🛍️ value (s)

💔 breaking the bargain

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A recent CBC Marketplace exploration informed by former employees detailed how Value Village uses (or used) a computer system to suggest prices for home goods that are - at least in some cases - higher than what their product is sold for new by other retailers. These surreal discrepancies were being shared on social media with a mix of wonder and disgust. 

The rapacious tactic is less of an instance of information asymmetry and more of a cunning violation of the core premise of second-hand discount shopping; namely, the implicit bargain that the prices of items on the shelves is lower than it would be if it were offered new, elsewhere. People don’t have a universe of prices in their heads, so instead we tend to take references seriously - there’s a psychological effect of basic anchoring that is being abused.

Paying more than the market rate for a used item [at VALUE VILLAGE!] is a pretty raw deal. At the same time, if there is more of a demand for these items, then the ‘market’ should be able to efficiently command the best price possible - even one that is set aspirationally or arbitrarily. But that idealised dynamic just isn’t what’s at play at that thrift store. They’re literally just tricking people, and exploiting the trust of their clientele. Gross! 

You could also argue that consumers need to be more vigilant, and use the information and tools available to them to check the value of the presumed bargain in order to ensure that it’s even a deal in the first place and avoid deception. It does seem that the public’s growing intolerance of excessive pricing and scepticism of markups could inspire more price checking in real-time. But I wonder if it’s reasonable to expect people to constantly do this in the first place, especially when they’re already explicitly engaging in an activity of frugality. 

Regulators should ensure businesses are not earning profits through indiscriminate gouging of consumers, while also addressing the increasingly unknowable aspects of price determination that lead to a sense of powerlessness and culminate in public anger. We should also pay closer attention to instances where the goodwill of less privileged people is deliberately extorted. 

Ontario has long-had legislation to prevent price-gouging in situations of crisis. Canada’s Competition Act now includes ‘excessive pricing’ as an anti-competitive act. But this change - which the Bureau notably did not advocate for - does not yet clarify when and how a price is ‘excessive.’

It’s not new to score a little more off people who have less. In the US, Co-director at the Institute for Local Self-Reliance Stacey Mitchell recently released a report suggesting that dollar chains use predatory tactics while targeting vulnerable communities. Her research suggests that these chains deploy a deliberate tactic whereby they go into poor neighbourhoods where people don’t have many other options and then incrementally mark up the prices, sneaking profit from low-income consumers with limited options. 

Accruing profit isn’t by nature ‘bad.’ But competition law generally cares about the strategies that companies deploy in pursuit of that surplus. We take seriously the conduct that allows gains to be made, and decide what’s fair, what’s not, all in the name of what kind of competition we want. 

Value Village is a for-profit company that buys merchandise from non-profits. It competes with non-profit thrift stores that donate most of their revenue to those in need, and other informal secondary marketplaces like garage sales or Facebook Marketplace. The chain capitalises on the good intentions of people who donate their used goods for resale to create wealth. 

Value Village’s parent company, Savers, was acquired by private equity firms in March 2019. The firm has twice been accused of misleading the public: first, that they inflate the percentage that they pay to non-profit charities that partner with the company, and second, for potentially leading the public to believe the organisation is a charity. While neither lawsuit stuck, they are a reminder of how the firm appeals to the premise of charitableness in order to profit. 

We don’t have a legal penalty for breaking social contracts, but the consignment marketplace could ‘discipline’ the stores by choosing not to go there and others may cease to donate used goods. There’s also a fundamentally moral element to pricing that helps explain why we react to this story with revulsion. *For more on taking advantage of consumer expectations to price gouge, see this Brian Callaci piece on the macaroni riots. 🍝

It seems obvious that the firm is not quite what it purports to be, especially given its willingness to subvert shoppers’ legitimate assumptions about second-hand pricing guaranteeing a reasonable discount, and substituting that with a sneaky markup. Which raises a bigger question: 

🏬 What do we value in our ‘village’?

Consumers deserve to know when and how algorithms are used to generate prices, and this basic transparency shouldn’t be limited to secondary marketplaces. Value Village is absolutely welcome to brazenly rip off shoppers in the name of capitalism and relentless pursuit of profit. They should just be obligated to be a little more up-front about it so that we don’t need to find out second-hand. 

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