I'm part way through Marc Levinson's book -- The Great A&Pand the Struggle for Small Business in America -- which chronicles the company'srise from small tea dealer to retail giant with 16,000 stores and over $1billion in sales. As A&P expandedduring the 1920s and 1930s, small grocery stores -- like the one where mygrandfather worked with his father, uncle, and brother -- closed. Even though the Diers Bros. Grocery inGresham, Nebraska, survived the Depression and competition with chain stores, A&Pwas an economically disruptive force in hundreds of communities across thecountry. I thought of that economicdisruption while reading about last week's passage of Initiative 1183 inWashington State. [Hat Tip to John Taylor of Tertium Quids for the article.]
While it brought lower prices to consumers, A&P alsoforced less profitable and noncompetitive retailers out of business. As a result, there was a significant pushbackagainst A&P and other chain retailers during the Depression. States tried to impose taxes based on thenumber of stores that a retailer operated. The federal government tried to outlaw the bulk purchasing discountsthat large retailers received from manufacturers and tried to prevent retailersfrom selling items below cost as loss leaders. All of this was done in the name of preserving local jobs, even though it meant higher prices for consumers.
Last week, Washington State voters decided to get theirstate out of the liquor business. I-1183, which was supported by Costco, succeeded just a year after asimilar Costco-backed initiative failed at the polls. Much like A&P, I-1183 will be aneconomically disruptive force. Washington state residents can expect liquor prices to fall as state-runstores are closed and private retailers open shops. However, 900 or more state employees willlose their jobs. This, obviously,doesn’t sit well with those employees. From The Seattle Times:
Tom Geiger, communication director for the unionrepresenting more than 700 workers in state-run liquor stores, said he thoughtthe results raised questions about democracy itself.
"If a private company decides to spend tens of millionsof dollars to pass a new law, to buy an election, can they do it?" Geigerasked. The results in this case, he said, suggest they can.
Putting aside the issue that Geiger seems to be ok withCostco spending millions and losing last year's ballot measure, his reaction issimilar to the anti-chain advocates of the '30s: preserving jobs is more important than any ofthe benefits that customers might derive. Actually, I-1183 looks like a win-win for consumers and taxpayers. Consumers will see lower prices, and thestate is expecting to collect $80 million more in revenue over the next sixyears. Bottom line: economic disruption can be good for consumersbut bad for the status quo.
Speaking of disrupting the status quo, I bought Levinson'sbook via the iTunes bookstore, and I'm reading it on my iPad. No printer. No wholesaler. No shipper. Just a little economic disruption and a lotof customer satisfaction.