Hard lessons in economics

It is a free country and it is a free market. So why is it that suddenly things got so uncomfortable for some Brazilian businesses in Framingham?

Precisely because it has come to their attention that their supplier has become their competitor.

The basics of this story may be as old as the first exchanges of what was later called commerce or business. But as in any other competition of such nature, some like it better than others, so the growing community of Brazilian immigrants is startled by the reality of cold decisions. Steady wholesale buyers of Rainbow Trading International, owned by Joao Araujo, are not at all pleased to see he is now offering some of the same products for a much lower price at his new grocery store on Concord Street.

“We have bought a shampoo (wholesale) from (Rainbow Trading) for $1.99 for a long time and we have to sell it for at least $3.00. But now they sell it for $1.99 at their store (the Brazilian Mini-Mart or Super-mercado Brasileiro),” said a woman who asked that her name not be used.  “The same thing with the “farinha de mandioca,” (cassava flour) which they now sell there for 95 cents and we sell for $1.50 because we bought it for 95 cents. Customers are bringing back the products and we can’t say much about that.

“Everyone is asking the same thing, ‘How can you be the distributor and then open a store right next to the others with prices equal or lower than those you offer your wholesale customers?’ ”

Even upset, this woman has also found humor in the new course of events. As a salesperson at one of the original stores (which is both a travel agency and a money transfer business) she wonders why would anyone do business as usual with Rainbow Trading.

“Why bother to do all the paper work?” she asks. “Now, when we need more chocolate candy to sell, for instance, we just go there and buy a box, because he is selling it there for the same price he sells to us through the long process of ordering ahead of time.”

For another saleswoman in downtown, there seems to be a breach of trust.

“What he is doing is not illegal, but it is certainly not loyal. If I had extra money, I’d get a lawyer and look for my rights in this. There must be something that can be done to stop it.”

In fact, she herself seems to have said it. “It is not illegal.” And the experts say this is in fact, the way of the market in the USA.

“Price competition is as American as apple pie,” said Karl Case, professor of Economics at Wellesley College. “In fact, the ideal model in economics is where firms cut prices against each other and consumers benefit by getting the lowest possible price.”

Araujo is confident that his new grocery store, which is co-owned by his sister-in-law Katia Moreira, of From Brazil, is a place that fills a need.

“Our business philosophy is to work like any other grocery store in the world,” he said. “ We have to offer quality, variety and competitive prices.”

Loyalty, he said, is not part of the deal, especially because his wholesale customers have the option of buying from 11 different suppliers and he himself only imports 60 percent of his products. He must buy the other 40 percent from others.

In his five-years in the business, Araujo has expanded his business to all over New England and New York. Strong customers include SWB New England, which sells to major grocery stores in this area. Brazilian products are, in fact, available in many other stores and according to Sean Kaplan, grocery manager of Stop and Shop at Connecticut Path, they are looking to expand their Brazilian product line from six feet to 20 feet.

For Araujo, his growth is only natural and his store is offering products that had never before made the shelves of Metrowest.

“ I sell 1,500 products in my store and the other stores in Framingham sell about 30 products,” he said. “I have seen the need of the market and now I sell from bread to milk, from shampoo to detergent, from chocolate to cookies, the whole array of products the consumer wants.

“We know what the community needs and we have products from all regions of Brazil. Since it’s doing well, it proves our point.”

Still, some smaller businesses are not amused by the sudden growth. And for Eliana Carito, who owns Montanha de Minas in Saxonville, together with her husband, Carl, people need to take stands that show their positions for the world to know.

“I wonder why people don’t want their names exposed,” she said. “ Brazilians complain but then they get afraid and that doesn’t help anyone. I often say that we are cowards.

“(Araujo) can open grocery stores all over the US, but what he is doing is wrong,” she said. “He can open it, but he has to keep prices that are fair to the ones he gives us.”

Araujo disagrees.

“Our investment was much bigger than anyone’s,” he said. “I arrived here in 1996 and I started in distribution. This is not me, it’s the market, it’s what is needed.

“The market is growing and there is space for everyone. And like in every place where there’s capitalism, those who are not efficient must get out.”

That is, in fact, the truth.  A painful one, indeed, but virtually the basic thought that has made this country attractive for the hard-working immigrants who came to Framingham precisely to try their luck and ability at having a chance.

Este artigo foi originalmente publicado  no jornal Metrowest Daily News, em Framingham, em maio de 2006.

 

5 Comentários para “Hard lessons in economics”

  1. As duras lições são até hoje aplicadas no mercado. O empresário João Araujo com base no livre comércio, passou a atuar no varejo e no atacado, sem regras que lhe proibisse o livre comércio de preços. O consumidor desatento, sustentaculo da economia, paga preços no atacado e no varejo. Os chineses aprenderam as lições.

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