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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) g
by 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 agoI 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 agoI 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 agoBy 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?