This paean to profiteering headlined the lead editorial in yesterday’s Wall Street Journal. The argument is that by not raising prices substantially when Hurricane Sandy hit America’s Eastern Seaboard, retailers hurt the public. This is because the initial, most frightened, customers to show up at the stores hoarded supplies, preventing others from having any. If the retailers had jacked up the prices, those first responders to the aisles would’ve thought twice or thrice about getting a thirtieth tin of tuna.
Retailers shrink from raising prices substantially at times of disaster because they fear public outrage would follow. The retailers are right. Still, can you curb hoarding in ways stakeholders would accept?
Might it work simply to state the case to shoppers? The WSJ editorial reports that one New Jersey supermarket broadcast appeals in the store for people to buy no more than what they’d need for a couple of days. Shoppers paid little attention to the appeals.
My guess is that, for many consumers, the effects of such an appeal constitute a case of reverse psychology: A retailer telling shoppers not to buy is unusual enough to lead to a pushback. “It’s still a free country! Nobody’s telling me I can’t buy as much as I want!”
Setting quotas is a variant of this. It could work if it’s a government mandate, such as with the ration stamps of the Word War II era or the odd/even-license-plate-number gasoline purchase days during the 1973 oil crisis. Last year, Target, Abercrombie & Fitch, and Saks Fifth Avenue did discuss restricting large-quantity purchases of high-demand items for which they predicted reselling.
Yet, maybe jacking up the prices is the most elegant solution. Not raising them to the point where only the affluent can afford the buy. Not raising them on items people won’t be hoarding. Instead doing the price hikes with recognition that many places will sell out quickly and you do want to serve as broad an audience as possible, maybe introducing yourself to new customers this way.
How to avoid accusations of exploitation? Team up with charity. Research finds this works best when the charity partner is logically related to the price increase. Suppose power outages cause a demand spike for flashlight batteries. Raise the price of batteries noticeably and announce how a portion of the profits will be contributed to Red Cross disaster relief programs.
Click below for more:
Prepare for Natural Disasters
Decide Whether to Limit Purchase Quantities
Show Fair Pricing By Contributing
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