5 ms·

Brexit won't have helped, but I'm sure supermarkets price gouging through inflation is a worse contributor to this. When they're stonewalling farmers with low b

by imdsm 4y ago

Brexit won't have helped, but I'm sure supermarkets price gouging through inflation is a worse contributor to this. When they're stonewalling farmers with low ball pricing, there's no incentive to produce.

petercooper 4y ago
That as well! It boggled my mind when I learnt about how a lot of agricultural output is priced. You'd expect the folks producing milk or selling eggs to, well, determine the prices, but no, no no..
- Veen 4y ago
  It's what happens when there is a de facto monopsony. Farmers can sell goods for whatever the supermarkets demand, or their produce can rot.
  - klondike_klive 4y ago
    Unfortunately it's often both - farmers have to grow way more than they need to make sure there's enough to meet supermarket demand after adverse weather, pests etc.
  - lotsofpulp 4y ago
    Is there a monopsony in the UK? It seems like there are at least 6 or 7 supermarket companies in the UK, presumably they are not all buying from farmers as 1 entity? https://en.wikipedia.org/wiki/List_of_supermarket_chains_in_the_United_Kingdom https://en.wikipedia.org/wiki/List_of_supermarket_chains_in_...
    - orwin 4y ago
      I don't know about UK, but in mainland Europe our supermarket chain created Alidis (ex-Agecore). And are in a monopsony situation, effectively, and strongarmed Nestlé into accepting their demands. I don't know why it isn't regulated yet.
lotsofpulp 4y ago
Tesco profit margin is 1.51%. https://markets.ft.com/data/equities/tearsheet/financials?s=TSCO:LSE https://markets.ft.com/data/equities/tearsheet/financials?s=... The publicly listed supermarkets all have pitiful profit margins: https://markets.ft.com/data/equities/tearsheet/profile?s=SBRY:LSE https://markets.ft.com/data/equities/tearsheet/profile?s=SBR... How can a business be price gouging and barely making money at the same time?
- AlbertCory 4y ago
  I think you need Finance 101. A supermarket turns over its inventory 50 times a year. And the items suitable for gouging are probably less than 1% of their volume.
  - lotsofpulp 4y ago
    Are you suggesting that there is a maximum allowable profit margin per item after which a business can be described to be price gouging? If so, what is that profit margin? What does inventory turnover have to do with price gouging? I would think that the reason a grocery store increases prices, regardless of which items and by how much, is that they themselves are experiencing increasing costs, hence the lack of substantial increase in profit margins.
    - AlbertCory 4y ago
      you said: >How can a business be price gouging and barely making money at the same time? and I explained it. The profit margin of the store is driven by (1) gross margins, and (2) inventory turnover. no one's alleging that they're gouging on every item. So gouging on a few produce items has almost zero effect on the overall margin.
      - lotsofpulp 4y ago
        I see. I would not describe increased profit margins on some items as an indication that a business is price gouging. Having different profit margins on different items has long been an accepted business model across the world. The business needs to earn a profit to survive, and one that is earning 1% to 2% profit margins is already on the edge. If the profit margin on items that are moving need to be increased to maintain the 1% to 2% profit margins, then that is just a business trying to survive.
makomk 4y ago
From what I can tell, the big reason that supermarkets in mainland Europe can work around this by ordering from different suppliers is that they're willing to pay their suppliers more and pass the cost increase on to their customers, whereas UK supermarkets aren't so willing to do this. That is, the main contributing factor seems to be precisely our supermarkets' unwillingness to engage in "price gouging" - and if they had put prices up, you can bet that would've been blamed on Brexit as well.
- skywal_l 4y ago
  I don't think that raising your price because your cost increase is price gouging. Gouging occurs when the price increase do not relate to the cost increase and the difference is being pocketed by the intermediary, here the supermarket. What you describe mainland european supermarket doing is just what happens in a free market. Not price gouging at all.
- cnelsenmilt 4y ago
  Charging more because your costs are higher is not really gouging. Obviously there's no precise definition -- it's a social judgement -- but generally it's taking more profit than is "fair" for a situation, like tripling the price of your bottled water after a natural disaster.

by imdsm 4y ago

petercooper 4y ago

That as well! It boggled my mind when I learnt about how a lot of agricultural output is priced. You'd expect the folks producing milk or selling eggs to, well, determine the prices, but no, no no..

Veen 4y ago
It's what happens when there is a de facto monopsony. Farmers can sell goods for whatever the supermarkets demand, or their produce can rot.
- klondike_klive 4y ago
  Unfortunately it's often both - farmers have to grow way more than they need to make sure there's enough to meet supermarket demand after adverse weather, pests etc.
- lotsofpulp 4y ago
  Is there a monopsony in the UK? It seems like there are at least 6 or 7 supermarket companies in the UK, presumably they are not all buying from farmers as 1 entity? https://en.wikipedia.org/wiki/List_of_supermarket_chains_in_the_United_Kingdom https://en.wikipedia.org/wiki/List_of_supermarket_chains_in_...
  - orwin 4y ago
    I don't know about UK, but in mainland Europe our supermarket chain created Alidis (ex-Agecore). And are in a monopsony situation, effectively, and strongarmed Nestlé into accepting their demands. I don't know why it isn't regulated yet.

lotsofpulp 4y ago

Tesco profit margin is 1.51%. https://markets.ft.com/data/equities/tearsheet/financials?s=TSCO:LSE https://markets.ft.com/data/equities/tearsheet/financials?s=... The publicly listed supermarkets all have pitiful profit margins: https://markets.ft.com/data/equities/tearsheet/profile?s=SBRY:LSE https://markets.ft.com/data/equities/tearsheet/profile?s=SBR... How can a business be price gouging and barely making money at the same time?

AlbertCory 4y ago
I think you need Finance 101. A supermarket turns over its inventory 50 times a year. And the items suitable for gouging are probably less than 1% of their volume.
- lotsofpulp 4y ago
  Are you suggesting that there is a maximum allowable profit margin per item after which a business can be described to be price gouging? If so, what is that profit margin? What does inventory turnover have to do with price gouging? I would think that the reason a grocery store increases prices, regardless of which items and by how much, is that they themselves are experiencing increasing costs, hence the lack of substantial increase in profit margins.
  - AlbertCory 4y ago
    you said: >How can a business be price gouging and barely making money at the same time? and I explained it. The profit margin of the store is driven by (1) gross margins, and (2) inventory turnover. no one's alleging that they're gouging on every item. So gouging on a few produce items has almost zero effect on the overall margin.
    - lotsofpulp 4y ago
      I see. I would not describe increased profit margins on some items as an indication that a business is price gouging. Having different profit margins on different items has long been an accepted business model across the world. The business needs to earn a profit to survive, and one that is earning 1% to 2% profit margins is already on the edge. If the profit margin on items that are moving need to be increased to maintain the 1% to 2% profit margins, then that is just a business trying to survive.

makomk 4y ago

From what I can tell, the big reason that supermarkets in mainland Europe can work around this by ordering from different suppliers is that they're willing to pay their suppliers more and pass the cost increase on to their customers, whereas UK supermarkets aren't so willing to do this. That is, the main contributing factor seems to be precisely our supermarkets' unwillingness to engage in "price gouging" - and if they had put prices up, you can bet that would've been blamed on Brexit as well.

skywal_l 4y ago
I don't think that raising your price because your cost increase is price gouging. Gouging occurs when the price increase do not relate to the cost increase and the difference is being pocketed by the intermediary, here the supermarket. What you describe mainland european supermarket doing is just what happens in a free market. Not price gouging at all.
cnelsenmilt 4y ago
Charging more because your costs are higher is not really gouging. Obviously there's no precise definition -- it's a social judgement -- but generally it's taking more profit than is "fair" for a situation, like tripling the price of your bottled water after a natural disaster.