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Are retailer unit costs fixed? The larger they become, the better contracts they can negotiate with suppliers, the cheaper they can make their logistics and del
by Scaevolus 4y ago
Are retailer unit costs fixed? The larger they become, the better contracts they can negotiate with suppliers, the cheaper they can make their logistics and delivery network with economies of scale, and the less they have to spend on advertising.
- md_ 4y agoI guess that's true. FWIW, because this chart only goes back ten years, it's not like there's some obvious trend with WalMart (as an example) where as revenue increased, margins went up: https://www.macrotrends.net/stocks/charts/WMT/walmart/profit-margins https://www.macrotrends.net/stocks/charts/WMT/walmart/profit.... In fact, as revenue went up, margins went down-ish. The comparison I would still draw is to pure software businesses where they: a) Pay almost nothing per unit b) Increase in value the more users they have (due to more software for the platform, for example, and greater compatibility) c) Directly lead to significant productivity/efficiency gains in their customers, which they can then claim a piece of If a retailer becomes a near-monopolist, short of monopoly pricing, they will generate margins that tend towards the average for retail (which are low!), and they will grow at close to the rate of economic growth. In comparison, if a software company becomes a near-monopolist, even without monopoly pricing, their margins will increase and their utility will increase.
- Scaevolus 4y agoWalmart hit diminishing returns on scale efficiencies a long time before 2012-- their revenue has basically been tracking inflation for the last decade.