The Arizona owned Bashas’ grocery store chain has filed for Chapter 11 protection is federal bankruptcy court. Later this month, the company plans to close ten stores and shed 1,000 jobs. ASU Economist Matthew Croucher discusses the economic impact of the bankruptcy on the State of Arizona.
Ted Simons: Bashas' and its family of stores has filed for federal protection in bankruptcy court. Here to talk about that is Matthew Croucher, an economist with the W.P. Carey School of Business at Arizona State University. Bashas' files for bankruptcy. How much of an impact on the valley's economy?
Matthew Croucher I think it's going to have a significant effect. Bashas' has a lot of stores in Arizona and they employ quite a lot of people. And given that we are already in a difficult situation and circumstances, it's going to have a significant impact, given the job losses that are potentially expected.
Ted Simons: We're talking 10 stores, a thousand jobs with more to come likely?
Matthew Croucher: Essentially, yeah. They are not closing all otheir stores down tomorrow, because that's a very large feeling which consumes the thinking, tomorrow we're going to see going out of business signs. It becomes a self-fulfilling prophecy. We might see more layoffs, but it's not doors going to close tomorrow, that sort of thing.
Ted Simons: The company says, we will emerge from Chapter 11 next year, strong and are better. Possible?
Matthew Croucher: It's entirely possible. The problems have been, first of all, the economy and how the economy has -- we've gone into a recession quickly and quite a severe recession. Importantly, it's the competition. The grocery industry is already a competitive market where profit margins are small. Wal-Mart, Frye's, Safeway are competing for the same consumer dollars, it's been very difficult for Bashas' to compete. They go in and attempt to provide goods and services at an extremely low price, it's been difficult for Bashas' to match Wal-Mart.
Ted Simons: I know there are union issues at Bashas'. People are all in a lather talking about this sort of thing. But how much impact does this have on Bashas'?
Matthew Croucher I don't think it's been a contributing factor. I think the biggest factor is the economy going into such a downturn. We are creatures of habit. We probably used to go to the same grocery store once a week for the last five years. Why? We like the store and the convenience and we know where products are. When money becomes tight and income becomes a factor, people start to shop around and say, where are the best deals to be had? Lots of grocery stores, one way to get business is run loss-leaders, or products priced very close to cost and get you in the door. Consumers are looking saying, I will go and purchase those goods and services, but then I will go to Frye's to buy what they have on offer, and the same to Safeway. One major issue in Arizona, we grow outwards, we don't grow upwards. We have this very low population density. As a result, grocery stores are always chasing the market, chasing the people and going outwards. It's very difficult to make profits in that environment where there's simply not as many people around to support that many stores.
Ted Simons: With that in mind, how can Bashas' remake itself?
Matthew Croucher: I think it's got to find its niche. It was locally owned, and people said, I'm shopping at a store that's locally owned. That loyalty was costly, the products were slightly higher than the competition. They attempted to compete in price, but that obviously hasn't worked yet. People want to go to Bashas', 16 maybe it could be the price, but I find it difficult for them to come out and compete on price. There's got to be some other reason to get people in the door.
Ted Simons: Can you see the Bashas' becoming something like Fresh and Easy, smaller stores, more specialized product?
Matthew Croucher: Well, in their kind of portfolio, they already have A.J.'s as being that kind of smaller market for an upscale kind of consumer. I think Fresh and Easy is attempting to compete in that market, kind of small and boutique-y. We might see a smaller, leaner more focused Bashas' come out of bankruptcy.
Ted Simons: Will we see a Frye's, a Safeway, but some of these other grocery chains having the same troubles?
Matthew Croucher: I think all grocery stores will have some struggles. Even Wal-Mart has been successful in some areas, but in others there are some struggles going on. All grocery stores are going to see some difficult times ahead. However, the larger you are and the more dispersed you are nationally, Bashas' has struggled to compete with that.
Ted Simons: Very good. Thanks for joining us tonight on "Horizon."
Matthew Croucher:ASU Economist;