5 ms·

> I work in the lumber business. We always, every day, at all times, sell our lumber to the highest bidder. This is auction-style pricing. Good for lumber and

> I work in the lumber business. We always, every day, at all times, sell our lumber to the highest bidder. This is auction-style pricing. Good for lumber and some other commodities, but not great if you want to buy eggs, bread, medicine, or gas on the way to work. >We always sell to the highest bidder. I have no idea how we'd even do it otherwise -- a lumber lottery? All of this reporting about corporate greed is truly dumb. Well, the other way to sell it is to put a price on it and sell it to the first person willing to pay that price! You mentioned that you have a lot of competition. That along with auction-style pricing will normally get very close the the WTP ("ideal") price of a product. This is not always possible. It is usually difficult to dial in the "right" price of a consumer product. They can just not buy your chips or cheese! It is no big issue for them and the psychological effect of raising prices for no reason will cause just that reaction. That is why shrinkflation has been a thing. Imagine having to outbid someone at the grocery store for milk. Or having to outbid someone at the pharmacy for your child's insulin. You can see why certain products cannot be sold to people that way. Another way of looking at this whole situation is that every company is greedy to some extent. Pricing is hard. And they took advantage of certain events and situations to try new pricing. Many lied about why (claiming supply issues, because saying "we just want more of your money" doesn't sit well with people), which is not cool. If the new pricing sticks then it is probably closer to the "real" price. If it is too high, people will not buy the products and the price may go back down. I say "may" because there is always the possibility that selling fewer items at a higher price might produce more end profit than selling more items at a lower price.

hcurtiss 4y ago
And what price would we choose? Yesterday's price? Last year's price? And if we sold out immediately, what then? Would we just have a race every morning for buyers to secure the prior day's production? Why wouldn't we increase price and see if we sold out again? And do the same the next day? You'd quickly wind up at the same place -- that is, charging what the market will bear. And while I was doddling along, my many competitors would be selling to the highest bidder, then using that money to bid up the logs I have to buy, thereby putting me out of business.
- mhuffman 4y ago
  Now you are getting it! Pricing is hard. You work in an industry where it isn't a problem, but it is if you sell potato chips. The point being that nearly nothing in a normal person's life is priced and sold the way you do it, so comparing them is silly. btw, auction-pricing is the wet-dream of every MBA that runs a company. It is the closest thing that people have to find out a person's WTP, for exactly the reason's you outlined in our comment. But you can't do that with loaves of bread, or bacon, or laundry detergent, or nearly anything else.
  - hcurtiss 4y ago
    But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most. We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated.
    - mhuffman 4y ago
      >But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most. No. In fact the manufacturer might sell through the distributor that pays the least, if they have high enough sales/coverage (think Walmart) and the total profit is acceptable. Think about selling your product through a mom and pop store that pays you more per item and you clear $1 but they sell 10, or selling 100,000,000 million of your items but you are only clearing $0.05 each. It is much more complicated and larger grocer chains do not have to pay as much wholesale, because they have access to a lot of loyal customers. So they don't compete they way you think and they sure as hell don't have to "bid" on items if they are a large chain. If anything, sometimes it is the reverse, where manufacturers have to pay for self-space and placement. All the ones of a similar size likely sell the product for about the same (in the same demographic area), but may pay different wholesale prices. Or they may not. It is much more complicated. The main point is that it is not like your business. Yours is special and highly-sought after in business, but almost never available. >We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated. Auctions don't have to be complicated. Whenever anyone "bids" on something and the winner gets it, it is auction-style pricing. There are many kinds. The ebay style is one. The one at estate sales or Christie's is another (called open-cry), etc. But it is the holy-grail in business of determining price. The only thing better would be to somehow scan the brain of a person and know the maximum that would pay and charge that.

hcurtiss 4y ago

And what price would we choose? Yesterday's price? Last year's price? And if we sold out immediately, what then? Would we just have a race every morning for buyers to secure the prior day's production? Why wouldn't we increase price and see if we sold out again? And do the same the next day? You'd quickly wind up at the same place -- that is, charging what the market will bear. And while I was doddling along, my many competitors would be selling to the highest bidder, then using that money to bid up the logs I have to buy, thereby putting me out of business.

mhuffman 4y ago
Now you are getting it! Pricing is hard. You work in an industry where it isn't a problem, but it is if you sell potato chips. The point being that nearly nothing in a normal person's life is priced and sold the way you do it, so comparing them is silly. btw, auction-pricing is the wet-dream of every MBA that runs a company. It is the closest thing that people have to find out a person's WTP, for exactly the reason's you outlined in our comment. But you can't do that with loaves of bread, or bacon, or laundry detergent, or nearly anything else.
- hcurtiss 4y ago
  But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most. We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated.
  - mhuffman 4y ago
    >But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most. No. In fact the manufacturer might sell through the distributor that pays the least, if they have high enough sales/coverage (think Walmart) and the total profit is acceptable. Think about selling your product through a mom and pop store that pays you more per item and you clear $1 but they sell 10, or selling 100,000,000 million of your items but you are only clearing $0.05 each. It is much more complicated and larger grocer chains do not have to pay as much wholesale, because they have access to a lot of loyal customers. So they don't compete they way you think and they sure as hell don't have to "bid" on items if they are a large chain. If anything, sometimes it is the reverse, where manufacturers have to pay for self-space and placement. All the ones of a similar size likely sell the product for about the same (in the same demographic area), but may pay different wholesale prices. Or they may not. It is much more complicated. The main point is that it is not like your business. Yours is special and highly-sought after in business, but almost never available. >We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated. Auctions don't have to be complicated. Whenever anyone "bids" on something and the winner gets it, it is auction-style pricing. There are many kinds. The ebay style is one. The one at estate sales or Christie's is another (called open-cry), etc. But it is the holy-grail in business of determining price. The only thing better would be to somehow scan the brain of a person and know the maximum that would pay and charge that.