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It's not easy, if even possible. Mature markets that reach enormous scale transform into a barbell shape, typically, with all the revenue being at the very top
by sparker72678 3y ago
It's not easy, if even possible.
Mature markets that reach enormous scale transform into a barbell shape, typically, with all the revenue being at the very top end, and the very bottom end.
Take furniture. In a new market you build a nice couch with decent materials that will last, and you charge a price that a middle-class income could afford. It will last, say, 15-20 years. You sell it, make money. Great.
Now a competitor comes along and makes a couch that will last 12-15 years. It's 20% cheaper, and your sales drop off a cliff. Your option is to lower your quality so you can lower your prices and compete, or go up market and _raise_ your prices, so you can stay in business.
Repeat this cycle many times, and you end up with nothing in the middle, because consumers will not buy (enough) things in the middle.
You can try to address this through quality regulation (ban certain materials, or require others, for example), which will raise the floor of the quality (in theory) while raising the floor price along with it. That will price people out of the market entirely, though.
You can place heavy import tariffs on products that are of lower quality coming from elsewhere in an attempt to create space for more locally produced mid-quality goods, but doing that prices out your poorer citizens from access to those goods entirely (and they won't like that, and will probably stop voting for you, eventually).
The problem is that human beings, on average, do _not_ value quality enough to keep a middle market alive.