Sure they are, in a qualitative sense. But that general realization doesn’t give them any specific quantitative information about exactly how many people need to patronize the location how often in order to keep it in business, nor what the implications of that quantitative information would be for their own individual shopping decisions.
But what this thread is all about is a hypothesized situation where the majority—in fact, all—of the consumers want the small stores to remain open, because they all do at least some of their shopping there. The problem in this case is that the market is producing a solution that is not considered optimal by anybody (except of course the owners of the supermarket). It’s not a case of majority rule at all.
Why no, I’m not. (And why do you call it “agreeing with me”? This situation has nothing to do with what I personally prefer in terms of grocery shopping choices. This is a general question about whether markets can produce outcomes that the consumers didn’t actually want, because of inadequate information.)
We’re talking about a hypothetical situation here where the actions of consumers are producing outcomes that none of the consumers considers optional. And the question is, is such a situation possible in reality? And I say it certainly is possible, if the consumers are not getting complete information about all the ways in which their choices affect those outcomes. And it is certainly true that in real life consumers don’t have complete information about all the effects of their choices.
You’re the one who is arbitrarily assuming that the missing information must somehow be unimportant, because consumers wouldn’t change their behavior anyway if they had it. I’m simply refusing to accept your arbitrary assumption with no better support than your repeated insistence on it.
At this point, I can see absolutely no rational reason for your continuing to insist on this arbitrary assumption. It’s apparently just something you really, really want to believe.
Ah, now we’re getting somewhere. You’re quite right that it would be very hard to assemble, analyze, and distribute adequate information on all effects of consumer choices. I never claimed it wouldn’t be.
I’m just arguing that the difficulty of the problem is no excuse for pretending it doesn’t exist. Just because the information would be very difficult to collect and process doesn’t mean that we’re allowed to arbitrarily assume that its absence has zero effect on consumer behavior.
No idea. My point so far has simply been to make the reasonable observation (in the teeth of some pretty fierce resistance, too) that the absence of such information might have a distorting effect on the choices the consumer makes.
But now that we’re on the same page with that, I’d like to start thinking about possible answers to your question: how indeed could consumers obtain useful information about the impacts of their consumer choices that go beyond the obvious basics of price and demand?
I don’t know how it might work in this “high street shoppe” situation, but one possibly relevant idea that comes to mind is the “subscription” approach employed by Community-Supported Agriculture ventures. The consumer wouldn’t have to be bothered with crunching the numbers for figuring out how much patronage to give the baker: the numbers would simply be reflected in the “subscription” price. What do you think?
This thread is starting to read like post-modern literary critisism. Can somebody explain again why all of the small shops are going to close? It seems obvious to me that only the weaker ones will close until there is enough demand to support a given number of these stores?
It sounds like pretty straightforward capitalism to me and everybody gets what they want. Or, are we only taliking about the smallest of towns being destroyed by Wal-Mart?
I am done trying to discuss the topic of this thread, but I’ll respond to the above you’re right; I haven’t been all that clear about what I think should or could be done, because I actually don’t have any idea; all you’ve seen is all I’ve got; what has sickened me here is that everybody else seems to be pretty sure about what (they think) I’m about to suggest; amrussel hit the nail on the head; there’s a problem, I’m trying to describe it - that’s as far as we got - nowhere near the exploration of possible solutions, people were too busy taking potshots at their notions of my ideologies.
What smells rotten, exactly? Are you implying that I am dishonestly hiding some agenda?
In a word location Each shopper does not have equally desireable access nor loyalty to each of the merchants. Small merchants don’t have big advertising bugets, so when Joe’s bakery closes, Mary might not even know about Bill’s bakery across town, and might not be willing to drive over there if she did.
And that is the point that is missed by those who suggest that MegaMart will help local buisnesses by culling thier weaker rivals. Joe the baker needs Marty the Butcher, and Sue the grocer just around the corner so that Mary only needs to find and fund one trip and one parking space.
I think the whole point of the OP is that MegaMart doesn’t need to compete successfully with every local merchant. They just need to put one bakery here, one butcher shop there, and one green grocer over there out of buisness, and suddenly it becomes loads more convienient for nearly everyone to go to MegaMart for all thier needs.
Since MegaMart carries all lines, it’s a fair bet that at least one catagory of buisness in a given area is voulnerable. When the most voulnerable shops close, it starts an avalanche that eventually takes out even the otherwise strong shops.
I understand your frustration, Mangetout, but don’t take it personally. As you’ve probably noticed, economic debates among Americans (at least at the popular/lay level, which is all I can vouch for) tend to be fairly heavily polarized and emotionally loaded.
You have to understand that a lot of American political commentators, and business advocates, still haven’t quite got over fighting the Cold War. They feel they need to defend the virtues of markets and free enterprise against a rising menace of collectivism and stultifying centralized command economies. At the same time, they feel gleefully triumphant about having won the Cold War, which they choose to view as a complete vindication of unregulated capitalism and a defeat for governmental control of any kind.
So for those people (and bear in mind that I’m not applying these remarks to anybody in this thread), whenever somebody pops up with a question or comment, however mild, implying that there are nevertheless some significant defects in capitalist systems, there is a strong tendency to play whack-a-mole with the questioner. Anybody who merely suggests that markets as we know them don’t always provide the best outcomes is reviled as a communist, an enemy of liberty and free choice, an advocate of stifling bureaucracy, an ignoramus who doesn’t understand the beauty and efficiency of markets.
This fervid hyperbole gets rigidified into the absolutist viewpoint called “market fundamentalism”, whose advocates will hardly admit that there can be anything suboptimal about markets. And the market-fundy rhetoric percolates through the general discourse, even among people who don’t subscribe to such extremist positions themselves. For example, I don’t think anybody in this thread is really a genuine market fundamentalist (although I’m starting to wonder a bit about our friend the bandit), but they still use some typical market-fundy preachy, simplistic arguments.
I agree that it can be very annoying and tiresome to have people jump down your throat whenever you question a pro-market position, as if you were somehow ignorant of the advantages of market economies or trying to advocate the elimination of markets altogether. But we American liberals have learned to put up with it, and we hope that some day the market advocates will become a little less touchy and shrill.
(To be fair, there are also some annoying and tiresome people on the other side who seem unable to get beyond the notion that “capitalism is evil”. These folks, however, are a lot fewer than the market advocates seem to think. Most of us “market realists” are quite supportive and appreciative of the advantages of markets in general, although we criticize what we see as their disadvantages too.)
The reason that Americans are finding it hard to take these theories seriously is because it is the opposite of what is happening in our towns and cities, especially on the coasts. I live 40 miles from Boston in serious suburbia yet, I can buy almost any goods, especially food, at any quality level I want and I have many small shops as well as big supermarkets, and specialty food supermarkets to choose from. That is the trend in America and it started in the mid-1990’s. Once you get closer to Boston, the range of stores and products is practically infinite. Well run stores of all sizes have found their place. Some of these have been around for a long time and have grown alot in recent years.
I mentioned that my wife’s family is the largest importer of gourmet cheese in the U.S. That market has grown over 500% in 8 years. More cheese and gourmet foods shops are opening up, not less. Supermarkets are upping the quality of their cheese to try to compete with the smaller shops.
To be fair, there certainly are towns that have been virtually destroyed by the Wal-Marts of the world but those tend to be small towns. The coasts are more immune to that effect as are cities of any significant size all over the U.S.
I don’t know why the opposite is happening in Europe.
Just a WAG, but how about the fact that it seems to be US government policy to ensure that every family owns at least 3 cars, covers a minimum of 500 miles per week and uses at least 75 gallons of petrol? And disposable income in the US is much higher?
Hyperbole aside, the cost of transportation in Europe is much much much (etc.) higher than in the US. Cars cost more, fuel costs more, parking costs more, taxes for roads/emissions etc. are higher, opportunity cost is higher due to congestion. The UK is pretty much the poster child for this.
As a result, it can cost you a chunk of change to drive to the shops. Because the transaction cost of each trip is higher, you want to buy more, therefore co-location of the various grocery categories is much more important.
mazinger_z touched on several of the other things that drive up costs, plus basically the UK is very crowded - population density of 243 per square KM as compared to 30 for the US (313 for Massachusetts). So building motorways and retail parks all over the place is pretty much out of the question.
Also, with regard to farmers markets - there is a small one in Spitalfields I used to go to, which had excellent produce. However, they had a limited range of sellers, small stocks (which meant they had often sold out of what we wanted), and sometimes particular traders were not there (family businesses means sometimes they can’t come), and the price was in the region of triple what I’d pay for factory-farmed in the supermarket or the grocers stall. So we stopped going.
As a thought experiment, how would these various specialty food shops cope if US fuel prices were to stay at approx $5/gallon permanently and disposable income stagnated for any length of time?
There’s quite a lot of justice to this, but a few caveats: VAT does not apply to food on the whole, although “non-necessities” (e.g. cakes and ale) are not exempt. I’m not sure that the high tax rate is forcing people to be price sensitive - disposable income has more than doubled in real terms since 1975, but the percentage of that spent on groceries from 20% to 9% in the same period - relatively speaking, people are spending less on food from a bigger total budget.
I’m not sure how big an effect tariffs have on food - a lot of food sold in the groceries comes from the EU, so it’s not like UK farmers are being specifically protected. (Far from, they would tell you.) That said, the EU’s tarrifs on African and developing world agriculture are a disgrace, so there will be an effect there.
However, there’s no question that big chains enjoy considerable economies of scale and greater purchasing power, and find it easier to cope with regulations. (And indeed, easier to hire sharp accountants and lawyers to minimise their exposure to these.)
Oh - you think the UK’s bad for going on holiday in August? Be grateful you’ve never lived in France - factories literally shut down for the month!
(My emphasis.) Who’s asking you to fight? Mangetout asked for a critique of the argument in the book, he outlined it and he asked for responses. There was an immediate flurry of replies with the same basic thrust - the market cannot be wrong, it gives people what they want, therefore they want whatever they end up getting. More than a few of these, it’s worth noting, didn’t fully grasp the subtleties of the argument (e.g. claiming that those who started shopping at the supermarket stopped shopping on the high street, which was clearly not the scenario laid out.)
Now, we’ve moved on to a situation where you are trying to “fight” Mangetout and find it difficult, even frustrating, because he’s not got a concrete proposal. But he never claimed he would. He’s identified a problem and wants to discuss, not argue, how big a problem it is and what the potential solutions might be. Instead, we’re in a needlessly adversarial position where various posters feel the need to defend and explain the glories of the market, as it were to idiots. I just feel that this is not constructive and has aborted a potentially interesting thread on the law of unintended consequences, the danger of short-term decision making and the importance of information to functioning markets.
I just don’t understand the argument that if even one main street business fails all of them must fail. Yeah, I can see the argument that if there are no main street bakeries so you have to go to MegaLoMart for your baked goods you might as well get your meat and vegetables there as well. And I can see that opening a new bakery (albeit one located inside MegaLoMart) means more competition for existing bakeries.
According to the model brought to our attention by Mangetout if any main street business fails, all must fail. I don’t see how that’s possible.
As for the argument that transportation costs are higher in Europe, I would think this would heavily favor main street businesses over supermarkets if you can walk to the local bakery but must drive to the MegaLoMart. Why don’t local businesses have a huge built-in advantage?
This really gets to the heart of the matter. The mistaken belief that anyone who enjoys the price and convenience of a central supermarket has been “tricked” by the system. I will chose to go to the supermarket because everything I want is there at a reasonably low price. For regular day to day staples (a box of Tide will not be amazingly better at Joe’s General Store) these factors are the major selling points. A smaller store cannot offer this level of service to me. I am not deluded and I not misunderstanding the situation. It is patently a better deal for me to go to the supermarket. Joe’s General Store is by comparision a terribly inefficient method of getting me my box of Tide, a method I would have to pay extra for!
You have every right to consider small stores worth fighting for, and to factor this into your buying habits. What you do not have the right to do is assume this is a priority for me as well.
There is no way that we are going to end up with a situation where there are only supermarkets, and a market where the majority of people sincerely want to shop at speciality stores but can’t because they don’t exist. Even if you started at this hypothetical supermarket-only world, speciality stores would spring up to meet this demand. In practice, we’ll never even get to the supermarket-only scenario because there currently does exist a demand for the speciality stores.
As has been mentioned before, the mix of supermarkets and speciality stores provides a choice that was not there before: cheap and convenient with a quality trade off, or of high quality with a price trade off.
And I’m been saying the same thing about this entire thread. It starts in fiction, and gets worse. There’s nothing to debate, and every call for moe clarity or actual evidence has been ignored, or points the other way.
All real-world practices are suboptimal. Free markets are less suboptimal than all known competitors for market dynamics. All attempts to regulate it have unforeseen negative side effects. For a few of these, people are general agreement that they are less serious then he benefits of regulation. This is not the case here.
Attempts to control markets are attempts to control people. You may be thinking about buying fresher tomatoes, but what you were talking about is adding another legal chain to the ankle of society. I don’t like it. It smells rotten me because I think of it as a rotten thing to do.
I’m not dealing with the original scenario, but rather with the ficitious nature of it. It was an argument before I got here, regardless of what Mangetout intended. Regardless, I know what he posted, and worked with that. I am well aware other posters failed to read carefully. But if Mangetout doesn’t know himself what he’s thinking, how can I respond to it? I calls 'em like I sees 'em. If he’s not going to explain carefully, then he’ll have to risk mistakes.
Mange’s posted argument, and the arguments made by him and others on this case, for that point of view, are riddled with logical errors and assumptions which are not true, or which there is no market recourse at all.
The best system I’ve heard of is survey, but by best, it surely isn’t optimal. It’s hard for people to be objective about themselves, and as Smiling Bandit points out, people can be downright lying.
You’re going to have to give me some more info on this. The thing I was thinking about was a jounral of the state of the industry for certain goods, like banans. I see that this isn’t what you’re talking about, so a link might be helpful.
Oh, and I forgot, as Kevbo and Shagnasty have pointed out, location means a great deal, too. It’s easier to load up the kids and the car and still pay for parking and shop at Megagrocer than it would be to take the tube around looking for deals at shoppes which aren’t necessarily close to each other.
Yeah, I forgot to check about rate of spend vs. DI.
Tariffs have a huge effect on food. High tarrifs for foreign food means that the local demand will shift towards the cheaper (albeit artificially cheaper) local food.
However, I forgot to mention subsidies even though I made myself remember not to forget . :smack:
My first econ class covered the subsidy on farmers in the US, in particular corn farmers. Corn farmers, at the time, were enjoying some of the best subsidies that the government had to offer (I think they were given a price floor, too). Simply put, like all subsidies, a farmer can still grow a crop and put it on the market for less than what it costs for the farmer to produce because of the subsidy. So now, US farmers can send their crops anywhere at less cost than what it takes for the local farmers to compete.
A counter-argument I’ve heard from a professor was that if the entire US were to change to a major agrarian economy, they would bankrupt the rest of the world, since they can outproduce every country in any product worldwide, and probably at the same time. This would cause carrots to be $2 a root, and corn to be $3/ear until the rest of the world caught up. This I would take with a grain of salt.
For a EU prospective, and probably not the best cite, but watch the movie The Girl in the Cafe for the highly engaging discussion regarding UK meat subsidies (I originally watched it b/c Kelly McDonald is my girlfriend, even if she doesn’t know it yet, and I find Bill Nighy always hilarious, even if he is trying to be serious, little did I know they would be having a relationship :eek: (though it’s not really emphasized, visually, in the movie)). If the movie is correct on its facts, a British cow can take a first class trip around the world with the subsidies it receives.
After listening to Coldplay and watching the movie (again, I know not the best cites, but it did make me do some digging on my own), one would think that the EU has a major hate on for Africa and the rest of the developing world. The Economist or may it was Oxfamstrongly suggested that the EU tariffs and agriculture subsidies against Africa and the developing countries are helping to subsidize EU’s social welfare programs.
OK, like I said I’m coincidentally doing a project on the grocery retail market in the UK at work just now, so happily I can give you some actual evidence. In 1975, the Multiple (e.g. supermarket) sector had 55% of the grocery market, and the Independent (e.g. high st store) sector had 33%. Now, Multiples have 90% and Independents have <3%. In other words, High St stores have been closing down and people have been spending their grocery budget in supermarkets instead. So we can at least be clear that the scenario of high st shops disappearing because people are going to supermarkets is grounded in reality.
Now the question is whether this is an accurate reflection of what people want, or is a situation that has arisen because people did not fully understand the impact of the day-to-day choices they were making. This hinges, as laid out in the OP, on the ability of high street stores to withstand even a relatively small loss of custom and spend (a third of consumers spending a quarter of their budget in the new supermarket). mazinger_z has very helpfully highlighted the problems which smaller independent stores face in terms of reduced purchasing power, loss of economy of scale, higher cost of implementing regulation etc. Given these, it should not be so surprising that a c.16% loss of revenue could cause a small store to go out of business. Given that closure, it is hardly radical to posit that the supermarket will now gain a greater share of the market, putting more stores on the margin of profitability. As more people shop in the supermarket, and find it more convenient and possibly cheaper to buy the majority of their needs there - particularly, as has been pointed out, generic staples that don’t vary in quality from store to store, more shops will go under. Eventually, you end up with supermarkets having a 90% share of the grocery market.
If you wish case studies, you really do only have to visit any small town in the UK. If Mangetout or I seem convinced that this really is happening, it is because it has been quietly developing in the background of our lives for the past 20 years and is as clear to us as the availablity of good produce in US supermarkets is clear to you. You can dismiss that as fiction if you like, but I would suggest that simply because you personally haven’t experienced something doesn’t mean it doesn’t exist.
The real question, as I said, is whether this is just the market at work - people want convenience and low prices and the invisible hand steers them into a supermarket dominated retail landscape - or whether people did not have enough knowledge of the long-term effect of their decisions. Consider the following:
It has been acknowledged by all in this thread that people cannot know whether their spending an extra £40 per week in the supermarket will be a partial cause of the loss of retail competition.
People who are now faced with at best a choice between two rival supermarkets do express dissatisfaction with this state of affairs. Either they don’t know their own minds, they’re lying, they’re suffering from cognitive dissonance or they didn’t realise what road they were heading down.
Supermarkets follow aggressively competitive strategies to maximise their market share. Who would have guessed! Who would have thought that a new supermarket will massively publicise price deals, lay on all kinds of cross-promotions to maximise their capture of grocery spend, and compete with existing butchers, bakers etc. on freshness and quality etc? Who would believe that when these strategies succeed, leaving the supermarket dominant, they are abandoned in favour of strategies that maximise profitability from a captive market? That the offering of supermarket with a local monopoly is less attractive to consumers in terms of price, quality and range on offer than the original competitive offering?
That is surely the point. While there is competition, people are being smart and choosing the best option for themselves. But where these choices lead to a local monopoly or oligopoly, the very attributes they were rewarding will disappear, leaving them with less choice and a poorer offering than before. And that is the situation which they did not foresee, did not choose and are now unhappy with.
I believe that this is a classic case of short-term successful decisions have a long-term negative outcome. As such, it is a criticism of the market’s operation. Now, it may be that there will be a backlash, that people will start spending money on fresh local food in protest against the poor supermarket offering. In which case, it will be entirely fair to say that the market was not offering what people wanted and corrected itself. So why can we not say now that the market is not offering what people want?
Please, drop the focus on regulation, which has been a minuscule and tangetial feature of the discussion, and consider the main point - whether or not there is a problem.
Yes, this is obviously the case, and it is happening all over. Well, actually it happened here quite some time ago.
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This hinges, as laid out in the OP, on the ability of high street stores to withstand even a relatively small loss of custom and spend (a third of consumers spending a quarter of their budget in the new supermarket).
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Fair enough. Thing is, I believe that the supermarkets are much more successful initially and continue to gain based on their own virtues, not because they slowly drive out all competition. It may be the case that it is possible, but I don’t see any evidence that this kind of “economy gaming” is what is happening. And any really successful store, local or otherwise, could cause the same chain reaction if it were the case. I don’t see that happening in the manner described, so I must conclude that, as far as the evidence I know, it doesn’t appear to happen.
It is not the outward facts I am disputing; it is the implied background. That is your assumption that’s unproven.
No arguments there. The key distinction is that I think that people are maximizing their value - and there it ends. There’s no “hidden” loss that consumers don’t see. They make the choice to accept competition solely on price and convenience, and pay the penalty.
You said it yourself - several years ago, the market was much more tilted to specialty shops. If that market niche still exists at all, then it seems likely to be filled soon in an even better way. I can assure you that the Fresh Markets and Farmer’s Markets around here claim nowhere near 33% of market share. Nevertheless, they are doing a thriving business. And both lack economy of scale. In fact, the Fresh market has only two stores. Yet it competes with Kroeger’s and does very well.
What I’m saying is that the average British consume doesn’t care so much about quality, instead choosing convenience and price. Those who disagree, if they are a small enough portion of the market, will not be satisfied.
Interesting. What proportion of total food spend in the area do they capture? Because if they only be capturing a few percent, and are irrelevant to the argument, in much the same was as the US has many thriving organic vegan restaurants, but that has no bearing on the fact that the majority of the population eat unhealthily.
If they have a reasonably high percentage of food spend it would show that the market does operate differently than in the UK.
I do find it interesting how much variation there is across countries in this sort of thing. France has abundant cheap fresh produce, the UK does not. In most continental countries the overall quality of food is higher than I’ve seen in the UK, but the retail channels tend to vary more i.e. in Germany there are many more superdiscount supermarkets but also bakeries and so on.
Hard to say exactly; they certainly don’t make those numbers public. However, just from eyeballing it, it seems that they likely have about 10-15%, just looking at relative store sizes and stock. People buy less, but most everyone buys *something * from there if it’s in range. It’s just too nice to pass up (and their better fresh breads vanish in minutes after arriving on the floor).
Obviously, this is my own impression, but it seems to be born out by events. Despite having only about 1/10th the floor space, they appear equally crowded, sell slightly more expensive products, and are pretty much selling constantly. Some days it’s a fight to get what you want. And my local store only came around a few years ago.
Indeed, and that implies that there’s no inevitable decline because of supermarkets. German specialty stores have survived by not competing head-to head, placing themselves in a different market niche. And even relatively ordinary German or French supermarkets seemed to have better-quality goods than American stores (possibly British, but as I said I haven’t been there).
By succeeding on their own virtues, of course they drive out competition. People’s grocery budget is more or less fixed, so when then they buy bread in the supermarket, the corollary is that the baker won’t get that money. And that’s fine, that’s the market in action - while there is both a baker and a supermarket and people can choose between more expensive fresh baking and cheaper, more convenient prepackaged loaves. But once the baker goes out of business, that choice goes away. Now, people either buy the prepackaged loaves, or they don’t buy bread.
In terms of the evidence of “gaming”, it is fairly clear that supermarkets use their advantages of size to compete in ways that seem designed to remove small business competition. (Incidentally, you base your conclusion on: “as far as the evidence I know”. I’m going to guess that you know as much about UK grocery retailing as I do about US grocery retailing. So why are you so sure that that evidence you haven’t seen is evidence that doesn’t exist? And is it possible that with only a little evidence, you should be tentative about concluding anything?)
For example, to stick with the baking theme, there was a price war on bread five or so years ago that ended with loaves on sale for 5p. Was this, by itself, a profitable proposition for the supermarket? Of course not. But they could all afford the loss-leader for longer than a local baker could afford to lose custom. And of course, once people came in-store to buy bread, they would find themselves filling a basket or a trolley (and subsidising the cheap bread by buying other products that were more profitable for the supermarket). Now, in buying bread for 5p, consumers were fulfilling their needs, maximizing their value and that’s great. But I doubt many of them considered what effect this was having on the competition, nor asked themselves what bread would cost once that competition was gone.
But my argument is that this choice seems to be one-way. If consumers decide now that they want some fresh baking, there is no longer anywhere to get it from. So of course we can now look at what they buy and say, “Clearly, despite their protests to the contrary, these consumers only value price and convenience - that’s what they spend their money on”. But you can’t buy what you’re not being sold.
I think there clearly was a demand for price and convenience that smaller stores were not meeting. And supermarkets met it, and that was good. But because supermarkets now dominate the market so much (90%, remember) , the average British consumer is only being offered price and convenience because that’s all that’s on sale to them. In fact, if this trend continues for long enough, the next generation of shoppers will only know supermarket shopping, and be even less likely to demand something different. And thus you get a self-fulfilling prophecy. Essentially, the “anti-mega corporation” statement of the OP boils down to: “monopolies or near-monopolies are bad for consumer choice”. No real surprise there.
