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What a crazy world where Walmart is the underdog. Two vicious monopolistic predators battling for ultimate pricing power.
by digitaltrees 7y ago
What a crazy world where Walmart is the underdog. Two vicious monopolistic predators battling for ultimate pricing power.
- sokoloff 7y agoIt's a good thing there aren't more monopolistic retailers vigorously battling each other in the market...
- digitaltrees 7y agoI get your snark at my use of monopoly for two companies but think about it. One has a monopoly on physical retail in most of America. The other has a monopoly over most e-commerce. Which ever wins will have a true monopoly over commerce in general. Scary. And not “free market” capitalism.
- sokoloff 7y agoWalmart has a monopoly on physical retail? I can almost understand your position on Amazon e-commerce, but I don’t think Walmart is anywhere close to monopolizing physical retail.
- digitaltrees 7y agoHave you been to a small town in rural America?! Walmart In many communities is the town square and effectively the only retailer other than maybe a dollar store.
- seanmcdirmid 7y agoDoes most of America live in small towns? With a 82% urbanization rate, it doesn’t really seem that way.
- blihp 7y agoI suspect that when most people refer to small towns they are implicitly including most suburban areas which are a big chunk of that 82%. (i.e. there are a lot of cities that don't have a significant downtown population but have massive suburban sprawl)
- digitaltrees 7y agoSmall towns are urban. They are not classified rural (ie unincorporated)
- EpicEng 7y agoThat doesn't make them a monopoly; it makes them a preferred option by consumers. In the US, antitrust laws are concerned with vertical domination of a market. The consumers of these small towns made a _choice_.
- NotSammyHagar 7y agoIt makes them an effective because Walmart will lower prices to put other stores out of business.
- EpicEng 7y agoAre they losing money on it? Lowering prices to compete isn't a crime.
- digitaltrees 7y agoIt is a crime if the intent is to gain so much market share that pricing power is achieved at which point predatory pricing is pursued. This is an old business model; operate at a loss until your competition is driven out of business and then sit back and collect windfall profits. This was one of the main drivers of anti trust policy to begin with.
- EpicEng 7y agoI understand that, "operate at a loss" being the key component there. Is that what's happening?
- stale2002 7y agoLower prices is explicitly what the government encourages. You are describing a benefit, not a drawback.
- digitaltrees 7y agoNot if it is part of a pattern of anti competitive practices. If you lower prices with the intent of putting competitors out of business that is not competition.
- yeahitslikethat 7y agoWith a Claire's, subway, and little Ceasars pizza in the strip mall with it.
- skybrian 7y agoEven small towns have lots of choices when buying things online, which is what the article is about.
- kbenson 7y agoFrom what I've been hearing[1], you might want to consider the "maybe" in "maybe a dollar store". At 15,000 stores, there's probably a Dollar General in every community with a Walmart as well as every community in the surrounding 200 miles. 1: https://www.npr.org/templates/transcript/transcript.php?storyId=702679681 https://www.npr.org/templates/transcript/transcript.php?stor...
- 0xffff2 7y agoI think the mere fact that I split my time between the Bay Area and rural Oregon, yet never feel compelled to shop an Walmart comes close to disproving the physical retail monopoly argument. The nearest town to my house in Orgeon has a Dollar General, but it also has two local convenience stores that sell some staple groceries. Prices are high enough that I usually drive down to the nearest city, where I have nearly all the same retail options I have in the Bay Area (and more, if I need anything resembling farm supplies).
- rangersanger 7y agoWest coast experience does not match the rest of the country. Outside the largest cities and wealthy suburbs, you’d be hard pressed. Especially on an average salary.
- 0xffff2 7y agoI think a town 40 miles outside of Klamath Falls, Oregon qualifies as "outside the largest cities and wealthy suburbs".
- digitaltrees 7y agoYou don’t sound like the representative example of most consumers in most communities in America.
- 0xffff2 7y agoReally? Where are most consumers living then? I think I'm in the unusual situation of seeing both sides of the urban/rural divide in a way that most people don't. The fact that I split my time between a major metropolitan area and a town that's only just starting to recover from the local sawmill closing a couple decades ago probably puts me a lot closer to the mean than most people.
- lotsofpulp 7y agoYour metropolitan area is not representative of other metropolitan areas. Most of population is clustered around cities that are not comparable to SF and it’s surroundings, economically and culture wise.
- tomrod 7y agoEconomist here. Monopolistic competition is a well-defined term. Intro: https://en.m.wikipedia.org/wiki/Monopolistic_competition https://en.m.wikipedia.org/wiki/Monopolistic_competition
- digitaltrees 7y agoI don’t think we were referring to “Monopolistic Competition” only monopolistic intent, as in, a desire to achieve monopoly to gain pricing power.
- amelius 7y agoWhat a crazy world where retailers have such power. At this point, retail should be a boring and solved problem. The true power should be with producers and consumers.
- lotsofpulp 7y agoIt is, that’s why the margins are 1%, and consumers do have the power. Consumers drove everyone out of business that couldn’t offer margins that low.
- sokoloff 7y agoIt’s important to note that while net margins are often 1-3%, gross margins are typically closer to 25%.
- 0xffff2 7y agoWhy is that important exactly? I would think that the gross margins don't matter much at all. If your net margin is -1%, who cares if your gross is 22%?
- sokoloff 7y agoBecause if your gross margin is high enough, it's possible to invest to scale such that with greater fixed cost absorption that your net margins can improve from -1% to +2%. Many companies go through a phase of initial losses (negative net margins) when they first start up until they reach scale where the gross margins pull the net margins positive. A competitor to Walmart would be in grave trouble (and shouldn't even try) if their gross margin was 1-3%.
- gbersac 7y agoyes but net margin is what really matters.
- jldugger 7y ago
- BurningFrog 7y ago> Two vicious monopolistic predators battling for ultimate pricing power This is of course the opposite of monopoly, and a Good Thing!
- tomrod 7y agoSort of. https://en.m.wikipedia.org/wiki/Monopolistic_competition https://en.m.wikipedia.org/wiki/Monopolistic_competition
- neilv 7y agoAnd the article says that Walmart is looking at the difficulty of bringing on a lot more brands. Walmart is famous for being rough on suppliers. Though Amazon hasn't really raised the bar, it sounds like. It would be good if someone managed to pull off "we're the trustworthy go-to, for supply chain integrity and real reviews, and we treat all suppliers/brands/workers/customers with a reasonable degree of respect". Walmart would have a long way to go for that, but could they possibly manage the corporate will to do it, out of desperation?