Bad for Business.

The focus of this piece is based on the operating cost and statistical data associated with the cost to operate a supermarket in a low-income area versus a middle-income area and if the data supports the notion of many supermarkets that it cost more to operate supermarkets that serve low-income consumers as opposed to median-income consumers.

According to a report prepared by the United States Department of Agriculture (USDA), their results in fact did not support the hypothesis that it costs more to operate supermarkets that serve low-income consumers and while stores with different rates of food stamp redemption have significantly different cost structures, their overall operating costs are essentially the same. Therefore, if the poor do pay more, factors other than operating costs are likely to be the reason. As such, we shall explore these other factors in order to determine what other issues are at play in this long-debated scenario.

The article goes on to state that the issue of higher cost for low-income consumers has been researched for more than three decades and the findings have been mixed, but much of the available evidence indicates that shopping opportunities for the poor are more limited than for higher income consumers and that prices are slightly higher in stores whose patrons are chiefly low-income consumers. Furthermore, the article references research where a review of a 14 store surveys which were conducted between 1966-1996 that indicates that food prices are generally higher in smaller grocery stores than in larger supermarkets and also higher in inner city and rural locations than in suburban locations. Therefore since the poor are more likely to shop in small grocery stores and to live in inner city or rural locations, they often face higher food prices (USDA, Supermarket Characteristics and Operating Costs in Low-Income Areas, 2004).

However the premise of location, location, location can not be the only contributing factor for these higher costs and common sense yields to the belief that these supermarkets are preying on the poor and less fortunate if for no other reason than because they can; because no one is going to stop them and because this is the way it has/and will continue to be. These supermarkets view poor people as uneducated consumers in terms of knowing their rights and fighting for their equal treatment as consumers. These supermarkets understand that there is a desperate need for their existence and services. As such, the advantages and disadvantages appear to be clear-cut in terms of winners and losers.

The report goes on to cite supermarket panel data on store operating practices and that data indicates the extent to which a store has adopted new technologies and business practices that support supply chain initiatives in the food industry. Further, the human resources index measures adoption of progressive training and compensation practices. The food-handling index measures compliance with accepted practices for ensuring food safety and quality. The environmental practices index indicates the degree to which a store offers environmentally friendly products and services to its customer and uses energy-efficient practices and store waste recycling in its own operations. Finally, the quality assurance index measures adoption of objective practices for assessing customer satisfaction (USDA, Supermarket Characteristics and Operating Costs in Low-Income Areas, 2004).

In my opinion all these variables combined still fall drastically short in effectively addressing the actual question-at-hand which is simply why do supermarkets in low income areas charge more to consumers than median-income areas? I would argue that the answer will not be found in any empirical analysis or data collection effort because it does not exist.

The answer...as simply as it may be is because no one has demanded that it be any different! The consumers has not demanded that pricing be changed either by those that are directly effected(low-income consumers) or by those indirectly effected (median-income consumers). The argument for the low-income consumers probably lies somewhere between not knowing and not caring and the premise for median-income consumers is that as long as it does not effect their bottom-line, it is not their problem. However, I would argue that the mistreatment of the few can and will lead to the mistreatment of the many. As such, it is in the best interest of all income brackets, low, high, and in-between to ensure that supermarkets and businesses alike treat all consumers equally in terms of pricing and access to goods. Furthermore, it is imperative that low-income consumers ensure that the change starts with them by effectively not patronizing those establishments that insist on providing sub-standard services at astronomical prices and although it is easy to mandate that low-income consumers boycott these establishments and other income brackets band with them collectively to help their fellow man, it is also important that government, both locally and nationally do not continue to facilitate the unequal, usurious pricing of the poor. We all must strive to create a society that does not seek to strengthen the strong on the backs on the weak!