) that this topic seems to have generated; I expected some strong pro-capitalist responses - that’s why I asked the question on a US-centric board; I’ll even admit that I might have defended the speculations made by this book a little too emotively, but I just don’t understand the sneering. I’m going to ask for this topic to be closed and I’m not going to discuss anything like this here on the SDMB again.
I don’t mean to disrespect the OP by continuing to post when s/he has declared an intention to close the thread, but I do want to respond to mazinger’s comments, because I think this is an important issue.
IANAEconomist, so I may well have made mistakes on the terminology: thanks for the tips. However, I still stress that the important issue is that consumers don’t have complete information about the effects of their consumer choices, they are making choices that don’t reflect the totality of what they really want.
This seems to me like a pure cop-out, as I said before. I’m pointing out a genuine shortcoming of this market situation—its inability to provide consumers with specific information about how their shopping choices will affect the survival of other stores and all the indirect consequences of that—and all you can offer is “well, maybe they don’t want to know anyway.” And then you retreat to the more obvious feature of the economic transaction, namely the price of the goods.
What I’m talking about here is the market’s inability to give people information that will allow their consumer choices to reflect their real desires about issues other than the price of the goods. That’s an important and serious problem. We shouldn’t just duck it by saying “well, maybe they don’t want to be bogged down in the decision-making”.
(And anyway, this suggestion is contradicted by the market research I mentioned above, about people changing their buying habits when food labels give them information about the environmental sustainability of different items. That suggests that people are willing to incorporate these non-price factors into their decision-making, as long as they get the necessary information in a practical and easy-to-use way.)
Sez you. This is market fundamentalism at its purest and most alarming. You admit that consumers don’t have adequate information about important effects of their consumer choices, such as their impact on local businesses. But you simply decide that it doesn’t matter, because you arbitrarily assume that consumers don’t “really” care about that information anyway and wouldn’t change their consumer choices if they had it. Sez you.
And when people don’t have adequate information about the total effects of their consumer choices, they will “vote” in ways that don’t necessarily reflect the total of what they really want.
Your attempts to argue that this is not a serious problem, or can’t end up seriously distorting market outcomes away from consumers’ real preferences, are not convincing.
This is the core problem with market fundamentalism. It assumes that markets must be producing the right outcomes, because those are the outcomes that the consumers chose. And this in turn assumes that the consumers have deliberately chosen, in full knowledge, every single outcome of the choices that they make.
But since consumers don’t actually have full knowledge about all the outcomes of their choices, this assumption is simply false.
I sympathize. But the way to go is not to buy crap food. It’s to try and start a new business based in fresh thinking and quality products. Go door-to-door giving people the taste difference. Organize crazy media events just to show how superior your food is. If the British peope have any desire for decent food, you’ll get business.
If not, move to Knoxville. We have good food here (including Granger County tomatoes!).
Not at all. People do want everything. Maybe they even deserve it. But they won’t get it. The idea that, given a choice, people want everything is no news. It’s the basis of economics, and seems to be a pretty good assumption so far. I believe people are quite capable of seeing that ceasing to patronize a given location could, in the long run, cause it to fail. I’ve seen it happen; it’s no mystery to me. And, because individuals are maximizing their own value, some will inevitably get the shaft and denied what they want. Basically, the majority rules, and the only alternative is to shaft the majority.
Thing is, you’re assuming that people would agree with you if they knew “the truth.” And I don’t think that’s so. They know “the truth.” They just don’t care. It’s not as important to them as the alternative.
With all due respect, I don’t think you understand what you’re asking. It’s ultimately legally protecting incompetence. You want to arbitrarily reward some and punish others based on your aesthetic tastes. When it’s your money, go ahead. Thing is, you want to make the same choice for everyone else. And we’re not so sure that’s a good idea. In fact, it seems an awful lot like several other systems which turned out very bad.
I can’t help but think that the non-UK posters are perhaps not aware of the situation in the grocery market here. Market share of the top participants in Q1 2004 (I’m lazy).
Tesco: 27.4%
Asda: 17%
Sainsbury: 16.4%
Safeway/Morrisons: 15.3%
The market is very very concentrated, giving the big players massive advantages in pricing, logistics and marketing.
Furthermore, in the UK smaller retailers tend to be concentrated in the middle of a town (the high street) whereas the supermarkets will be located in an out-of-town complex with ample parking. Pay £3 to park and then walk around bying produce or else park for free and do a big all-in-one shop?
Finally, since it is increasingly difficult to get planning permission to develop large stores and the market is anyway saturated, the supermarkets are now opening smaller ‘minimarkets’ in high-traffic location to scoop up the convenience trade as well.
So good luck with starting up that new high-quality food business and please don’t take the bancruptcy to heart. By the way there is already a supermarket chain specialising in high-quality high-price merchandise (including produce). Waitrose have a market share of 4% and you’ll have to fight your way past them too.
I’m sure the market in the US works much more efficiently, but that is no guarantee that it does the same everywhere.
However, as I said in my previous post I’m not sure any of the solutions I have seen touted are workable, so we may just have to put up with it.
All that Mangetout has done is highlight a problem in the UK retail grocery market - large supermarket chains can very quickly destroy local competition, with the ultimate result of reducing consumer choice. This is not revolutionary, or surprising, or an assault upon capitalism. He tentatively suggested that there might be some regulatory solution (much as we have a regulatory solution to the problem of companies paying non-living wages), but the main thrust of his remarks has to identify the problem. This hardly merits snide accusations about Communism. There is a real problem concerning large supermarket chains’ distorting effect upon the retail landscape in the UK, and the tautological dogma of market fundamentalism that is being parroted in response does not constitute an intelligent engagement with the issue.
The negative effects of the success of large supermarket chains on the UK grocery market have been noted for some time. I’m doing a project at work on this at the moment (being a grocery market analyst working in the UK). The four largest chains now have something approaching an 80% share of the grocery market (on preview, thanks for the figs, slaphead). This is not a recipe for wide consumer choice. Nor does it reflect perfect servicing of consumer needs, or anything like it.
It is quite true, as Mangetout says, that these retailers compete primarily on price, rather than on quality of produce. As has been pointed out patiently by Kimstu, consumers do not have all the information about how their choices will affect their environment. It is therefore impossible to say that the decisions they have made reflect the way they really want things to be.
There is, in fact, a growing tide of opinion that says that supermarkets have gone too far - residents of various towns have campaigned against new supermarkets being built, and there is a growing demand for local produce. Growing but small. It remains to be seen whether this demand can be met, or whether these people will be forced (not choose) to settle for what is available from the only suppliers in a 10 mile radius.
Now, it may be that this opinion does find suppliers who can afford to meet the demand (and the start-up costs for these bold entrepreneurs who will start competing with national chains have been completely ignored by our hard-headed market theorists, I note). If so, this opinion will gain the imprimatur of market approval and be, as I understand it, completely respected. It is even possible, I would say probable, that Mangetout is going to start spending more of his food budget on local produce from farmers’ markets etc. I’m guessing that this would be seen as a good thing. So why would one expression of his opinion (words on a message board) meet with such scorn, but the other (money from his wallet) be lauded, when they are both aspects of the same idea?
And the proper response, IMHO, is to use the newer methods to trump the pioneers (in this case, supermarkets).
And I can go on as to why this is bad idea in the long run. I have no problems with towns refusing to allow supermarkets (or any new business) to move in. It may be economically less efficient, but it’s basically another method of voting. Their loss or gain. I do not, however, like large-scale regulartions which lock down economic progress. And yes - competition on price is progress.
I am being neither snide nor accusatory. Mangetout has not yet been clear about what he thinks, at least as far as I can understand, beyond not liking current produce selection. This is not to trivialize his opinions, but I can’t fight against a shadow. Nor am I going to outline his argument for him and write responses to all possible variations. Mange may not know himself exactly what he thinks ought to be done. But it smells awfully rotten to me.
If you’re aware of it, why aren’t they? Or, to put it another way, if they don’t perceive that they’re being forced or manipulated, what makes you think that they are? I think that most of these anti-big-store arguments are based on the implicit assumption that people, in general, don’t know what’s best for them – and the person making the argument does.
I find this to be another example of the same sort of thinking. If you’re aware of “that information,” why do you assume that he’s not? And if getting home to watch the cricket is important enough to cause him to shop at the big store, what is your basis for saying that’s wrong? It sounds like he just has different priorities than you do. And if many people are shopping like he is, it sounds like a lot of people in your town have different priorities than you do.
I understand why you’re chagrined by this. I’m often baffled by what’s popular and what’s not. But that market is not broken simply because it doesn’t provide the sort of shops that you like.
In addition, I note that hardly anyone seems to question the premise that small stores provide better service, or more expert help. This is undoubtedly true in some cases (though I think those are the stores least likely to be “Wal-Marted”) but I don’t see that it’s true across the board. And in many cases, I don’t see that it’s even a factor. I frequently shop at the local Super Target, and 99% of the things I buy there do not warrant any kind of help (beyond, perhaps, “where can I find this?”).
Personally, I think that small-store advocates tend to indulge in the same sort of faux-nostalgia that cultural conservatives do. Why can’t everything be like it was 50 years ago, when kids listened to their parents, and we didn’t have all this crazy rock and roll music, and we bought our meat from dear old Mr. Johnson?
Even assuming that small stores provide a real advantage over large ones, you still have to establish that consumers in general (not you personally) find those advantages valuable. I frequently hear small-store advocates go on and on about how wonderful those stores are, and then describe how customers abandon them in droves as soon as Mega-Mart offers the same thing for 10% less. If the small stores are so great, why does this happen? The predominant theory in this thread seems to be that they don’t understand the ramifications of their actions. But why would they understand them any less than the people posting in this thread?
I don’t know a lot about economic history, but I feel confident saying that, when a small minority tries to “manage” a nation’s economy on the theory that the common folk are choosing the wrong things, the effects have usually been far worse than anything Wal-Mart has wrought.
Finally, I have a similar empirical question about the treatment of employees. In some respects that treatment may indeed suck, but I have yet to see any solid evidence that they’re worse off than small-store employees (other than stories about how someone’s grandpappy used to treat his workers like family). Of the people working at small family-owned shops, how many have health insurance? Paid vacation? Maternity leave? A retirement plan? I think you need some data on that before you know if Wal-Mart’s arrival is really hurting workers.
Ok, fine then, let’s turn it around: how would you collect this information? How would you get this information out to the public? Who is going to trace where every dollar went, from production costs, marketing, taxes, wages, etc.? The government? How is anyone going to be able identify those who are at risk, those who enjoy a risky position, and those who just don’t know what they’re doing financially? Who is going to use this info once it is assembled? I have a hard enough time reading the paper every morning that I pay to have delivered to me. Now, I have to read some market survey on my local economy which is like 2 million people? Does this sound like a cop-out now? God forbid that I should want a little simplicity in my life. I just want to eat my Kellog’s Raisin Bran®! Can you start to see now why price is so important? Unless this info is able to be directly downloaded into my brain and I can make even a somewhat accurate future prediction of how my choices will affect my local economy in the future (if I could, I would play the lottery), then maybe I’ll let this extra information influence my decision on where I do my shopping. In the meantime, I will continue to maximize my value for my dollar by buying the best tasting/highest quality goods at the price that I’m willing to pay.
The only models I have seen to this concept are models which involve environmentalism and/or healthier produce. It makes no comparrison of this demand relative to the entire demand for all goods, i.e. what percentage of these nobler buyers are of the entire demand population.
This is quite different from the OP where the passage quoted laments the passing of high street. And, as others have already criticized, there are leaps in logic as to the demise of high street. Your position Kimstu rationalizes a view that people are willing to pay more for environmentally sound goods and extrapolates it here to encompass all of consumer demand. I don’t disagree that certain people are willing to pay more for environmentally friendlier goods. However, every survey and model I’ve seen shows that the people willing to pay more for environmentally cleaner goods and greener produce is small compared to overall demand, while only briefly mentioning the desired effects to the local economy. One can reasonably infer that overall demand is still affected by price by and large.
Yeah, sez me. First off, you’re reading far too much into what I posted. Price is not the only piece of information, and I agree that there may be other relevant information out there for consumer, but let me ask you again, how are they going to get this info? Walking in and talking to their local shop owners, I gather, that’s what I would do. We do not know this in the OP. What we do know is that a 16.5% drop from previous consumption resulted in the demise of high street. If there was any type of a competitive market there, it stands to reason more often than not that another competitor would have taken the business of the weaker competitor.
With all due respect, your appeal to emotion with nary a measureable or quantifiable metric for “lack of information” is what is really unconvincing. I at least can model something based on price and demand.
Before I go off on too much of a tangent, the main problems with basic economics is that the models assume: 1) perfectly competitive markets; 2) no extranalities (some models account for waste); 3) we assume all actors to be profit maximizing (minor); 4) all goods and services are the same, little to no concept of marketing or brand loyalty
I have lived in the UK for three years. One year at school on a tight budget, and two years for work. IMHO, I believe that the major reason why the competitive landscape looks like it does is because of taxes and restrictions on free trade. Foreign products, particularly US goods are outrageously expensive because of tariffs. Crap-ass VAT hikes up prices forcing producers/sellers to concentrate on offering a cheaper product above all else (stupid Tony Blair still owes me $430.57). High tax rate on buyers/consumers cause them to be more price sensitive. High taxes on petrol makes it more difficult for shoppers to find bargains. I’m also assuming that the business tax rate is high, to pay for pension, unemployment, and other government safety net programs. This is much harder for single, small business owners to overcome than it is for people pulling resources together and forming a corporation. Small shop owners and whole bunch of other people taking off in August doesn’t help either (I’m surprised the government just doesn’t declare a national month of vacation :)).
