2 ms·

Isn’t it because resellers like Walmart always require lower prices than what the brand sells publicly, otherwise brands would always undercut all their reselle

• lotsofpulp 6y ago
  I doubt it, that would be ascribing immense sway to Walmart over other enormous companies like Procter and Gamble, Unilever, etc. What is more likely is this is a simple example of price discrimination or price segmentation. Theoretically, you can earn the most money by selling each item at the maximum price the buyer is willing to pay. But if the buyers all have varying levels of income or willingness to pay, how do you scale this? Obviously, you can't barter with every single person for every $5 bottle of lotion. What you can do is create various brands, and maybe differentiate the products slightly, or maybe not. Similar to binning with silicon chips where the chips with higher probabilities of performing better and longer get sold for higher. So Walmart can go to Johnson and Johnson and say hey, you're selling Lubriderm for $5, make me some lotion that's similar or lower in quality (but still acceptable to Walmart), and we'll sell that for $4. Now, J&J get to sell their $5 lotion to people willing to pay $5, and a cheaper line to people wanting to pay less, but they don't have to lose the people paying $5. And they do this in many, many layers. P&G, Unilever, J&J, and others all have countless brands they use to hit various price points. And the products may be the same, or may be marginally less in quality. And maybe it behooves some people to pay more for the extra assurance of quality.