Monday, August 23, 2010

Supermarket-Or Government-Rip-Off?

While we were away last week, the Department of Consumer Affairs issued its periodic indictment of the supermarket industry-and inadvertently exposed its own complicity in the demise of  neighborhood markets in NYC. As Crain's reported-with an explosive, "Supermarkets Ripping off Customers," headline: "City says groceries overcharge for items, charge tax when they shouldn't and neglect to put price tags on many items. The worst offenders are found in the poorest neighborhoods."

 Amazing, isn't it? We have a profiteering industry right in the middle of New York City that is, at the same time it is ripping off poor people, it is hemorrhaging stores-at least 200 units have disappeared under the watchful eye of the Bloomberg regulators. What we do need is a study of how the current regime of Bloombergistas-and that would include Commissioner Mintz and his minions of inspectors-has made NYC simply an impossible place to successfully conduct business in.

And if we started to compile the list of taxes, along with the voluminous regulatory mandates in the city's municipal code, we just might conclude that it is the city, through the excessive burdens it imposes, that is actually the entity that is doing the consumer rip-off. Because each additional tax and regulatory levy is passed along to the consumer as an extra cost of doing business.

But so great is the disconnect-and so interested is the DCA in, not only generating sensational headlines, but raising operating funds through the fines it collects-that the city can't grasp how it has been a major culprit in the demise of local supermarkets that it now seeks to remedy in some program that it cheekily calls the, "Fresh Initiative."

Indeed, this Fresh program is a signature component of the mayor's health initiative-designed to bring supermarkets into those very poor neighborhoods that have supermarkets allegedly stealing from the poor. This is draw room comedy disguised as public policy. Take East Harlem. It has lost close to a dozen neighborhood markets-a victim of high taxes, rising rents, and over regulation. Yet the Fresh Program is fixated on drawing new markets in, without any concomitant effort to preserve and protect the food resources that are already there.

As we told Crain's: "Supermarket lobbyist Richard Lipsky said the city has lost 200 supermarkets over the past decade. He added that city government should focus on how to reduce the cost of doing business here." And beneath the sensationalist headline grabbing of the DCA is the fact that the lion's share of the fines were for failure to item price-hardly an egregious sin because this requirement is absent in a majority of other urban environments without any great harm to anyone.

As the NY Post points out: "The most common offenses were failure to properly identify the prices of items on shelves, which occurred with 50 percent of the products checked, and inaccurately charging customers at the cash register, which took place nearly one out of three times." Not mentioned was the fact that the latter issue is a scanner technology problem-and often it is the store that shortchanges itself; something that a consumer will rarely call to the supermarket's attention.

As we told the Post: "Supermarket lobbyist Richard Lipsky slammed the DCA for being too onerous. "It operates its budget based on the amount of fines it collects," Lipsky fumed. "There are mistakes and glitches in the technology. There's no concerted effort to bilk anybody here."

And is it any wonder, then, that our bodegas came out smelling like a rose?  Crain's gets at the disparity: "One silver lining is that bodegas scored much higher in the sweep. Citywide, their compliance rate was 82%; bodega compliance was 94% for the five poorest neighborhoods in the city. Mr. Mintz said, “I can't help but wonder whether part of it is the relationship they have with their customers,” said the commissioner. Ms. Brodhagen (of the Food Industry Alliance) offered that bodegas may not use scanners and therefore more items in their store would carry price stickers."

With no scanners, these small stores have to item price so that both the owner and the customer know what the item is selling for. That being said, we do believe that the industry needs to do better at self inspection-particularly of its technology.
But this doesn't take away from all of the useless regulations that the DCA also enforces with the glee of the Sheriff of Nottingham. And while we continue to lose more markets, the DCA will continue with its crackpot vigilance-failing to understand that a less onerous business climate would create a more competitive market; one where the better stores, with the fairer pricing structures, would put any unscrupulous and less efficient operators out of business.