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Commentary

Market Basket’s Forgotten Customers


     
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The battle to control Market Basket is a family feud worthy of a plot on the old TV series Dallas. It pits a good cousin against an evil cousin with non-unionized workers rallying in support of the good cousin and public sentiment supporting them. Predictably, media has soaked it up. But most coverage misses the impact that it all has on consumers, who, after all, are the reason Market Basket exists in the first place.

Market Basket, a 71-store grocery chain in Massachusetts, New Hampshire and Maine, was founded by an immigrant nearly 100 years ago. His grandchildren, Arthur S. Demoulas and Arthur T. Demoulas, have been battling over finances and control of the company for decades. Arthur T. was fired in June after Arthur S. gained control of the board.

Family feuds in business are nothing new. But what has excited the national media about this case is how workers have responded to Arthur T.’s dismissal. First, eight middle managers asked for Arthur T. to be reinstated. They were promptly fired. Now thousands of workers are refusing to work until Arthur T. is reinstated. The protests have gone on for weeks and rallies have drawn as many as 10,000 people.

Most news coverage focuses on how great Arthur T. was to his employees. He created a profit sharing plan, promoted from within by encouraging baggers to get an education and move up to management positions, and was known for his personal caring that he provided for employees that ran into hardships. It’s no wonder that his employees want him back.

But Market Basket does not exist for the benefit of its employees. It exists to serve consumers. Unfortunately, Market Basket hasn’t been able to serve them well for the last month because of the turmoil.

Some media outlets are reporting that there is a massive consumer boycott in support of the workers. I’m sure that some consumers are boycotting. But the real reason that most former customers are not shopping at Market Basket is because there isn’t food on the shelves!

The workers striking at distribution centers have prevented the reliable shipment of food to the stores. Many shelves remain empty and it is not predictable which ones might be filled. As a result, consumers have gone elsewhere.

I spent most of the last month in Massachusetts. My hometown of Haverhill has three Market Baskets and only one alternative full service grocery store, Shaws, on the border of neighboring Plaistow, NH. The strikes were a minimal inconvenience to my family. We paid more money for products at butcher shops and specialty grocers or dealt with the massive crowds in Shaws. But we were the lucky ones. We could afford the higher prices and had a car.

Market basket is known for having low prices. Some of its stores, like its Central Plaza location in Haverhill, are also located near elderly housing communities and low income neighborhoods. These consumers have a hard time affording higher prices and are forced to take lengthy public transit rides to get to supermarkets outside of town. Yet, we see few media stories about their hardships.

Businesses make profits in a market economy by serving consumer demands. Regardless of which Arthur Demoulas controls Market Basket, the profit incentive will drive them to try to best help consumers. I have no idea which Arthur’s management model is better for serving consumers, but I do know that they both face the same incentives.

Whichever one is running Market Basket needs to have employees willing to help them serve consumers. On Friday, August 15, between 200 and 700 workers who have been striking will be fired if they do not show up for work.

According to posts on Save Market Basket, these employees will not go back to work unless “Arthur T. Demoulas goes back to work with full authority.” Well, Arthur T. doesn’t run the company right now, so the current CEOs should follow through with their threat and fire these workers if they are not going to help Market Basket serve their customers.

Market Basket, or any other business, exists for us consumers. The owners only profit by serving us and the workers only have a job to aid in that process. Owners suffer losses when they fail to serve us. When workers fail to serve us, they should be replaced with others who will.


Benjamin Powell is a Senior Fellow at The Independent Institute, Director of the Free Market Institute at Texas Tech University, and former President of the Association of Private Enterprise Education. Dr. Powell received his Ph.D. in economics from George Mason University. He has been Assistant Professor of Economics at San Jose State University, Associate Professor of Economics at Suffolk University, a Fellow with the Mercatus Center's Global Prosperity Initiative, and a Visiting Research Fellow with the American Institute for Economic Research. He is also the editor of the Independent Institute books, Housing America: Building out of Crisis and Making Poor Nations Rich.






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