Sunday, March 11, 2007

Big-box Bait and Switch, Part II (the myth of lower prices)

If you ask big-box shoppers why they shop at Wal-Mart, Target, Best Buy and any other similar store, the most common reason given is lower prices. Because these large retailers have an advantage due to economies of scale and buying clout, it would seem logical, then that they would in fact offer lower prices on most items and goods. On closer inspection however, “always lower prices” may not be the reality.

Wal-Mart, more than any of the other big-box retailers lives by the perception that their prices are lower than anyone else’s. From the smiley faces in their incessant ads to their famous slogan, this mega-retailer has convinced shoppers that they're getting the best deal at Wal-Mart, whether that’s true, or not.

In some instances, Wal-Mart will lower prices in order to drive the competition’s prices down, or worse, put them out of business. After that occurs, stores have then been known to up their so-called “everyday low prices.” Also, Wal-Mart’s prices are cheaper on some items simply because they are of inferior quality. There is no comparison between a shovel whose handle bends and breaks when shoveling heavy snow and one made by Rugg Mfg., or some other high quality U.S. manufacturer.

According to Kenneth Stone, an economist at Iowa State University, all big-box stores utilize what’s called a pricing strategy known as “signposts” and “blinds.” Signposts are items that most consumers know the price of and blinds are those items that most customers have less knowledge of. By keeping the prices lower than the competition on bananas, diapers, four-packs of light bulbs and other items in prominent places, consumers assume that all items (these signposts) have lower prices.

In 2005, Consumer Reports found that on items such as ranges, refrigerators, vacuums and other large appliances, independent retailers out priced all the big-box retailers they surveyed. Also, the magazine also found that consumers rated the independent stores highest in customer service and selection. So why do shoppers continue to flock to the big-box stores at the peril of losing local control, putting U.S. manufacturers out of business and cutting their own economic throats? It’s really baffling and without any clear rational explanation.

Despite clear evidence that Wal-Mart and other big-box chains eliminate competition, destroy manufacturing jobs paying above average wages (with benefits) and on top of that, with evidence indicating that their prices may not always be lower and their selection on many items isn’t up to snuff with independent retailers, it’s tempting to argue that many Americans have become just too damn stupid to know any better.

One area I’m particularly concerned about when it comes to big-box stores and mega-retailers, is bookselling. While perceptions of most consumers is that the local Barnes & Noble, or other chain has a greater selection than the independent bookseller, in fact, chain stores’ merchandising policies tend to focus their attention and dollars on the big-name authors. As a result, new novelists and non-fiction titles get relegated to the back of the store. Midlist authors and their books, if they have succeeded, almost always attribute their success to the independent bookstores.

In our local area, independent stores like Longfellow Books in Portland (an independent in every sense of the word, primarily because of its wonderfully feisty owner, Chris Bowe), Bookland in Brunswick and even smaller stores like BookMarcs in Bangor, have staff picks and highlight titles other than Stephen King’s, or J.K. Rowling’s latest runaway bestseller. Taking nothing away from these authors, there are thousands of other wonderful books, many of them by first-time authors, who would end up selling poorly and ending up out-of-print if not for the bibliophiles that more often than not run the independent stores.

Wal-Mart also tries to act as moral arbiter of a community when it refuses to stock music CDs that have parental guidance stickers, or deal with themes that it deems inappropriate. This kind of censorship isn’t limited to Wal-Mart, either. Blockbuster requires movie makers produce “sanitized” versions of movies that they consider objectionable.

The resulting homogeneity that comes as a result of this shrinking of retail choices doesn’t bode well for innovation, or just plain diversity of products, not to mention how it portends the demise of artistic risk-taking by musicians, writers, and other creative types.

So, if Wal-Mart and the other chain stores are so destructive to our communities, then what can, or should we do to keep them out of our communities? And if they have already set up shop, what are our options as consumers?

I’ll be back with at least one more post to answer these questions and focus some of my own thoughts on what our roles and responsibilities are in these matters.


weasel said...

I agree with your analysis, but it is interesting to note that one man's idependent can quickly become another man's chain. Take Bookland (a wonderful store) who expanded with a store on the outskirts of Rockland and thus imperilled the two lovely single store independents on our revitalised Main Street. They are hanging on- just- but more and more money is going to the "out-of-town' behemoth up by the chain restaurants and big boxes on Camden Street. Or take Shermans, a third generation Maine owned bookseller in Bar Harbor (I know the wife of the founder and she is a lovely old bird) who now have a gift store thing in Freeport, and moved to Camden into the exact same building the local bookstore had been priced out of.

I guess I'm saying that unless we declare all property theft and set up one big commune, there is going to be a conflict between consumer and business owner needs (one wants to save as much as possible, the other wants to make as much as possible).

I think we can all agree however that false choice is no choice at all and therefore Wal Mart and its ilk- with all their manipulations and false flags- should probably be avoided, even by those poor souls who have become "too damn stupid to know any better."

Jim said...

The "one man's independent can quickly become another man's chain" argument on the surface sounds plausible--sort of like the South Park episode, "Something Wall-Mart This Way Comes"--but in truth, Bookland, Sherman's and even Reny's have inherently different economic models than Wal-Mart, Target and other big-box stores. They are not looking to drive every single viable competitor off the face of the earth and offshore all production to third world nations (although they aren't necessarily examples of the kind of sustainable businesses I think we should be demanding).

I don't think my case against Wal-Mart (and extending Stacy Mitchell's argument from "Big-box Swindle") is "declaring all property theft and setting up one big commune." Hardly the case at all.

To try to equate Bookland with Wal-Mart is to conveniently paint over a very pervasive problem that imperils communities across the country.

I didn't say all chains were evil--go back and read my two posts. In fact, in my own personal experience, as a book seller, Borders has treated me well and make laudable attempts to carry local books. Barnes and Noble, on the other hand, absolutely suck when it comes to small press publishers getting books into their stores.