The Customer And The Shopkeeper

The Customer And  The Shopkeeper
The customer and the shopkeeper.

Twenty-first-century America is likely the most egalitarian society in history. As our founding document, the Declaration of Independence, states, “All men are created equal…” Today, if there is any descent from those sentiments, it is to make them even more inclusive: “all men, women, or other sexual orientation, etc.”

By law and tradition, Americans feel that their rights and obligations are indistinguishable from one another. We’re all the same under our laws and customs. It is settled law, codified in our legal rules and regulations.

Interestingly, one field goes against this general American point of view: the marketing of goods and services. The framework for modern systematic marketing began with Edward Bernays, the nephew of Sigmund Freud. Like his more famous uncle, Bernays examined what made people tick. He focused on specific groups and what would motivate them to adopt a particular attitude or buy a product.

Bernays used his uncle Sigmund's endorsement to promote bacon and eggs as the true “American” breakfast in one of his first campaigns. Later, he would promote disposable Dixie Paper Cups as the sanitary alternative to traditional glass or, even worse, drinking fountains.

But his most revolutionary campaign was for the tobacco company Lucky Strike. It was 1929, and at the time, it was considered improper for women to smoke. Lucky Strike’s management felt that they were missing out on half the population, and if they could convince women that smoking was not only acceptable but desirable, they could dramatically increase sales.

Bernays created an ad campaign suggesting that smoking would make one thin. He introduced famous celebrants at the time to promote the brand and medical authorities to claim that smoking was better for you than sweets. This less-fattening angle appealed to American women of the 1920s, and L&S cigarette sales skyrocketed.

A century later, this appeal to specific market segments still works. Americans quickly identify with a particular segment, profoundly affecting this country’s political and economic course.


Virtually the entire country falls into the consumer sector. With very few exceptions, we all shop. We all need to purchase the necessities of life, like clothing and groceries. Sometimes, we buy major durable goods like furniture and automobiles. If we’re wealthy enough, we may purchase luxury yachts or other “playthings” like exotic automobiles or private airplanes. Sometimes, we all open our wallets to buy, buy, buy. While the items we purchase may differ significantly, the fact remains that we’re all part of that segment of the population that Bernays would call the “consumer.”

It is the everyday activity that unites us all.

As consumers, we are all experiencing the unwanted effects of higher prices. By some estimates, our grocery bills are up nearly one-third over the past three years. Also, for energy, gasoline, electricity, propane, and natural gas, prices have risen by about the same one-third over that time frame. Unfortunately, no consumption area seems immune; rising prices have reached all parts of the economy. We are all experiencing a current round of inflation that is the greatest in over 40 years.

Retail marketing companies are well aware of the consumer’s unhappiness. They know that we resent these higher prices at their stores, and the storekeepers want to ensure they don’t get the blame. Recently, two of the most savvy retail marketers, Walmart and Target, announced that they’re rolling back the price of many everyday items. They know that these higher prices are cutting into demand, so they cut prices to keep customers in their stores.

Of course, there is a limit to how much the retail store can cut. Overall, they still have to maintain their profits. But a loss leader here and there will be compensated for the sales of other products.

BOTTOM LINE: As customers, Americans appreciate it when those stores we frequent understand that we need a price break.


The next segment of Americans is the owners. Although not quite as large as the consumer segment, it is still substantial. Included in this group are those who own a small business, investors, and those who have various retirement accounts, such as an IRA or 401(K).

Generally, these are people who may receive dividends or other returns of their capital (such as stock buybacks) paid by the companies in which they own or invest. The owners, or as Bernays may put it, the capitalist class, benefit as the companies they own or invest in become more profitable. But those rising profits are under pressure right now, as stores cannot offset these higher costs through higher sales prices.

Ironically, today’s increasing profit squeeze is occurring as many Americans, some for the first time, have joined the “capitalist segment.”

This amalgamation of employee-consumer and the capitalist segment was the aim of the many reforms to our retirement system, returning to the ERISA Employee Retirement Income Security Act of 1974. It was the first time employees could invest substantial sums into stock ownership, which would be used for their retirement and accumulate tax-free until the employee retired.

Today, this amalgam of consumer capitalists has become the heart of our financial system. The uniting of customers and owners (primarily through such legislation as ERISA) has become part of the “American Dream.” Today, much of America’s wealth is concentrated in our financial markets. It’s easy to see why the Stock Market has become the de facto proxy for American prosperity.

Currently, for the first time in 40 years, the owners find themselves on the opposite side of the counter from their customers. The owners would like to raise their prices as their costs are rising. But to do so would directly harm their customers, who seek lower, not higher, pricing. But, at least for now, that’s out of the question. American consumers would likely avoid any retail store that increases its prices proportionally to the rise in inflation.

Most of the nation’s retailers have already indicated that meeting profit projections in this environment is becoming increasingly difficult. Walmart and Target, in particular, have noted that customers have moved toward lower-priced, generic goods over their more costly name-brand items.

Walmart is not immune from this low-price squeeze because it's the largest retailer. If Walmart begins to hike prices too far, there’s always Dollar General. And so it goes in this highly competitive retail economy. Look for the entire retail sector to guide toward lower profits as customers move down the price ladder.

Walmart noted this trend in its latest earnings report. They see consumers moving down the retail ladder from more expensive stores to Walmart to save money. However Walmart is not immune from this low price squeeze. If Walmart begins to hike prices too far, there’s always Dollar General. And so it goes in this highly competitive retail economy.


What’s good for the customer may not be as good for the shop owner. This circumstance goes back to the very beginnings of capitalism. Our time is unique because many of today’s customers are also owners. And what may help them at the local store, as customers, may hurt them in their IRA as investor-capitalists.

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Jamie Larson