5 ms·

I expect businesses to bump prices. Bump em because of tariffs, bump em some more to pad the margins because what is an extra 5%, bump em even when they're not

I expect businesses to bump prices. Bump em because of tariffs, bump em some more to pad the margins because what is an extra 5%, bump em even when they're not affected by tariffs because everyone else is doing so, and delay un-bumping them once tariffs fall again.

ceejayoz 1y ago
Yup. My grocery store raised bananas from 49¢/pound to 55¢/pound this week, with a sign about 10% tariffs… but the tariff would be on their wholesale costs, not the shelf costs. They're probably paying 1-2¢/pound extra. People have a hard enough time understanding who pays tariffs. Stores'll be able to muddy the waters this way pretty much at will.
- Aurornis 1y ago
  Grocery stores have famously low margins. Everyone thinks they’re cash cows, but they have some of the thinnest profit margins of common consumer businesses. Stores often sell common staples like bananas, generic milk, and other basics at close to cost. They’re the things that get people in the door. They make their profit on things like cereal, deli meats, packaged goods, and other non-staple items that people also buy once they’re inside. It’s similar to how many gas stations compete on cost of gas to get people there, but hope that you’ll stop inside and get a $6 drink or some $5 packaged snacks. Then you have to consider all of the other things that go into a store are also tariffed. The parts for the trucks that transport the bananas have tariffs. Many of their cleaning supplies. Parts for the checkout registers. The light bulbs they have to replace. Many of those tariffs could be well over 100%. They have to make up that price in the cost of bananas and everything else.
  - ceejayoz 1y ago
    Low margins, high volume. The family owners of our regional privately held grocery store chain (Wegmans) are worth billions. They're making plenty.
    - mistrial9 1y ago
      no - I guess that the massive net worth of that family is related to capital investments.. the value of the property that a store sits on, with no debt.. skillful use of traditional investment vehicles using a predictable cash flow. things like that. Many frugal and tireless small business in the large port city here in California fail.
      - ceejayoz 1y ago
        Wegmans has long been known for an extremely high revenue per square foot for grocery stores, and their stake in it is absolutely worth billions. I’d happily take 2-3% margins of their $11B in revenue (2020 per Wiki).
    - Aurornis 1y ago
      Everything in the world makes more sense when you accept that it’s all supply and demand. The net worth of the family that owns the business is irrelevant.
      - ceejayoz 1y ago
        Supply and demand can both be impacted by perception, which can be tweaked by humans. If tariffs increase the wholesale cost of an item by $1, but you can make consumers think $5 retail is what the increase should be, that’s an extra $4 in your pocket. Economics education doesn’t stop at 101 for a good reason. “Supply and demand” is like “veins carry deoxygenated blood” - it’s largely true, but further learning reveals complexity.
        Aurornis 1y ago
        > Supply and demand can both be impacted by perception, which can be tweaked by humans. Supply and demand is impacted by many factors, but it’s still supply and demand. You can put different labels on different components of the influences, but at the end of the day it’s still supply and demand.
  - Eisenstein 1y ago
    I thought they made a lot of their money selling the desirable shelf space. "Many grocers earn more profit from agreeing to carry a manufacturer's product than they do from actually selling the product to retail consumers." * https://en.wikipedia.org/wiki/Slotting_fee https://en.wikipedia.org/wiki/Slotting_fee
    - OptionOfT 1y ago
      I moved to the USA from Belgium, and in the USA I have also seen that the lessee of said space stocks the shelves. Of course, I didn't know this, which was very weird when I saw someone those stocking shelves, only to be met with a 'sorry, I don't work here' response when asking them a question.
      - therealpygon 1y ago
        It depends. Some companies choose to stock shelves themselves in order to make sure their products are properly stocked. Coke/Pepsi and their subsidiaries are this way. It ensures that old out of date product isn’t getting shoved to the back of a shelf, allows them to keep a better track on refills (thus an estimate of sales), so on and so forth. In other cases, the store sometimes requires it to alleviate their own stocking burdens. The vendors are also generally the ones who set up the sale advertisement displays (end-cap or stand-alone). It tends to be a win-win because the vendor gets to advertise with a large display and the store may sell more product (and doesn’t have to set the crap up or take it down). Though, anything can be anything from store to store, so these aren’t “rules”.
- danesparza 1y ago
  Pretty sure those bananas are grown elsewhere. Hopefully we'll still be able to get bananas in the near future. At some point, buyer demand will drop so much it may not make sense to ship them.
  - ceejayoz 1y ago
    > Pretty sure those bananas are grown elsewhere. Yes. But the tariffs are on the import price, not the shelf price. The shelf price went up as if it were on the shelf price, because consumers won't realize/understand the distinction. (Hell, a good proportion of the population still thinks someone else eats the costs entirely.) We saw the same thing during COVID - "it's because of COVID / supply chain issues" was the magic wand you could wave around to raise prices. Some of those increases were warranted, for sure. But all? Almost certainly not.
    - StackRanker3000 1y ago
      But what do you mean by “warranted”? Businesses are free to set their prices as they see fit (with some caveats), and you generally expect them to do so in a way that maximizes profits. The prices before these tariffs were arrived at by some confluence of factors such as cost and competition, it wasn’t some universally agreed “fair pricing” scheme that determined them. So what does it mean for a price to be warranted? Now businesses have to raise prices because of the aforementioned tariffs, and, you speculate, they will add some extra margin because they think the customer is primed to accept higher prices right now than they’d normally be. First of all, is that the end of the world? If this is only made possible because the wool has been pulled over the customer’s eyes, then at some point there will be a correction in the other direction - unless you’re saying that there is actual and widespread price-fixing (which is illegal and enforced as such). This particular mechanism on its own won’t cause prices to spiral out of control or anything. Secondly, even if you think it is bad and don’t want it to happen, how would you prevent it? I can’t come up with a single feasible approach that isn’t basically halfway to socialism (which is fine if that’s your preference, but then that’s a larger conversation).
      - 1y ago
- seanmcdirmid 1y ago
  We haven't had 49 cent bananas in my market for a longtime, so I'm wondering if they were adjusting for tariffs as well as just general inflation at the same time (but the sign wouldn't be honest in that case).
  - dylan604 1y ago
    is truth in marketing still a thing?
    - gruez 1y ago
      It would hinge on the wording. "impacted by tarrifs" or "caused by tarrifs" probably won't be illegal, even if they're arguably misleading.
fallinghawks 1y ago
Back when the price of crude oil was in the news a lot, if a rise was announced, gas stations would immediately hike prices, even though it takes like a month for the oil to be refined into gas and delivered to the station.
- echoangle 1y ago
  That's perfectly rational though. Stuff is priced taking into account the current value, and a raising crude oil price immediately increases the value of the already refined product. Just like falling prices would immediately lower the value of the already refined product.
  - ytpete 1y ago
    Do falling prices in crude oil reflect in gas prices as instantly as rising prices in crude oil do though? I think that asymmetry is what the poster was calling out. It lets resellers skim a bit of extra profit off of the volatility, by raising prices quickly but lagging on lowering them.
    - tmottabr 1y ago
      The rational is more or less like this.. And i know i simplifying things A LOT here.. but that is the mentality behind it.. When crude oil price go up then gas station raise their prices because they know next they they buy it will be more expansive and they will need more money to afford it, so they raise their prices prices immediately.. On the other hand, if crude oil prices drop, it means that next time they buy it will be cheaper, but the gas they currently have was expensive, so they need to keep the prices up to recover what they already paid for it..
- 01HNNWZ0MV43FF 1y ago
  That's expected If I bought a gallon of water for a dollar and then there was a terrible water shortage I would not let it go for two dollars
- Aurornis 1y ago
Aurornis 1y ago
Prices are always set by supply and demand. The price will rise until it gets high enough that the product of sales * price falls. It has always been that way. Businesses haven’t been selling goods and services out of the goodness of their hearts at an arbitrary price. It’s always supply and demand. Tariffs are expected to reduced demand because they increase prices. This is why the stock market is down and nearly every economist is calling the tariffs a big problem. Companies won’t have room to raise prices infinitely because they feel like it, because consumers are about to be able to afford fewer things because the things they need are getting more expensive.
- iterance 1y ago
  Supply and demand is one driver of economic pricing, but not the only driver. Efficient pricing is a complex topic and not as black-and-white as it seems. As demand falls, the price may be expected to fall, but there is an inelastic limit set by material, labor, transport, and taxation cost. A company may elect to decrease their profit margin per sale to offset increased costs, but there is only so much margin to eat. In the current circumstances, though, companies do not have a choice to lower prices. The basic cost of taking an item into inventory from these suppliers has risen significantly, in most cases well above 2024 margins. The net effect is that, despite the market's best effort to correct prices to within an affordable range, costs may rise considerably and availability may still fall regardless. Under severe shock to the system, the usual maxims that account for nominal shifts in day to day trading no longer apply.
  - Aurornis 1y ago
    This is just semantics. If it becomes untenable to supply a good at a given price, the supply for that good decreases. Then supply and demand reach equilibrium. Supply and demand doesn’t mean that either or both supply and demand remain constant. Both supply and demand change depending on the price.
    - ceejayoz 1y ago
      > Both supply and demand change depending on the price. But that's a massive oversimplification. It's like saying programming is "just typing". Technically, sure; accurate, no. There's latency in the real world. Bad actors. Information asymmetries. Regulations. Monopolies. Stuff you can't do without and can't even always decline (ambulance ride for an unconscious person). Fake news about a supply crunch changes demand without changing supply for a while.
snarf21 1y ago
They did the same for inflation and oil prices and any other thing they can blame on someone else.
throwaway83845 1y ago
In my experience, once they raise prices due to "external reasons", once they lower prices they are almost always higher than the original price. At least for goods that people buy anyway
kangda123 1y ago
Uncertainty costs money. It's normal to require extra pay for extra risk.
rlpb 1y ago
Of course businesses charge the maximum the market will tolerate. That’s how it’s supposed to work. No need to treat this as surprising, nefarious or unexpected.

ceejayoz 1y ago

Yup. My grocery store raised bananas from 49¢/pound to 55¢/pound this week, with a sign about 10% tariffs… but the tariff would be on their wholesale costs, not the shelf costs. They're probably paying 1-2¢/pound extra. People have a hard enough time understanding who pays tariffs. Stores'll be able to muddy the waters this way pretty much at will.

Aurornis 1y ago
Grocery stores have famously low margins. Everyone thinks they’re cash cows, but they have some of the thinnest profit margins of common consumer businesses. Stores often sell common staples like bananas, generic milk, and other basics at close to cost. They’re the things that get people in the door. They make their profit on things like cereal, deli meats, packaged goods, and other non-staple items that people also buy once they’re inside. It’s similar to how many gas stations compete on cost of gas to get people there, but hope that you’ll stop inside and get a $6 drink or some $5 packaged snacks. Then you have to consider all of the other things that go into a store are also tariffed. The parts for the trucks that transport the bananas have tariffs. Many of their cleaning supplies. Parts for the checkout registers. The light bulbs they have to replace. Many of those tariffs could be well over 100%. They have to make up that price in the cost of bananas and everything else.
- ceejayoz 1y ago
  Low margins, high volume. The family owners of our regional privately held grocery store chain (Wegmans) are worth billions. They're making plenty.
  - mistrial9 1y ago
    no - I guess that the massive net worth of that family is related to capital investments.. the value of the property that a store sits on, with no debt.. skillful use of traditional investment vehicles using a predictable cash flow. things like that. Many frugal and tireless small business in the large port city here in California fail.
    - ceejayoz 1y ago
      Wegmans has long been known for an extremely high revenue per square foot for grocery stores, and their stake in it is absolutely worth billions. I’d happily take 2-3% margins of their $11B in revenue (2020 per Wiki).
  - Aurornis 1y ago
    Everything in the world makes more sense when you accept that it’s all supply and demand. The net worth of the family that owns the business is irrelevant.
    - ceejayoz 1y ago
      Supply and demand can both be impacted by perception, which can be tweaked by humans. If tariffs increase the wholesale cost of an item by $1, but you can make consumers think $5 retail is what the increase should be, that’s an extra $4 in your pocket. Economics education doesn’t stop at 101 for a good reason. “Supply and demand” is like “veins carry deoxygenated blood” - it’s largely true, but further learning reveals complexity.
      - Aurornis 1y ago
        > Supply and demand can both be impacted by perception, which can be tweaked by humans. Supply and demand is impacted by many factors, but it’s still supply and demand. You can put different labels on different components of the influences, but at the end of the day it’s still supply and demand.
- Eisenstein 1y ago
  I thought they made a lot of their money selling the desirable shelf space. "Many grocers earn more profit from agreeing to carry a manufacturer's product than they do from actually selling the product to retail consumers." * https://en.wikipedia.org/wiki/Slotting_fee https://en.wikipedia.org/wiki/Slotting_fee
  - OptionOfT 1y ago
    I moved to the USA from Belgium, and in the USA I have also seen that the lessee of said space stocks the shelves. Of course, I didn't know this, which was very weird when I saw someone those stocking shelves, only to be met with a 'sorry, I don't work here' response when asking them a question.
    - therealpygon 1y ago
      It depends. Some companies choose to stock shelves themselves in order to make sure their products are properly stocked. Coke/Pepsi and their subsidiaries are this way. It ensures that old out of date product isn’t getting shoved to the back of a shelf, allows them to keep a better track on refills (thus an estimate of sales), so on and so forth. In other cases, the store sometimes requires it to alleviate their own stocking burdens. The vendors are also generally the ones who set up the sale advertisement displays (end-cap or stand-alone). It tends to be a win-win because the vendor gets to advertise with a large display and the store may sell more product (and doesn’t have to set the crap up or take it down). Though, anything can be anything from store to store, so these aren’t “rules”.
danesparza 1y ago
Pretty sure those bananas are grown elsewhere. Hopefully we'll still be able to get bananas in the near future. At some point, buyer demand will drop so much it may not make sense to ship them.
- ceejayoz 1y ago
  > Pretty sure those bananas are grown elsewhere. Yes. But the tariffs are on the import price, not the shelf price. The shelf price went up as if it were on the shelf price, because consumers won't realize/understand the distinction. (Hell, a good proportion of the population still thinks someone else eats the costs entirely.) We saw the same thing during COVID - "it's because of COVID / supply chain issues" was the magic wand you could wave around to raise prices. Some of those increases were warranted, for sure. But all? Almost certainly not.
  - StackRanker3000 1y ago
    But what do you mean by “warranted”? Businesses are free to set their prices as they see fit (with some caveats), and you generally expect them to do so in a way that maximizes profits. The prices before these tariffs were arrived at by some confluence of factors such as cost and competition, it wasn’t some universally agreed “fair pricing” scheme that determined them. So what does it mean for a price to be warranted? Now businesses have to raise prices because of the aforementioned tariffs, and, you speculate, they will add some extra margin because they think the customer is primed to accept higher prices right now than they’d normally be. First of all, is that the end of the world? If this is only made possible because the wool has been pulled over the customer’s eyes, then at some point there will be a correction in the other direction - unless you’re saying that there is actual and widespread price-fixing (which is illegal and enforced as such). This particular mechanism on its own won’t cause prices to spiral out of control or anything. Secondly, even if you think it is bad and don’t want it to happen, how would you prevent it? I can’t come up with a single feasible approach that isn’t basically halfway to socialism (which is fine if that’s your preference, but then that’s a larger conversation).
    - 1y ago
seanmcdirmid 1y ago
We haven't had 49 cent bananas in my market for a longtime, so I'm wondering if they were adjusting for tariffs as well as just general inflation at the same time (but the sign wouldn't be honest in that case).
- dylan604 1y ago
  is truth in marketing still a thing?
  - gruez 1y ago
    It would hinge on the wording. "impacted by tarrifs" or "caused by tarrifs" probably won't be illegal, even if they're arguably misleading.

fallinghawks 1y ago

Back when the price of crude oil was in the news a lot, if a rise was announced, gas stations would immediately hike prices, even though it takes like a month for the oil to be refined into gas and delivered to the station.

echoangle 1y ago
That's perfectly rational though. Stuff is priced taking into account the current value, and a raising crude oil price immediately increases the value of the already refined product. Just like falling prices would immediately lower the value of the already refined product.
- ytpete 1y ago
  Do falling prices in crude oil reflect in gas prices as instantly as rising prices in crude oil do though? I think that asymmetry is what the poster was calling out. It lets resellers skim a bit of extra profit off of the volatility, by raising prices quickly but lagging on lowering them.
  - tmottabr 1y ago
    The rational is more or less like this.. And i know i simplifying things A LOT here.. but that is the mentality behind it.. When crude oil price go up then gas station raise their prices because they know next they they buy it will be more expansive and they will need more money to afford it, so they raise their prices prices immediately.. On the other hand, if crude oil prices drop, it means that next time they buy it will be cheaper, but the gas they currently have was expensive, so they need to keep the prices up to recover what they already paid for it..
01HNNWZ0MV43FF 1y ago
That's expected If I bought a gallon of water for a dollar and then there was a terrible water shortage I would not let it go for two dollars
Aurornis 1y ago

Aurornis 1y ago

Prices are always set by supply and demand. The price will rise until it gets high enough that the product of sales * price falls. It has always been that way. Businesses haven’t been selling goods and services out of the goodness of their hearts at an arbitrary price. It’s always supply and demand. Tariffs are expected to reduced demand because they increase prices. This is why the stock market is down and nearly every economist is calling the tariffs a big problem. Companies won’t have room to raise prices infinitely because they feel like it, because consumers are about to be able to afford fewer things because the things they need are getting more expensive.

iterance 1y ago
Supply and demand is one driver of economic pricing, but not the only driver. Efficient pricing is a complex topic and not as black-and-white as it seems. As demand falls, the price may be expected to fall, but there is an inelastic limit set by material, labor, transport, and taxation cost. A company may elect to decrease their profit margin per sale to offset increased costs, but there is only so much margin to eat. In the current circumstances, though, companies do not have a choice to lower prices. The basic cost of taking an item into inventory from these suppliers has risen significantly, in most cases well above 2024 margins. The net effect is that, despite the market's best effort to correct prices to within an affordable range, costs may rise considerably and availability may still fall regardless. Under severe shock to the system, the usual maxims that account for nominal shifts in day to day trading no longer apply.
- Aurornis 1y ago
  This is just semantics. If it becomes untenable to supply a good at a given price, the supply for that good decreases. Then supply and demand reach equilibrium. Supply and demand doesn’t mean that either or both supply and demand remain constant. Both supply and demand change depending on the price.
  - ceejayoz 1y ago
    > Both supply and demand change depending on the price. But that's a massive oversimplification. It's like saying programming is "just typing". Technically, sure; accurate, no. There's latency in the real world. Bad actors. Information asymmetries. Regulations. Monopolies. Stuff you can't do without and can't even always decline (ambulance ride for an unconscious person). Fake news about a supply crunch changes demand without changing supply for a while.

snarf21 1y ago

They did the same for inflation and oil prices and any other thing they can blame on someone else.

throwaway83845 1y ago

In my experience, once they raise prices due to "external reasons", once they lower prices they are almost always higher than the original price. At least for goods that people buy anyway

kangda123 1y ago

Uncertainty costs money. It's normal to require extra pay for extra risk.

rlpb 1y ago

Of course businesses charge the maximum the market will tolerate. That’s how it’s supposed to work. No need to treat this as surprising, nefarious or unexpected.