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But the reverse doesn't work for the suppliers (which it should if the world was organised as you say it is). Retailers who are theoretically in competition reg

But the reverse doesn't work for the suppliers (which it should if the world was organised as you say it is). Retailers who are theoretically in competition regularly band together to force suppliers to accept lower prices. Most recently this played out in both the UK and Australian dairy markets, where supermarket chains collaborated to force the dairy farm prices down. Dairy producers were unable to negotiate better contracts with different supermarkets paying more. So the supermarkets could easily also collaborate to maintain minimum prices on retail goods, and pay their staff more, etc. It suits them to cry "but competition!", but the competition is optional.

deleted 6y ago
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lotsofpulp 6y ago
Why would the supermarkets not want to maintain minimum prices if they could? Net income is usually a percentage of revenue, so if supermarkets could force prices higher, why wouldn’t they? I don’t know the specifics of the dairy situation you are referring to, but all the information from financial reports I’ve read indicate that retail businesses don’t have much pricing power. Hence why you don’t get rich buying stock in grocery stores, but rather high margin businesses like tech companies.
- marcus_holmes 6y ago
  https://www.abc.net.au/news/2019-02-23/milk-wars-whats-at-the-heart-of-dairys-battles/10838390 https://www.abc.net.au/news/2019-02-23/milk-wars-whats-at-th... In Australia, there's basically a cartel of 2 supermarket chains (Coles and Woolworths) and they control all retail pricing of groceries. https://www.farmdrop.com/blog/how-supermarkets-ruined-dairy/ https://www.farmdrop.com/blog/how-supermarkets-ruined-dairy/ In the UK there are more players, but the game is essentially the same. Price-fixing by colluding with the competition is illegal in both countries, but regulation is effectively powerless. The supermarkets are both politically connected, and in a position to cause voters pain. The position might be different in the USA, I don't know. I would suspect not - this article suggests that Walmart has considerable pricing power: https://www.businessinsider.com/walmart-low-price-strategy-tips-2019-4?r=DE&IR=T#bargaining-power-4 https://www.businessinsider.com/walmart-low-price-strategy-t...
  - lotsofpulp 6y ago
    There are many more grocery options in the US. Walmart does have some pricing power, but not much since it’s in the single digit percentage range at most, and it results in low single digit profit margins. Meaning if Walmart tried to use their pricing “power” to increase prices more than a couple percent and earn more net income, shoppers would go elsewhere.
    - marcus_holmes 6y ago
      https://ilsr.org/wp-content/uploads/2019/06/Walmart_Grocery_Monopoly_Report-_final_for_site.pdf https://ilsr.org/wp-content/uploads/2019/06/Walmart_Grocery_... I think you're underestimating Walmart's market share.

deleted 6y ago

[deleted]

lotsofpulp 6y ago

Why would the supermarkets not want to maintain minimum prices if they could? Net income is usually a percentage of revenue, so if supermarkets could force prices higher, why wouldn’t they? I don’t know the specifics of the dairy situation you are referring to, but all the information from financial reports I’ve read indicate that retail businesses don’t have much pricing power. Hence why you don’t get rich buying stock in grocery stores, but rather high margin businesses like tech companies.

marcus_holmes 6y ago
https://www.abc.net.au/news/2019-02-23/milk-wars-whats-at-the-heart-of-dairys-battles/10838390 https://www.abc.net.au/news/2019-02-23/milk-wars-whats-at-th... In Australia, there's basically a cartel of 2 supermarket chains (Coles and Woolworths) and they control all retail pricing of groceries. https://www.farmdrop.com/blog/how-supermarkets-ruined-dairy/ https://www.farmdrop.com/blog/how-supermarkets-ruined-dairy/ In the UK there are more players, but the game is essentially the same. Price-fixing by colluding with the competition is illegal in both countries, but regulation is effectively powerless. The supermarkets are both politically connected, and in a position to cause voters pain. The position might be different in the USA, I don't know. I would suspect not - this article suggests that Walmart has considerable pricing power: https://www.businessinsider.com/walmart-low-price-strategy-tips-2019-4?r=DE&IR=T#bargaining-power-4 https://www.businessinsider.com/walmart-low-price-strategy-t...
- lotsofpulp 6y ago
  There are many more grocery options in the US. Walmart does have some pricing power, but not much since it’s in the single digit percentage range at most, and it results in low single digit profit margins. Meaning if Walmart tried to use their pricing “power” to increase prices more than a couple percent and earn more net income, shoppers would go elsewhere.
  - marcus_holmes 6y ago
    https://ilsr.org/wp-content/uploads/2019/06/Walmart_Grocery_Monopoly_Report-_final_for_site.pdf https://ilsr.org/wp-content/uploads/2019/06/Walmart_Grocery_... I think you're underestimating Walmart's market share.