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I mean true cost, not just COGS. If we all had to buy straight from the vendors, we’d have to pay the COGS as well as replicate the functions you mention.

rahimnathwani 3y ago
It sounds like you're saying that it's preferable to buy from a retailer whose net profit (as a % of sales) is as low as possible. Because that means the price you pay is as low as possible (relative to what you call 'true cost'). If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall. (I'm not suggesting Costco is poorly run, or is a bad place to shop. Just trying to illustrate why focusing on total costs instead of COGS can lead to absurd conclusions.)
- lotsofpulp 3y ago
  > If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. What does low net income have to do with anything? Profit margin tells you how much the middleman is keeping. The lower the profit margin, the lower the prices, for something as fungible as retailing consumer goods. A business needs at least a minimal profit margin to survive a little volatility. That is why Walmart/Costco/Kroger have 2% profit margins. If anyone could deliver those goods for cheaper, they would, but they probably cannot as evidenced by competitors going out of business. >Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall. Businesses that lose money tend to get shut down by the owners, since people generally do not like to lose money.
  - rahimnathwani 3y ago
    "What does low net income have to do with anything?" Please read the comment to which I was replying. My whole comment was written to explain why we shouldn't focus on net income, and instead focus on COGS. You're making the same point I was.

rahimnathwani 3y ago

It sounds like you're saying that it's preferable to buy from a retailer whose net profit (as a % of sales) is as low as possible. Because that means the price you pay is as low as possible (relative to what you call 'true cost'). If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall. (I'm not suggesting Costco is poorly run, or is a bad place to shop. Just trying to illustrate why focusing on total costs instead of COGS can lead to absurd conclusions.)

lotsofpulp 3y ago
> If that's the case, then you could do even better: don't shop at profitable retailers. Only shop at places with really low net income. What does low net income have to do with anything? Profit margin tells you how much the middleman is keeping. The lower the profit margin, the lower the prices, for something as fungible as retailing consumer goods. A business needs at least a minimal profit margin to survive a little volatility. That is why Walmart/Costco/Kroger have 2% profit margins. If anyone could deliver those goods for cheaper, they would, but they probably cannot as evidenced by competitors going out of business. >Better still, shop at places that are so badly run that, even though they have high gross margins, waste so much money on overheads that they lose money overall. Businesses that lose money tend to get shut down by the owners, since people generally do not like to lose money.
- rahimnathwani 3y ago
  "What does low net income have to do with anything?" Please read the comment to which I was replying. My whole comment was written to explain why we shouldn't focus on net income, and instead focus on COGS. You're making the same point I was.