Photo: Getty Images/Wolterk
Michigan AG accuses Menard’s of price gouging
The Michigan Attorney General has sent a cease and desist letter to Menards after investigators from the office determined that the home improvement retailer was engaged in preying on the public’s fear about the spread of the novel coronavirus by systematically raising prices of items in high demand, including cleaning products and 3M face masks.
Attorney General Dana Nessel responded after customers of Menards in the state began complaining about the prices the retailer was charging. Investigators from Ms. Nessel’s office claim that at least one Menards store in the state doubled its price on disinfecting bleach.
“Big box stores are not immune to the Michigan Consumer Protection Act or the Governor’s Executive Order,” said Ms. Nessel in a statement. “Large corporations must also play by the rules, and my office will work diligently to ensure this state’s consumers are treated fairly and not abused by businesses seeking to unlawfully jack prices up to line their pockets with profits at the expense of the public during this time of great need.”
The number of patients in Michigan who have tested positive for the SARS-CoV-2 virus increased by 12 people yesterday to currently stand at 65.
In an email, a spokesperson for the retailer told MLive that the retailer began selling a new Clorox bleach product with a concentration of 7.5 percent sodium hypochlorite, compared to the previous item with a six percent concentration. Menards, which priced the item at $8.99 for a 121-ounce container, has since lowered the price to $7.49. The chain believes that its current price is in line with market rates for the same product.
“We will continue to monitor and adjust prices if the market changes,” the spokesperson wrote in the email. “Our focus right now is to get products to our stores or else none of this would matter anyway.”
Discussion Questions
DISCUSSION QUESTIONS: Does Menards have a public relations problem on its hands following the Michigan Attorney General’s cease and desist letter for price gouging? Has the chain’s response to the accusation been adequate for the moment?
Poll
BrainTrust
Neil Saunders
Managing Director, GlobalData
Ben Ball
Senior Vice President, Dechert-Hampe (retired)
It’s not nice to take advantage of your customers. They may never come back now…
In this situation, a key question is when prices were raised. Here in Georgia, once a state of emergency is declared, increases on anything are severely limited. Before a state of emergency, capitalism reigns, although one can create a publicity nightmare. $8.99 v. $7.49 for a better/more concentrated bleach product doesn’t strike me as gouging.
Why do I have “Save Big Money with Menard’s!” ringing in my ears right now? Shoppers are hyper-sensitive to this sort of thing right now, and governments no doubt equally anxious to score points with voters as being their watchdog. But retailers with Menard’s positioning need to protect their core price perception with consumers. The short-term margin gains just aren’t worth it.
Menard’s has a major problem, and its response so far will only fan the flames of outrage. Unless the company aggressively acts to change perception immediately, the stain of this event will haunt it for a long time after the crisis ends.
Regardless of the law – which clearly must be obeyed – increasing prices too much damages customer loyalty. Consumers don’t appreciate retailers that take advantage of a crisis and it colors their view of brands. How we all – corporations and people – act during this challenging time will reveal our values. And once revealed, those values will be remembered.
That is a fact!
This is not a good thing. The publicity will not bode well for them. I remember a few years ago during Hurricane Harvey, a major retailers (not a food retailer) was offering a 24-pack of water for $68. That retailer never sold water again because of the outrage that arose from doing this during a time when there was no water, as gouging in this manner is unconscionable.
Menard’s has two issues. The first is what really happened regarding the pricing decision on the new higher concentrated version of Clorox. The answer to that we may never know. The far bigger issue facing Menard’s is the consumer’s perception that it was price gouging. As I have said many times, the consumer’s perception is the reality that retailers have to deal with. That perception with have a lasting impact on Menard’s.
There is something “off” about Menards’ response. I live in Michigan and the rule is you can’t raise prices precipitously UNLESS you can show that the price to you has been raised. So if in fact the new Clorox product had a higher wholesale cost, all Menard’s would have to do is show the AG the invoices and the cease and desist order would have been automatically lifted. Fool me once by raising prices in a public health crisis — shame on you. Try to fool me twice by trying to lie your way out of it — BIG public relations problem.
Perception is reality…
To be candid — gee, I’m getting to say that a lot lately — Menard’s has always had a PR problem in that it’s frequently been accused of wrongful business practices, ranging from improper disposal of toxic waste to medieval employment policies (“accused” isn’t the same as guilty of course, but it is enough to generate bad P/R) So no, I don’t think this particular occurrence will mean much: people patronize a business because it makes sense for them, and I doubt isolated instances of walking an ethical tightrope will change that relationship.
This one will not go away. This is not a marketing blunder. It is a marketing nightmare. Ask yourself: would you go shop Menard’s after you read the story?