Consumers continue to be hit hard by rising prices every time they go to the grocery store or department store.
US Department of Agriculture Said The consumer price index for food is reported to have increased by 25% between 2019 and 2023.
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But lower prices may not actually be what consumers are exactly looking for, according to personal finance writer Dana Miranda.
“Consumers don’t want cheap products” Miranda I have written In her newsletter “Healthy Rich.” “We want to be in an economic situation where we can buy quality products.”
Miranda argued that large retail chains such as Walmart use low prices to attract customers, but in the long run this is to our own economic detriment.
Conditions for purchasing cheaper products
Miranda believes there’s a “reductive and condescending” narrative that consumers buy based solely on price, but this narrative doesn’t start with consumers.
“This never happened because consumers were begging for lower prices before Walmart came along,” Miranda wrote. “This happened because Walmart came along and told consumers they should expect a lower price.”
Miranda explained how this works. Chain stores assume that consumers only care about low prices, so they cut costs to provide this. They do this primarily through tough negotiations with wholesalers, but due to the huge market of these stores, wholesalers have to bow to their demands.
This may not sound like a problem, but it creates a quasi-monopoly situation.In fact, the 2021 Guardian is investigation They found that 65% of the U.S. retail market is controlled by four companies: Walmart, Costco, Kroger, and Ahold Delhaize.
Smaller stores charge more than larger stores because they don’t have the same discount power or market share. Or they may simply not be able to compete and close.
What is the Walmart effect?
If this situation continues, in many cases, “Walmart effect”. The theory is that when a Walmart comes to a city, it destroys the local economy. Small businesses are unable to compete on price and may even have to close down their operations.
This may sound like just the free market acting freely. But in the long run, it works against consumers.
As the town’s smaller stores gradually close, laid-off workers often look for jobs at one of the town’s few remaining stores, such as Walmart. This means that since there is no job market, Walmart can further reduce costs by lowering employee wages.
Ultimately, Walmart takes over the town and the community loses out. Miranda argued that national chains like Wal-Mart make little financial and emotional investment in local communities. Small, local stores pay more local tax revenue and help sustain communities.
“Our children will grow up with better parks, sidewalks, and schools,” she wrote about the benefits of independent retailers. “They might stay here as adults because they can do something here.”
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What consumers actually want is fairness.
Miranda assured readers that there is no shame in shopping at Walmart, Kruger, and other large department stores.
“This is a regulatory issue, not personal consumption,” she says.
Miranda believes that the real way to create a long-term, sustainable economy is to practice commercial fairness.
Members of Congress agree with her, 16 of whom recently letter We have challenged the Chairman of the Federal Trade Commission (FTC) to implement better practices on this very issue.
Lawmakers already have the law on their side. In 1936, Congress passed it The Robinson-Patman Act (RPA), an antitrust law against wholesale price discrimination.
This means that large retailers such as Walmart cannot force wholesalers to take advantage of their deals because of their size and purchasing power. This should give all companies, from mom-and-pop shops to large department stores, an equal opportunity to become viable businesses.
However, while RPA is technically still in planning, it is rarely used in practice. A recent letter from Congress asks the Federal Trade Commission (FTC) to begin enforcing the rule again.
Miranda knows that RPA enhancements will cause food prices to rise again, and that that’s hard for consumers to hear. But she reminds readers that with government-backed support for small retailers, everyone could greatly benefit from increased commerce and employment in their communities. Then food price increases would not be so unbearable.
“A more just future may see higher food prices,” she wrote. “[But] we have the money to buy them. ”
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