Friday, June 08, 2018

The "Big Retail" Trap

A few months ago I had a conversation with a 30-ish fellow who is in the software business.  The systems he designed were for automobile retailers' use.

This young fellow was convinced that in 10 years or less, "car dealers" would be extinct.  Instead, there would be some people in a building who would merely be concerned with delivering cars which had been ordered by computer from the manufacturers, (and of course servicing those cars later).

See?  No more 'car salesmen.'   No inventory available to touch and feel, nor test drive!!   No more traditional 'dealers!!'

It was clear to me that this software programmer never encountered Finance 101 in college, or if he did, he probably failed the course.  There is no way that the manufacturers can finance the inventory required to run the car-biz without the dealers.

But that's only Objection Number Two to his Nirvana scheme.  Objection Number One is related to this essay from Z-Man.

...Think of it this way. The local retailer does more than sell stuff. In practice, he stocks the things popular with his community and offers customer service to help his neighbors get the best product for their needs. He’s also going to sponsor the local little league teams and participate in the community. Big retail takes the social capital and the customer service and turns that into a quick profit for the chain store, by cutting prices at the retail side and purchasing power on the supply side. It’s a form of economic piracy....

...This is why conservatives used to be skeptical of capitalism. They correctly saw the reality of large scale retail. It was not that the big retailer was better at selling product or provided a better service....

Big retail operates as a parasite through false economy. It’s a form of cost shifting, where the loss of social capital and customer service is pushed into the distance, while the cheap prices are in the present. The Old Right understood the corrosive nature of this form of retail and opposed it. Today, everyone laments the loss of local retail and the town shopping district. We’re told it is the result of Amazon being a better choice, but in reality the cause is the willingness of our leaders to auction off our social capital....

Z-Man notes the passing of Sears and K-Mart.  He didn't note the passing of Bon-Ton (Boston Store), which suffered from the same disease.  Nor did he note the contra-example:  the locally-owned, small-scale Sears stores which remain active in their communities.

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