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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 volu

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.
    - AlbertCory 4y ago
      I don't actually know if Tesco or any supermarket chain is "on the edge." The inventory-turns thing is relevant because if you have $1M in capital but you gross 1% on it every week, that can still be pretty good annually. If you're an appliance dealer that turns over its inventory once a month, a 1% gross margin would mean you're out of business.
      - lotsofpulp 4y ago
        By definition, I would think 1% to 2% profit (net) margin is doing business on the edge, regardless of gross figures. 0% is a charity. The slightest changes in your costs or revenue can be devastating if not immediately made up for with price increases and cost cutting. Grocery stores can usually do this, which is why they continue to survive at single low digit profit margins. Are there businesses that reliably operate on less than that?

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.
  - AlbertCory 4y ago
    I don't actually know if Tesco or any supermarket chain is "on the edge." The inventory-turns thing is relevant because if you have $1M in capital but you gross 1% on it every week, that can still be pretty good annually. If you're an appliance dealer that turns over its inventory once a month, a 1% gross margin would mean you're out of business.
    - lotsofpulp 4y ago
      By definition, I would think 1% to 2% profit (net) margin is doing business on the edge, regardless of gross figures. 0% is a charity. The slightest changes in your costs or revenue can be devastating if not immediately made up for with price increases and cost cutting. Grocery stores can usually do this, which is why they continue to survive at single low digit profit margins. Are there businesses that reliably operate on less than that?