Monday, April 22, 2024

Some inflation is nothing more than deliberate price-gouging by businesses


I was cynically amused by the outrage displayed by a shopper at Whole Foods in Boston.

A Boston-based influencer has sparked outrage over inflation after claiming she paid $7 for a single apple at a Whole Foods.

. . .

“Genuinely what economy are we all f–king living in that it costs 7 dollars to buy an apple?” she asked. “I could have sworn that some other like apple that I bought was not 7 f–king dollars. It’s crazy, like 7 dollars for a latte? OK. This apple better be tasting so f–king good.”

There's more at the link.

I agree with her:  that price for a single apple is absolutely ridiculous - but so was her behavior in buying it.  If she'd put it down and walked away, she'd have saved money and the store might have learned a lesson in consumer economics.

Something like this is behind quite a lot of inflation.  Businesses aren't pricing their goods according to what they pay for them, plus a fair and reasonable profit.  Instead, they're pricing them as high as they think they can get for the product.  From a strictly capitalist perspective, of course, they're entitled to do so, because there's nothing forcing us to buy their products in the first place.  We can always look for lower prices somewhere else.  However, that becomes a lot more difficult when the availability of product is restricted (e.g. a breakdown in the supply chain, a natural disaster, etc.).  Under those conditions, products that are critical to life, health and safety may be priced out of the reach of those who most need them.  Is that just?  Is that fair?  "Pure" capitalism says it doesn't matter - that the market determines the price.  Simple human decency (not to mention the teaching of a large number of religious faiths, including Christianity, Judaism and Islam) argues otherwise.  There's no point in debating that here.  Opinions are likely as numerous (and as diverse) as our readership.

Another aspect of that problem is corporations that enter a market offering deliberately low prices, even below cost, in order to gain dominance there.  By doing so, they drive out of business other companies that can't afford to price-match them.  As soon as their competition is gone, they increase their prices to normal levels - sometimes far above normal levels.  Since consumers no longer have anywhere else (local) to go for what they need, they have little or no choice but to pay the now-inflated prices.  I've seen that at work, too.  A few years ago, back in Tennessee, a garbage removal company tried to enter our local market by offering rock-bottom rates.  Our existing service, a small family-owned business, put out flyers to all its customers, pointing out what was happening and saying that if the new entrant succeeded, they'd have to close their doors, because they didn't have the financial resources to fight back.  When a number of us checked, we found that the new entrant had used those tactics in a number of nearby municipalities, and then drastically raised its prices once customers were "locked in" to its services due to the absence of competitors.  Most of us stayed with our existing supplier, and the new entrant, frustrated, took its efforts elsewhere.

In so many words, a lot of the inflation we experience from day to day is actually caused by manufacturers and vendors setting the highest prices they think they can obtain.  They'll cite scarcity, supply chain issues, weather and anything else you can think of - but they won't reduce their prices unless and until market factors force that upon them.  Fundamentally, it's greed at work . . . and greed is one of the Seven Deadly Sins.  Unfortunately, many businessmen appear to ignore such factors.

One major exception to the rule is Waffle House, and they deserve a round of applause.  I'm sure most of my readers have heard of the "Waffle House Index", a widely referenced measurement of how severely an area has been affected by a disaster.  I've seen Waffle House at work through several hurricanes in the South, and one thing is very noticeable;  they never gouge their customers on price.  They get their restaurants back up and running as fast as humanly possible, and they maintain their pre-disaster prices no matter how much extra it costs them to bring in supplies over disrupted and sometimes hazardous routes.  Kudos to them for offering their services to survivors and rescue workers who need them very badly.  There are other stores that do likewise, but that's often at the discretion of local store managers.  Waffle House is the only chain I know of that does so as a matter of policy.  (If any readers know of other chains that do business that way, please let us know about them in Comments.)



Gerry said...

Whole Foods is a totally organic hippy laden specialty market.
Shop there at your own risk.

Anonymous said...

Eh. For that price I'd expect it to be something like a cultivar with viable seeds, not a mass-market one.

Divemedic said...

When you apply for a job, do you ask the boss for the highest pay that you can realistically get him to pay, or do you ask for less because you think that is "fair" to be paid less?

So if you do that, why would a business do anything different?

audeojude said...

So went over and read link and comments.. ehh... stuff is getting expensive. However in regards to food in particular I heard some information a year or two ago from a friend that spends more time online than me..

He was following stuff that happened in the year end board meetings of some of the bigger food conglomerates/brands that own a major percentage of all the stuff that is on the shelves in most grocery stores. Told me that it was public record in the minutes where they were talking how they had changed pricing strategies sometime COVID year and were increasing the margins on products over and above cost of goods sold. so as to make more money. From what I can tell 25% to 50% of increased prices are larger margins not directly inflation.

so... I got this third hand and didn't follow up on it so it is worth as much as the number of electronic digits it takes to writes this down. take it for what its worth.

Roy Zesch said...

The whole foods shopper has no idea what the apple "should" cost and neither do we. The point of business is to maximize profits. If Whole foods is doing that it is neither wrong nor gouging. The customer chose to shop at whole foods believing their groceries are better than the local grocery store. She chose to purchase the apple, there was a willing buyer and a willing seller. I will bet that the apple she purchased is somewhat better and more expensive than the grocery store apple she chose not to buy. The buyer prioritized the "wholeness and organicness" of that apple over the other.

Gouging is a different issue. Think about a convenience store on the edge of a hurricane disaster area. It will cost more to get new fuel than you paid for the old fuel, if you can even get more. Your employees homes are damaged and they aren't willing to come to work for their normal pay. If you keep charging $3 for gas, everyone needs more gas and you run out in a few hours. If you charge $6 for the gas in your tanks, many people decide to wait and get gas in a few days. Therefore your gas last 3 days. The people who need it badly are willing to pay and others decide to wait. The price sends a signal that gas is worth more today than it was last week. Plus maybe you can use the extra money to "encourage" a supplier to deliver more gas so you can help more people. And you can pay your employees extra to come to work. In this case "gouging" has actually been beneficial to the you and your customer base. This is a free market win.

I am not saying that no company has ever gouged in an evil greedy way. But it isn't predatory gouging.

Anonymous said...

Went through Katrina in Gulfport, you,'re absolutely correct about Waffle House. Ace Hardware has always treated me right too, they're fairly priced and their employees don't pull out a phone when you ask where something is. That said, I've known examples of anti gouging laws that were selectively enforced, and anybody that's open is careful about those laws.
I lived two blocks from the original whole foods on North Lamar in Austin forty years ago, it was a small neighborhood retail building. Pricey even then, when Austin was the cheap town in Texas.
rick m

TCK said...

Charging 7 bucks for a single apple isn't price gouging, it's an intelligence test. And that lady flunked it (then again, she shops at Whole Foods, so there's that).

Skyler the Weird said...

Looking at Whole Foods prices at Amazon Fresh she would have had to have purchased a 1 1/2 lb Organic Honeycrisp Apple to have paid $7 for one Apple even in Boston. Those are running $3.99/lb. Most of the rest are running at $2.99-3.29/lb.

Not sure if she is on the up and up or if this particular store is just raising prices.

Fredrick said...

Whole Foods. AKA another Bezos corporation. That apple was a bargain. They should send the lady a bill for $100 as they made her day, if not week. Outrage? You've got the feelz! and look, BRM even did a blog post about it. You can't expect to get that kind of public notice for only $7!

Francis Turner said...

$7/apple. Converts to yen. Thinks about it. Yes I've seen apples priced at that.


those apples are vast (as in maybe 8 in diameter) and the price is what it is because they are bought as gifts and hence are beautifully packed and wrapped after having been inspected 50 different ways for any blemish.

Michael said...

Unless you have no other options like working at a mine and forced to buy at the "Company Store" there is no real price gouging.

Self-created "Food deserts" where thugs continue to rob and beat up store employees CREATE their own "Company Store" situation.

You choose to buy it or not based on its value to you at the time.

Is a I-Phone newest edition worth thousands? Some folks think so, so Apple continues to send out new "improved" I-Phones for even higher prices.

Mind your own business said...

We always called "Whole Foods" "Whole Paycheck."

As for Waffle House, there's one in town near where I live, and I periodically go give them some of my business just to help keep them in business. They aren't often my first choice, but I think having them around is incredibly valuable. A great community resource.

E. C. said...

Y'know, part of this may be on the supply side, because last fall a guy we met who lives in Washington discovered that multiple commercial apple orchards had essentially been abandoned because they'd been paid not to sell their produce. So he went and filled up multiple 5-gallon buckets full of Cosmic Crisp and Honeycrisp apples and shared them around. We still have some down in the basement, but Cosmic Crisp apples are NOT cheap, and clearly they were afraid that a glut of produce would drive the price down too much. When the government pays farmers to waste food, something has gone horribly wrong in society.

Tregonsee said...

The lady in question (and I use that term loosely) has chosen to shop at the MOST expensive grocery store (Whole Foods, known locally as Whole Paycheck) and in Boston probably one of the most expensive locales in the area/ The stores overhead is likely huge due to ridiculous taxes and ludicrous minimum wage requirements (Let alone what the business types call shrinkage. aka loss to shoplifting and via things going silently out the back with "employees"). Going rate out here in the 'burbs is $1.99-$2.49 /lb for most apples with the higher price being for "organic" produce purchased at Market Basket, Big Y or Stop & Shop. Walmart would be cheaper although super Walmarts are rare, Target slightly more. Her primary issue is she is in BOSTON. I know of two medium sized grocery stores one over I-90 (might actually be in Brighton) and one attached to North Station/ Boston Garden complex (Both Star Markets). I did use the Garden one a couple times to get lunch items back before 2020 and it was 25% above prices I expected out 20 miles into the suburbs. The City of Boston has regularly prevented the use of commercial space for "Big Box" stores like traditional groceries or Walmart/Target monsters. Even moving as far as Newton/Brookline gets you regular grocery stores and you can still take the MBTA/commuter rail to Boston for work. $7 for an apple is to some degree the price you pay to live in a city which is essentially politically insane/nonfunctional. I'm pretty certain Apple in NYC/San Francisco/Los Angeles/Chicago aren't much different in price from a similar source.

clark myers said...

Confusing inflation - which is a loss of value in the currency - too much money chasing too few goods - leading to higher prices across the board - with price increases as meaning increased prices set by "greedy" manufacturers and vendors confuses discussion.

A price increase in coffee can be met by switching to tea but a general rise in prices properly labeled inflation does not allow the same changes by the poor consumer.

"In so many words, a lot of the inflation we experience from day to day is actually caused by manufacturers and vendors setting the highest prices they think they can obtain" However unfortunate that's not properly called inflation although it is a price increase - gouging if you will. Notice such economic profits will attract more supply depending on barriers of entry to the business.