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and yet, target can mark up their products higher on average than the competitors you named (e.g., http://blogs.marketwatch.com/great-columnist/2012/10/15/retai

and yet, target can mark up their products higher on average than the competitors you named (e.g., http://blogs.marketwatch.com/great-columnist/2012/10/15/retail-markups-and-the-power-of-amazon/ http://blogs.marketwatch.com/great-columnist/2012/10/15/reta...). so they really have no market power? why do you think target spends so much on branding? really understanding a firm's market power and the competitive dynamics of it's market requires a bit more depth than noting that products are similar. (there are also different forms of market power, but i'll leave that for another day)

AnthonyMouse 8y ago
> and yet, target can mark up their products higher on average than the competitors you named Costco and Amazon have lower unit margins because they charge annually for memberships or Prime. Walmart has lower nominal markups because they don't use promotions, so all their nominal markups are their actual markups rather than regularly getting eroded by promotions. When it all shakes out, the thing that costs ~$15 at Target costs ~$15 at Walmart. > why do you think target spends so much on branding? That's what companies with no market power do. They can't significantly raise prices so they push to drive sales volume. > really understanding a firm's market power and the competitive dynamics of it's market requires a bit more depth than noting that products are similar. On the other hand, when they're independently selling the same product for the same price... https://www.target.com/p/lego-minecraft-the-zombie-cave-21141/-/A-53166490 https://www.target.com/p/lego-minecraft-the-zombie-cave-2114... https://www.walmart.com/ip/LEGO-Minecraft-The-Zombie-Cave-21141/280852858 https://www.walmart.com/ip/LEGO-Minecraft-The-Zombie-Cave-21... https://www.amazon.com/LEGO-Minecraft-Zombie-21141-Building/dp/B075RDZLZ5 https://www.amazon.com/LEGO-Minecraft-Zombie-21141-Building/...
- clairity 8y ago
  the misconceptions you hold about marketing and unit economics are hard to work through here given the limited time and space. i'll just note that branding is first and foremost about pricing power. lower cost forms of marketing are employed to encourage volume.
  - AnthonyMouse 8y ago
    Branding isn't pricing power. If you see a McDonald's, you know what's in there. It may not be a premium product, but it's consistent, and consistency is worth something. Buying a branded product is really buying two separate products. One is the commodity and the other is certification of the commodity by the brand. People might pay more for a product certified to be a known quantity than one that isn't, but that isn't the same as market power because certification can be a commodity too. Some random hole in the wall can't compete with McDonald's on being known and consistent, but Burger King and Wendy's can, which is sufficient to keep their prices in check. Charging more because you're providing something some competitors don't have is not market power when some different competitors do have it.

AnthonyMouse 8y ago

> and yet, target can mark up their products higher on average than the competitors you named Costco and Amazon have lower unit margins because they charge annually for memberships or Prime. Walmart has lower nominal markups because they don't use promotions, so all their nominal markups are their actual markups rather than regularly getting eroded by promotions. When it all shakes out, the thing that costs ~$15 at Target costs ~$15 at Walmart. > why do you think target spends so much on branding? That's what companies with no market power do. They can't significantly raise prices so they push to drive sales volume. > really understanding a firm's market power and the competitive dynamics of it's market requires a bit more depth than noting that products are similar. On the other hand, when they're independently selling the same product for the same price... https://www.target.com/p/lego-minecraft-the-zombie-cave-21141/-/A-53166490 https://www.target.com/p/lego-minecraft-the-zombie-cave-2114... https://www.walmart.com/ip/LEGO-Minecraft-The-Zombie-Cave-21141/280852858 https://www.walmart.com/ip/LEGO-Minecraft-The-Zombie-Cave-21... https://www.amazon.com/LEGO-Minecraft-Zombie-21141-Building/dp/B075RDZLZ5 https://www.amazon.com/LEGO-Minecraft-Zombie-21141-Building/...

clairity 8y ago
the misconceptions you hold about marketing and unit economics are hard to work through here given the limited time and space. i'll just note that branding is first and foremost about pricing power. lower cost forms of marketing are employed to encourage volume.
- AnthonyMouse 8y ago
  Branding isn't pricing power. If you see a McDonald's, you know what's in there. It may not be a premium product, but it's consistent, and consistency is worth something. Buying a branded product is really buying two separate products. One is the commodity and the other is certification of the commodity by the brand. People might pay more for a product certified to be a known quantity than one that isn't, but that isn't the same as market power because certification can be a commodity too. Some random hole in the wall can't compete with McDonald's on being known and consistent, but Burger King and Wendy's can, which is sufficient to keep their prices in check. Charging more because you're providing something some competitors don't have is not market power when some different competitors do have it.