Posts tagged " profiteering "

How Do I Stop My Customers from Hoarding?

March 18th, 2020 Posted by Ask the Rabbi 30 comments

Dear Rabbi & Susan,

I run the general store in our small town and the coronavirus has impacted supplies of many things that people want. I recently got in a load of bathroom tissue from my wholesaler and three of my customers came in and between them cleaned me out. They bought it all. I know they are just hoarding it in their basements; it is far more than they usually purchase. I tried to argue with them and I explained that they please should not buy more than they need. When I said that I would limit it to one package per customer, one of them laughed in my face and said he’d just come back with all his cousins. (He has a huge family) This crisis is turning my neighbors into people I can barely recognize. And it’s not only toilet paper. 

Here’s my question. Can I raise prices to encourage people to buy only what they actually need and to stop hoarding? I’m frightened they’ll slander me as a price gouger. My supplier doesn’t know when my next shipment will arrive, and even worse, my supplier says that they don’t yet know what my price will be. So at the moment, I am selling merchandise for possibly less than I will need to pay to replace my inventory. 

Can I raise my prices?

Yours sincerely,

Joe F.

Dear Joe,

We sympathize with your predicament. There is little question that right now, greater suffering is being inflicted by fear, panic, and hysteria than by the virus itself. We do want to point out that while you have unfortunately seen some bad behavior, that is not universal. Our synagogue, along with many other groups in America, has organized phone trees to make sure that the elderly and those who live alone receive daily phone calls and have people shopping for and helping them. Even in supermarkets, we have seen examples of people helping each other. Unnerving times like this tend to exaggerate character traits and serve as a litmus test for all of us.

Let us examine your question through the lens of God’s word alone and try to ignore the cultural implications. There are harsh words in English that have been used for centuries to hurl slurs against business professionals. These include price gouger, slumlord, and profiteer. Occasionally they are legitimate charges leveled at people who are practicing business in styles not intended by God in His plan for human economic interaction. Other times they are used by sickly envious people imbued with socialistic thinking who flail about their own lack of industry by using these words to attack the more successful whom they envy.

The Biblical origin of our sense of morality when it comes to pricing goods is this verse: 

When you sell merchandise to your neighbor or buy any from your neighbor, you shall not wrong one another. (Leviticus 25:14)

Ancient Jewish wisdom explains that this very brief Divine dictum means that God forbids us from overcharging or underpaying for a commodity when the other party is unaware of the value. For example, every store in town is selling TP for $1.25 a roll but your store is, let’s say, near a hospital so you count on people being stressed and rushed and you charge $2:50 even though your own operating costs are no higher than the store ten blocks away. You’ve just violated Leviticus 25:14. 

This principle does not apply to real estate or to rare items like antiques or collectibles. This is because there is no ‘market’ in those things; they are each unique. This Biblical rule does apply, as we said earlier when other stores are all selling the commodity for about $1 and you try to get a less knowledgeable or more harried customer to give you $3. That is a swindle and is prohibited. Obviously, this does not apply if your store is subject to considerable “shrinkage” (a euphemism for extensive shoplifting) so that vandalism and theft have raised your insurance costs, or if your store is in a higher-priced rental location or your jurisdiction mandates a high minimum wage. In other words, there may well be reasons that you have to charge a higher price and that is valid. 

However, in today’s coronavirus circumstances where other stores do not have the merchandise, there is no established ‘normal’ price, and therefore no Biblical rules about your prices. This means that you may raise your prices. However, there is more to your question.

If you do raise your prices in order to be able to replace your inventory and also in order to discourage customers from buying your products and either hoarding or reselling them out of the back of their cars at inflated prices, you may come in for vile criticism and really unpleasant ostracism for you and your family. You did say you live in a small town. People you think of as friends might accuse you of gaining from the hardships of others.

On the other hand, if you don’t raise prices you may be encouraging hoarding and scalping while also harming your own ability to remain profitable when you have to replace inventory at new, but currently unknown prices. You are also depriving some of your fellow citizens of bathroom tissue, to use that example. They might be people who’d happily have rather paid $2:50 a roll than have none. Meanwhile, cartons are sitting unused in the basements of three homes.

As far as people accusing you of gaining from the hardships of others, that is another odious example of cunningly using language to stigmatize. When I sell a pair of new shoes to my customer, I make a profit because my customer suffered the hardship of having his old shoes wear out. When I summon a plumber to ease my hardship of a leaking pipe damaging my parquet floor, he indeed does gain. My lawyer gains from my hardship of needing a contract reviewed. When my wife hands over money to our local grocer, it is because we are suffering the hardship of an empty pantry. And so on.

So what are you to do? We think you might consider taking the following three steps:

1) Raise your prices to cover your best guess at the cost of inventory replacement.

2) Place signs in your store indicating that you have had to raise prices because your costs have gone up but that you kept it to an absolute minimum. Let regular customers know that if they are experiencing hardship you will do your best to alleviate their stress.

3) Restrict quantities of purchases and explain that until this crisis has passed you are limiting customers to one item per person or whatever number you choose.

We think that most people will be understanding and sympathetic.

Wishing you good health and the ability to continue serving your community with your best ability and judgment.

Sincerely,

Rabbi Daniel and Susan Lapin

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