1) Greggs, a bakery chain, saw early success during the recession by selling cheaper foods, but profits have since declined as consumer preferences changed. 2) Greggs is now promoting on-the-go foods to cater to the 75% of customers who want food for convenience rather than meals at home. 3) Adam Smith believed businesses act primarily out of self-interest to maximize profit rather than benevolence towards customers, as seen in the modern tenants of Smith's former home focusing on profitability over all else.

1. Ruth Tarrant Head of Economics and Politics, Bedales School September 2013
Greggs had good growth and high profits in the
early part of the recent UK recession as consumers
switched to buying cheaper food items. By mid 2013,
however, their profitability was starting to falter, with
annual pre-tax profits down by 3.3%. Market research
suggests that most consumers (75%) at Greggs are
“food-as-you-go” consumers, wanting a hot sausage
roll to munch on the street, rather than people looking
for something to take home for tea. Greggs is now
trying to address this by promoting on-the-go foods,
getting staff in early to make up ready-made
sandwiches for the early-bird consumers that pop in
to get breakfast and could buy lunch too, and staying
open later for those who are peckish after work. Is
Greggs responding to “our own necessities” or has
their strategy changed with “regard to their own
interest?” Clearly it is cheaper for Greggs to make
food for consumers to “buy on the go” than for
consumers to make their own. Smith had this to say
on the subject:
It is the maxim of every prudent master of a family,
never to attempt to make at home what it will cost
him more to make than to buy.
What about the discount clothing centre? The one in
question in Edinburgh offers “Big Brand Names at
Discount Prices!” Clearly consumers like wearing
brand names but in difficult economic times, many
are not prepared to pay top prices or perhaps even
buy the real deal, opting for fakes instead. Indeed,
one of the biggest-selling fake items of 2013 are
fake Beats by Dr Dre headphones, with over 200,000
of them seized by Trading Standards in the first half
of 2013 alone. With experts saying that the fakes
would cost around £1 each to make and can be sold
for £15, there is a healthy profit to be made from
faking it. Are the fakers being “benevolent”, helping
desperate consumers to get their label fix, or just
interested in making a quick buck?
What would Adam Smith say?
It is not from the benevolence of the butcher,
the brewer, or the baker, that we expect
our dinner, but from regard to their own
interest. We address ourselves, not to their
humanity but to their self-love, and never
talk to them of our own necessities but of
their advantages.
So wrote Adam Smith, the generally accepted father
of modern economics and the guy on the back of the
£20 note, in his most well-known work “The Wealth
of Nations” in 1776 (which, it is rumoured, was
carried without fail in Margaret Thatcher’s equally
famous handbag). The building in Edinburgh in which
Smith wrote “The Wealth of Nations” is now home,
somewhat ironically, to a branch of Greggs the bakers,
a discount clothing centre and a bank. This article
explores the link between Smith’s view of the profit
motive as the sole business objective and the
businesses now operating in his former home.

2. Ruth Tarrant Head of Economics and Politics, Bedales School
Finally, the third shop in the historic Edinburgh building
is a branch of the Clydesdale Bank. The venomous
attitude expressed by most British consumer towards
the banking system would suggest quite strongly
that consumers believe banks are purely interested
in extracting as much profit as possible rather than
responding to consumer demands. Smith recognised
the potentially destructive power of banks back in
1776:
Though the principles of the banking trade may
appear somewhat abstruse, the practice is
capable of being reduced to strict rules. To
depart upon any occasion away from those rules,
in consequence of some flattering speculation
of extraordinary gain, is almost always extremely
dangerous and frequently fatal to the banking
company which attempts it.
Despite Clydesdale Bank’s high-profile sponsorship
of the Scottish Premier League and recent
restructuring by its owners, the National Australia
Bank (NAB). Moody’s (a credit-rating agency)
downgraded Clydesdale’s ratings in August 2013 as
a result of its past risky lending and weak franchise
structure. Whether this will have any overriding
impact on Clydesdale Bank’s risky search for profit
above the demands of its customers for prudence
remains to be seen.
So, what would Adam Smith say about the modern
users of this famous building in Edinburgh? No
doubt he would be fascinated to see that much of
what he wrote about in 1776 was still relevant today.
It remains as difficult as ever, though, to establish
which is more pressing for businesses – the need to
respond to consumer demands or the drive for profit.
Sources
www.bbc.co.uk/news/uk-scotland-scotland-business-
23591179
http://en.wikipedia.org/wiki/File:19th-century_
building_at_location_where_Adam_Smith_lived,_
1767-1776.jpg
www.bbc.co.uk/news/uk-scotland-scotland-business-
23825079
www.bbc.co.uk/news/uk-22469347