Thursday, August 6, 2015

Agency stores - How the Democrats will prove privatization doesn't work

In an August 5th interview with the Pittsburgh Tribune-Review, Democrat State Senator Jay Costa said he backed "agency shops" as a compromise to efforts by GOP legislators to privatize the State Store System. What he is really saying is, 'Let's show how these fail and keep the State Stores.' How do I know this?  Let's look at the scenario.
It's for all his friends in the rural areas.
First: The stores will only be put in underserved rural areas (you know, those 20 counties that have only one or two State Stores in hundreds of square miles), and he admits that it's to avoid cutting into PLCB profits from well-performing outlets in populous areas of the state. Nothing like a fair and level playing field for the suckers lucky entrepreneurs in those agency shops!

Second: Given the lack of enthusiasm for the "store in a store" concept (only fifteen in the whole state after 35 years!), it will probably be a standalone structure, forcing a higher cost per square foot than if integrated into an existing store. Even if not, the existing store would still legally have to provide separate entrance and register, increasing their cost. Of course, the hours won't be any better than the current State Stores either.

Third: "State Mandatory" items that all State Stores have to carry may not be the product mix these rural stores need to have, costing shelf space and sales. But Harrisburg knows best, so they're stuck.

Fourth: These stores will still have to buy from the PLCB. It isn't clear if they will get wholesale prices, which is highly unlikely (given the PLCB's jealously stingy attitude toward any private entities), or some discount from the PLCB retail price, like bars and restaurants do. If they do get a discount, you can be sure it won't be the same the State Stores get, thereby ensuring higher prices at the agency stores...exactly what the PLCB bureaucrats want to prove: private stores "cost more."

Fifth: Cost of transportation, while not stated, will certainly play a part. If you think the PLCB will provide free shipment to their new competition, you are just wrong — it ain't gonna happen.  That leaves the agency store going to a larger state store to pick up product, or all the way to one of three warehouses in the state.  (P.S. The PLCB is trying to knock that down to only two warehouses — more convenience!) In either case it is time and expense that the State Stores don't have to bear.

Sixth: While Ohio does have agency stores, that is ALL they have. There is no competing with State Stores, no limitations on being only in rural areas, and still no competition because the state sets the prices. They are a control state, just not as onerous as PA. Not a real improvement, by any stretch of the imagination.

Seventh: With a very limited number of these stores (no details on the amount, or what the criteria is for selection), there wouldn't be the incentive or need for any price competition that the free market brings. It would be the same as the beer distributor oligopoly, only with even more protections for maintaining a higher price.

So Senator Costa is selling us a bill of goods, and not an attractive one at all. What agency stores would really be about is three things.
  1. Like "modernization," putting in agency stores would lead directly to a cry to 'give them a chance,' which is really about kicking the privatization can down the road, putting it off so Wendell W. Young IV doesn't have to worry about it for another five years at least.
  2. Set up to fail, agency stores would be a great straw man for anti-privatization fanatics to point to and say, 'See, we gave you privately-owned stores, and what happened? The same selection (or less), higher prices, and no more convenience than the State Stores!!!" Because that's the way Costa wants it to be.
  3. The PLCB no longer has unprofitable stores. Because they'd dump all the stores that aren't making a profit — due to their ballooning operating costs — on the agency stores, allowing them to decrease the number of State Stores again, keeping their bloated payrolls and administrative costs humming along in markets where selling booze is like shooting fish in a barrel. 
We urge the GOP not to bite on this. Senator Costa is actually proposing to save the State Stores — a bad idea from the 1930s — with 'agency stores,' another bad idea from the 1930s. Don't double down on stupid.

Like we keep saying: End It, Don't Mend It. There's a great solution to the problems of the State Stores: privatization. Don't let this moment go. Don't let Governor Wolf off the hook.


Anonymous said...

As for the store-within-a-store concept, I must ask: to anyone reading this, which would you rather shop at? The state store inside the Newtown Square Acme, or the OTHER state store in the SAME shopping center?

Anonymous said...

Neither I will continue to shop in delaware, for my goods. thanks anyway