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Retailers will never take less profit in the long run. Especially in industries where ROIC is extremely important. The retailer will always squeeze the manufact
by zebrafish 7y ago
Retailers will never take less profit in the long run. Especially in industries where ROIC is extremely important. The retailer will always squeeze the manufacturer and the manufacturer, depending on the volume of the account, will typically fold to keep the (extremely expensive) line running. This plays out over long time horizons (a few years) but eventually price erosion will happen and capacity will go offline.
- wpietri 7y agoNobody is disputing that when prices decrease, capacity might also decrease. But the claim was that capacity drops to zero, which I still think is absurd.
- zebrafish 7y agoWell, I think the claim that worldwide capacity will drop to zero is absurd. But after enough price erosion, domestic capacity will dwindle significantly and these companies' goal is to remain in business. I love low airfare as much as anybody but the claim that price transparency leads to price erosion isn't ridiculous. I honestly think that the trend towards lower prices has led to the reduction in quality of the flying experience as the airlines try to accommodate both low prices expected by consumers and high margins expected by Wall Street. But your point is fair. The capacity rarely disappears completely because of price transparency. Only innovation and obsolescence will completely take that capacity offline.