Submitted 3 weeks ago by Patnou@lemmy.world to nostupidquestions@lemmy.world
And now you know the story of Amazon.
Selling stuff at cost is already selling stuff at a loss if you factor in labor and overhead. How long can you go losing money? Probably not as long as Walmart or Target or Amazon. That’s what they’re betting in.
Employing your exact strategy is how Amazon became one of the largest corporations on the planet. In fact, they still sell their entire Amazon Basics line at a loss for this reason.
“At cost” could be a compound value inclusive of overhead and labor.
Well, that’s just a regular business then.
To put it simply, cost isn’t the same for everybody.
Even beyond this:
Coca-cola and Walmart had a secret inside deal. Nobody could sell coke products for less than Walmart.
When they find out smaller grocery stores are undercutting Walmart to drive traffic, the wholesaler/distributor will go into those smaller chains and force them to pay even higher wholesale prices to force them to raise their prices.
Walmart gets bulk discounts nobody else on the planet receives, then games the market to hedge themselves against everyone else - not setting a fair market price floor, but rather a price ceiling.
They get to be the lowest priced, everyone else the highest.
Yep. And boot-lickers of that kind of business ethics will always say “Well that’s capitalism, baby!”
But it’s really not. Capitalism as an economic theory IS those small businesses that are being driven under. It’s human beings making a living from their own labour." Even if that human being is the person in charge and doesn’t set foot on the sales floor (for example), it’s still a human being at the helm.
My goto example for some reason is always furniture, I don’t know why. But someone making bespoke wooden furniture out of his garage because he enjoys it and other people want to purchase it. That’s capitalism.
If that same guy’s product gets so big that he starts a company, get’s a factory, and now has employees making the furniture for him, it’s still capitalism because he built that company with his own sweat and he deserves to reap the benefits of such.
What’s missing from what the bootlckers call capitalism is the human element.
When the human equation is taken away and everything is at the whim of a stock price, it’s not capitalism anymore, it’s called a Corporatocracy. Humans themselves become just another metric on a spreadsheet called “labour”. Something to be accounted for, controlled and minimized for the sake of the share price. Those shares aren’t owned by humans either (for the most part), they’re owned by other corporations and hedge-funds. Humans are so far removed from modern corporatocracy that there’s no room (or even understanding of) empathy.
Dude, as someone that worked, briefly, in retail at a corporate level, the agreements between the major players like Coke and Pepsi and the big boxes are like some Van Halen “no brown M&Ms” level shit on both sides of the equation.
I have seen emails describing what happens when a coke representative walks into one of those stores and finds that their product is not merchandised within X feet of X aisle or is out of stock on the shelf and there are serious financial sanctions for that shit. Something is minor as a customer setting a 12 pack of 7-Up on top of the stack of Sprite has gotten escalated to levels that would be ludicrous to a layman.
Everything, every single shelf or peghook or rack in that store, has a dollar amount attached to it, and the sums of money being exchanged over whether your product is placed at eye level or down on the bottom shelf is unreal.
Also, unless you’re selling literally everything, they can pad their margins on what you don’t provide, and pound you into the ground with loss-leaders, ON TOP of volume discounts. That’s how Walmart destroyed local businesses, by taking “acceptable losses” selling below cost for a while until it broke the competition.
I sell locks at my work. We get our stuff through a distributor at a set price discounted from MSRP. We are not large enough to buy direct from manufacturer for these locks. Amazon and home depot are selling the same locks cheaper than we buy them from the distributor because they can buy direct and buy more volume than even our distributor. You would need to buy in volume higher than Amazon which would be difficult because it would require a ton of up front capital which you would not really have a way to make back because you are making no profit. This isn’t the case for everything but it’s particularly bad with residential smart locks.
Anyway to answer the question no it would not drive Amazon’s prices down because at cost we would still be selling them for more than Amazon.
Hello fellow locksmith. We’ve basically given up on selling residential Smart Locks and Padlocks in our shop. For pretty much the same reasons you’ve described. Our prices would be outrageously higher.
Fortunately we deal in car keys, and dealerships still give us plenty of breathing room to beat them on parts, service, and lead times.
I so desperately want to expand our capabilities on doing car keys but my boss is allergic to spending money. It really seems like a no brainer when the dealerships change an arm and a leg we could easily beat their prices.
Pretty much this.
People have shared how Costco would work with farms and say, “Well pay you less per product, but we’re order a magnitude more than your next buyer. Enough that you can retire next year.”
The numbers are insane.
The difference between you doing that and a megacorp doing that (amazon) is that the megacorp has a lot of money to keep doing that for years
As others have said that is a business strategy that has been employed many times.
It is all about who can outlast the competition.
Maybe, but why would somebody do that in the first place? Put effort, money, time and resources into a loss net gain?
You would need lots of those stores to justify others to lower prices like one or more on every town and place…
Maybe a state run enterprise at that point… But that woul be… Communism I guess.
How would this store afford to pay its employees, rent and utilities if it only sold things at cost? One store alone would also make no difference, you’d need a chain of many stores.
I am talking like a small town. Buy.build business outright have a couple investors for tax purposes and only employee people going thru hard times who want to work and give them a percentage in store. Cover all insurance cost and everything.
I suggest having a side business to help prop this ‘at cost’ idea up. Could be as simple as a moving truck rental business.
I think you are asking, essentially, why there are no retail non-profits. Operate them like a charity for the common good, etc, but all you do is sell stuff. No fancy human rights work or animal rescue. Just sell stuff. Cheap. As a non-profit.
Here’s the best possible answer to this: good idea - go do it.
I think what you will find is that you can’t get any kind of investment to help you, not even a small business loan. So it’ll be hard for you to compete at all. And in the beginning you’ll be so small that you probably won’t be able to sell for less than the big stores. They buy at special lower prices because they are so big. You don’t get that. And even if you frame the whole thing as a charitable enterprise to help the poor, who will your donors be? Why would anyone give their money to this cause over something that helps the most vulnerable directly?
Big corps do this the reverse way.
First off for the most part, high prices isn’t where big corps are screwing us usually. Least not on luxury goods. Mainly low wages is the real killer, our shit is stupidly cheap. Prices that are only possible via exploitative labor and high environmental destruction. So even the premise is flawed.
But then the bigger thing, even if you could say sell something below amazon’s price… and keep up with inventory and shipping to keep doing it. Amazon can, and will bring their price down… temporarally, only as long as you are still selling the product. They have bots watching everything… and they will undercut you. For them it’s not a big deal, they are in basically every other industry, so while you are still paying for hosting, some bare minimum staff needed to get and sell your product, amazon can just undercut you, make sure you have no customers and starve you out, and the second the bots see you are no longer selling… they jump their prices up to where they are profitable again.
Adding to what everyone else said, stores commonly sell loss leaders as a way to get people into the store to sell goods with higher margins. Part of the reason why there are so many food deserts in the USA is because stores like Dollar General will sell higher margin stable goods at a lower cost. This means grocery stores who rely on those profits to sell fresh produce and meat can’t compete, going out of business.
I often though about if for some reason I had a lot of money if I should try to make common things and sell at low margins over a charity setup. Like target 1% above inflation for the companies profit when targetting the price of the items.
This was basically the concept behind Cost Plus Drugs. Mark Cuban realized he could sell generic drugs at a basic 15% markup and $10 pharmacy+shipping, and drastically undercut the competition. Their drug prices literally list the breakdown of manufacturing cost, 15% markup, $5 pharmacy labor, and the $5 shipping on each page.
He has been blunt that the business isn’t really about lowering drug prices. That is certainly a bonus, but he’s not doing it to be magnanimous. He simply realized that the markup on drug prices was so mind-bogglingly absurd (oftentimes over 2500% markup) that he could undercut the market by thousands of dollars and still make a tidy 15% profit.
Patient drug prices in the US are insane, and he is simply exploiting that fact to undercut everyone else on the market.
sorta but the idea is the market would be more like 5% but maybe 10 depending on the interest rate. Essentially enough that it does not go under but actual profit should be about the same as a certificate of deposit from a bank.
He simply realized that the markup on drug prices was so mind-bogglingly absurd (oftentimes over 2500% markup) that he could undercut the market by thousands of dollars and still make a tidy 15% profit.
When the libertarians tell you fan fiction about the “invisible hand of the free market,” this is what they mean. And the fact that it took this long for someone like Cuban to come along should tell you how viable a strategy it is.
which undercuts competitors by a lot
Not by a lot. First thing you got wrong is that local grocery stores run on high margins. They aren’t.
Second: Your non profit store would still be more expensive than shopping mall, because shopping mall benefits from economics of scale. A lot.
Where I live large scale Carrefour is like 25% cheaper than small scale Carrefour Express
Long story short, logistics benefits from scale. The cost to ship a pallet of poptarts to a store is roughly the same as shipping half a pallet. Smaller stores can’t really undercut larger corporations because they don’t have the scale.
Also when your mom and pop store doesn’t make a profit for 3 months, they go under. When a Walmart doesn’t make a profit for 3 months, they stay open because they have those loses spread across hundreds of other Walmarts.
You mean googlw fiber?
pwnicholson@lemmy.world 3 weeks ago
That’s basically what Amazon did. They did it even worse: they sold many things below cost. They ran their entire business burning cash for a long time (surviving off money raised from investors and later from going public and selling stock), driving other book stores out of business. Once they had enough market share and less competition, they negotiated tougher deals with punishers for lower costs and raised their prices to be at least a little profitable (they still sell some things loss-leader and many things at cost).
xErah@anarchist.nexus 2 weeks ago
Fuck. Not only are there multiple Punishers, but Amazon negotiated tougher deals with them?? Shit. That’s how you capitalism I guess.
Klear@quokk.au 2 weeks ago
They didn’t mean Frank Castle but the robots built by Galactus