Doing business with large corporations has hidden costs

December 1, 2006

The possibility of chain stores coming to JP Center raises some complex issues that need further discussion. Though usually lower in price, the products and services of large corporations—as compared to those of local merchants—can have unrecognized costs.

The local retail establishment of a large regional or national corporation is not as responsive to customer requests. For example, when I lived in Brookline, I commented to the manager of the local Stop & Shop about what products I would like to see in the store. He assured me that he had absolutely no power to respond to my request, since all purchasing decisions are made at a higher level. All stores in the company must buy the same products. This results in less diversity in the marketplace, reducing consumer choices. With an independent local store, the communication between customer and decision-maker is more direct, and the owner/manager is more able to respond to customer and community needs.

Another hidden cost is that the profits of a large corporation are more likely to be taken out of the community in which they are generated. The wealth that a community loses in this process is unlikely to be replaced, resulting in a “trade deficit” for the local community. As with the national trade deficit, this situation can also have an impact on local businesses and employment opportunities.

There seems to be a conflict between the ideals of the free market and those of democracy. By having virtually no limits on the growth of corporations, the economic power of the many can become concentrated in the hands of fewer and fewer people. As often happens, this wealth may then be used to buy political influence that can further the concentration of wealth and threaten the ideals of democracy.

We just witnessed an example of this. The manager of the Jamaica Plain Stop & Shop wrote a letter (JP Gazette, Nov. 3) that supported Question 1 on permitting grocery stores to sell wine, claiming that it “promotes healthy competition.” Of course, the Stop & Shop has dominated and killed most competition from independent grocery stores and just tried to expand its market control to wine by contributing almost $2.7 million dollars to the campaign to pass Question 1!

The competitive market works best when no business has an unfair advantage. Let’s consider what this means. We would not think of having 14-year-old children compete against 6-year-old children in sports. They are different in size and stage of development. It would not be fair. Is it fair to an independent store owner if, for example, a company a hundred times larger has the advantage of buying in significantly larger volume and lower price and relies on the considerable resources of corporate funding and/or financing?

I am not suggesting any rush to regulation. I am simply calling attention to some factors that may be overlooked. Our purchasing decisions can have long-term, indirect effects on us and others. Next time you shop, you may want to consider the hidden costs.

Ron Goldman
Jamaica Plain