Wholesale food prices are soaring and consumers are still struggling in a challenging economy. That puts grocery stores in rather nasty bind.
“Retailers face that challenge as to whether to pass it on to consumers or suck it up and take lower margins,” says Timothy Richards, professor at Arizona State University’s Carey School of Business.
Profit margins in the grocery business aren’t that high in the first place. They’re generally around 1-2 percent. Even with these razor thin margins, grocers work hard to keep prices consumers pay low. With so many Americans unemployed or underemployed, stores that raise prices risk losing shoppers.
“We’re seeing consumers at an all-time high in thriftiness,” says Rich Nanda, principal at Deloitte Consulting. “They’re really trying to stretch every penny.”
Retailers worry that this may be a permanent shift. In Deloitte’s recent survey of food shoppers, 94 percent agreed with the statement “even if the economy improves, I will remain cautious and keep my spending at its current level.”
Mark Garrison: When stores have to pay more for food, something’s gotta give, says Arizona State University business professor Timothy Richards.
Timothy Richards: Retailers face that challenge as to whether to pass it on to consumers or suck it up and take lower margins.
And profit margins aren’t high anyway, says Boston College marketing professor Kathleen Seiders.
Kathleen Seiders: Around 1%, 2%, sometimes even lower.
Even so, stores must keep the price we consumers pay low, or risk losing shoppers.
Rich Nanda: We’re seeing consumers at an all-time high in thriftiness. They’re really trying to stretch every penny.
Rich Nanda with Deloitte Consulting says grocers could try pushing their cheaper store brands harder. They may have to, as the firm’s latest research on shoppers shows this thrift is not temporary.
Nanda: 9 in 10 told us that they’re not gonna change if and when the economy improves.
In any event, food prices will likely rise further this summer, at which point most retailers will have to pass more of the cost onto us. I'm Mark Garrison, for Marketplace.
In Jersey City and other towns along the Hudson, home-grown capitalists have wiped out the urban ritual called waiting for the bus.
Private operators jam commercial streets with mini-buses— and in turn spark new issues. (Think: traffic jams.) Longtime complaints peaked last summer, when a wayward bus killed a baby girl, and the state created new regulations, which take effect next year.
Meanwhile, to hear Haroun Khan tell it, most drivers regulate themselves. He drives part-time, but today he’s a passenger. Sitting near the front of a jitney heading down Bergenline Avenue, he explains to a fellow-rider how drivers keep out of each other’s way.
“They try to keep two or three traffic lights before or ahead," he says. "Wait, see what he did? There’s a bus behind him. So he’ll skip that passenger, try to get the space, and he’ll pick the other passengers up. So that way, they can both make money.”
People call the buses jitneys, collectivos, immi-vans. They’ve got maybe 20 seats. They charge less than New Jersey Transit buses. They stop on any corner when a passenger hails. And they always make change, something New Jersey Transit drivers will not do.
They’ve been driving through towns like Jersey City, Weehawken, and Bergen for decades. And they’re still growing, 40 percent just in the last four years, according to regulators.
Big operators rent out branded buses to drivers like Pasquale Gomez. At the end of his route, he waits in line for a dispatcher to call his turn.
He pays$100 a shift and buys the gas. Asked how much he makes, he says, “Well, it depends, man. Today, I don’t have a dime for me yet.”
He plays by the rules. Waiting for a dispatcher to call his turn, he says, “Sometimes we’re here maybe 20 minutes. Sometimes an hour.”
Nicholas Sacco, the state Senator who sponsored the new regulations, seems surprised when he hears about Gomez’s situation.
“If they were all that organized, maybe we wouldn’t have needed the bill,” he says. “We had no desire to get rid of the omnibuses. Just to make them safe.”
The new regulations include higher insurance minimums— $1 million — and a hotline for riders to report anything unsafe.
Many of the jitneys fall under federal regulation— taking passengers back and forth to Manhattan, that’s interstate commerce. Anne Ferro, who runs the Federal Motor Carrier Safety Administration, doesn’t expect tighter regulation to slow business.
“It’s a supply/demand situation,” she says. "Trucks and buses are like water: They will always find a way through.”
Pasquale Gomez would like to see things more tightly regulated, even if it meant fewer buses.
“We are too many,” he says, “going up and down like crazy. That will make us doing things we don’t want to do.”
Meaning: Not all drivers follow the rules.
“They have three blocks to work on, they want five,” he says. So greedy drivers block the way for other buses, slowing up traffic in the process.
And misbehavior begets misbehavior— or at least, aggressive driving. “I see him doing that to me—playing games— and what am I going to do?” he says. “I’m not going to stay behind him.”
Truth: sometimes we journalists get tired of reporting a story. And I'll admit it -- trying to describe Net Neutrality a different way every day this week hasn't been easy. But most people we talk to about the issue of whether Internet service providers should deliver all data to the user with equal speed agree it's significant -- maybe the most significant Internet issue of the decade.
For as long as we've all been online, we've basically been able to access web pages with equal speed -- no matter what web page we're trying to get to and what company is helping us get there. But that could be changing; today's Federal Communications Commission vote on new Open Internet Rules could allow for so-called "fast lane" deals, where a company like Netflix pays a company like Verizon or Comcast to make sure you don't get the spinning pinwheel of sadness. Many people say these deals would stifle innovation (making it hard for the next Netflix-like startup to get off the ground without forking over money it doesn't have yet), and allow service providers to degrade the quality of our connections. Others say that more oversight from the FCC would do the same. It's always super helpful when two sides in a debate use the exact same potentialities to argue their case, isn't it?
But the real question is this: what analogy is best for this big, hot mess? Because a hot mess it is. And part of the mess is that it's so hard to describe and understand. On Wednesday, Sen. Al Franken told me Internet service providers should be considered common carriers -- just like the companies that have covered the country in a web of phone lines. He's even made a video to promote his position:
On today's show, University of Pennsylvania professor Christopher Yoo explains his opposition to that idea by comparing the Internet to the postal service. Sometimes, Yoo says, you should be allowed to pay extra for FedEx or Priority Mail Express, so that your package gets to its destination faster than it would with regular old snail mail. Maybe it's like electricity?
I was arguing with Stacey Vanek Smith a few weeks back about Netflix making a deal with Comcast and trying to use the highway analogy -- but I got fouled up trying to decide who the toll booth operators were. I was talking with Vox managing editor Nilay Patel this week -- he thinks the FCC is about to turn the Internet into airport security.
The idea I keep coming back to is that of the Gordian knot -- an intractible problem that seems like it should have a simple solution. But a simple solution isn't in sight, so that doesn't work. So I put it to you: how would you describe the movement of information on the Internet? And what does that say about your position in the debate?
The recently-announced plans by chairman Tom Wheeler and the FCC to create an internet "fast lane" have been met by a great deal of skepticism from those who worry that large companies could pay to speed past the competition. But Christopher Yoo, professor of Law, Communication, and Computer and Information Science at the University of Pennsylvania, argues that offering a pricing system for internet speed makes sense.
Yoo points to the varying services one can pay for when sending a package. If a package can take longer to get somewhere, you pay less. But if the arrival date is imperative, then you should pay more.
"If you force everything into a single class of service, you would force people who would have been willing to take slower service to pay more, and you would deny people really fast service the ability to get it at any price."
Others believe that the internet should be re-classified by the FCC as a common carrier. Yoo argues that in light of recent Supreme Court rulings, it would be difficult for the FCC to claim authority to do so.
To Yoo, its also a moot point. He says that even services defined as common carriers are allowed to create different tiers of service as long as they don't have rules explicitly prohibiting anyone from paying for the better service.
"The 'Common Carrier' regime has always acknolwedged that providers can create different classes of service as long as they charge everyone who wants that class of service the same amount....it wouldn’t prevent internet service providers from creating a fast lane in the first place."
Prosecutors indicted the captain of the ferry and 3 crew members on homicide charges Thursday. Less serious indictments were issued against the 11 other crew members.