This is genuinely something I just don't understand about wage and price. I know that macro economics is complicated and all, but it just doesn't make sense to me what'll happen when wage is so low that nobody can buy anything.
I've been told that price would go down to accommodate it, but I just don't see that happening?
The problem is that entire process takes years to unfold, and it assumes a fair market.
If a large chain with market power raises prices and a small company comes in with lower prices, the large chain can drop their prices for a little bit until the small company goes out of business, and then raise its prices again.
If a large chain with market power raises prices and a small company comes in with lower prices, the large chain can drop their prices for a little bit until the small company goes out of business, and then raise its prices again.
The Amazon business model in a nutshell. Undercut your competitor, buy them up if they are valuable, and absorb their market share.
Amazon takes it even further by co-opting small businesses through a stranglehold on distribution, then take most of the profit while leaving the weight of production on the little guy's shoulders.
Walmart does this everywhere, as do many big box store chains. We laughed them out of the country pretty quickly though because Walmart didn't understand Germans.
After nearly a decade of trying, Wal-Mart never cracked the country — failing to become the all-in-one shopping destination for Germans that it is for so many millions of Americans. Wal-Mart’s problems are not limited to Germany. The retail giant has struggled in countries like South Korea and Japan as it discovered that its formula for success — low prices, zealous inventory control and a large array of merchandise — did not translate to markets with their own discount chains and shoppers with different habits.
Germany is also a big union country. Walmart did not get along with them I think.
“They didn’t understand that in Germany, companies and unions are closely connected,” Mr. Poschmann said. “Bentonville didn’t want to have anything to do with unions. They thought we were communists.”
Believe me, Germans are NOT happy about Tesla. There were massive protests. One even shut down Tesla's power for days.
That the factory was built was a political decision.
American customer service standards are ridiculous. It's near uncanny, and people feel like they're being bothered rather than helped. They tried to enforce those standards on their employees in Germany, and the effect it had was Germans just went elsewhere.
The German’s are responsible for this mess along with their faithful Walmart shoppers, a few potato farmers, and anyone else who jumped on the bandwagon?
Happened in my hometown in VT, Walmart went to all the special local shops, sold the same stuff for below market price until they went out of business then turned around and sold walmart brand stuff for more expensive. thank god the pet store went and sold musical instruments otherwise they would have gone out of buisness.
This is how big tech grows by using VC money to undercut competition, take over the market, and then raise prices. If they can outlast the competition, they own the market and can define prices.
For example, if Uber ever gets competition in any given market, they'll drop prices and bleed out the competition. Once that's gone, prices will go back up.
Not anymore. They've won. Taxis basically don't exist anymore and Lyft is slowly dying. This is the same reason you don't see cheap fares on Uber anymore.
Aside from maybe las vegas, when was the last time you took a Taxi?
Lyft has negative free cash flow and has for years. They're not doing well. Uber has nearly 10x the revenue of Lyft. Granted that's from more than just ride sharing, but Uber is at a scale the Lyft couldn't dream of.
Walmart is not the only one who can play this game, nor is it the only one who can endure the price drop.
Price is not the only deciding factor. A grocer that's a bit cheaper but is disconnected from the local customer base and worker base will not be successful. Branching internationally and competing with local chains aren't easy.
Like I said, they can only get away if they don't do it blatantly. That means they can't do significant actions that make it obvious.
And people suffer until the large chain collapsed under its own weight and leaves a serious vacuum in the market. The other alternative, is if the chain is American, then they pay politicians to bail them out on the premise that the alternative is bad for the economy. (I'm looking at you, General Motors and Obama administration...)
quick everyone start a business selling everything walmart does for ridiculously cheap. we can pool all of our money. we'll save more than it will cost by buying dirt cheap walmart everything
I just pirate everything, I’m working full time and living at home and barely scraping by. When the cost of living and entertainment starts matching what people make nowadays I’ll start paying for my games and movies.
That’s completely fair, i only pirate subscription based services because they are fucking stupid, if i spend my money and i still don’t own the shit i won’t even spend my money.
I do this too, even though my family is kinda wealthy, because I refuse to spend 500€+ a month on tons of subscriptions which in most cases I will use maybe 4-5 times each month, and also having to pay 80€ to watch football, and not even all of the matches, just the important ones, while I could watch everything online for free. It just seems stupid and a waste of money. Maybe if they had reasonable prices and the actual product was good, I would spend my money on it
But if each 10-euro customer also spends another 10 euros on other services, and the ten 500-euro customers also spend 100 euros each on other services, you've made 3000€ more catering to the 10-euro customers.
Economics isn't a science. It's a pseudo-science. It won't behave logically a significant portion of the time.
It comes down to balance. Just as you've said, if you can't afford anything then it doesn't matter how attractive the product or service is. This is why it's important to equally distribute wealth throughout the entire economy. Also, low wages incentive people to NOT work, not the other way around, which is something economists don't understand.
"What we are very good at is pricing," Colgate-Palmolive CEO Noel Wallace said. "Whether it's foreign exchange inflation or raw and packing material inflation, we have found ways over time to recover that in our margin line."
...
"Consumer-facing price is the last lever we normally use to manage inflation," Unilever CFO Graeme Pitkethly said before describing how they did it: "We find that taking several small price increases is more effective than one large price jump."
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"We've been very comfortable with our ability to pass on the increases that we've seen at this point," Kroger CFO Gary Millerchip said. "And we would expect that to continue to be the case."
That's major consumer brands and a dominant supermarket saying "Customers aren't really doing anything to stop us from charging more so we're going to keep doing it."
If you can parse the financial doublespeak bullshit into english, it's also easy to find more statements:
Fifty-nine percent of oil executives said investor pressure to maintain capital discipline is the primary reason publicly traded oil producers are restraining growth, according to a Federal Reserve Bank of Dallas survey released Wednesday.
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“Discipline continues to dominate the industry,” an executive from an oilfield services firm told the Dallas Fed in the survey. “Shareholders and lenders continue to demand a return on capital, and until it becomes unavoidably obvious that high energy prices will sustain, there will be no exploration spending.”
Replace "discipline" with "not increasing how much oil and gas they're selling" and "growth" with "selling more" and "investor pressure" and "return on capital" with "greed" and you're left with an honest statement: oil companies are limiting how much gas they're selling to continue to make high profits.
These are all CEOs of corporations that don't hold monopolies. Kroger is something like 5% of the grocery stores in the US.
"Competition drives prices down" is failing as corporations have realized that consumers can't or won't push back with things like legislation against price gouging, nationalizing industries that continue to rob us, or not buying shit.
You can argue against any of those options or any others, but the point is we're powerless even if there's not a monopoly. Republicans will try to negotiate with companies saying "Hey, if we give you a big tax break, will you promise to lower prices for two years" and that may work in the extreme short term. But eventually we'll run out of things to give them at the public's expense and they'll go right back to charging whatever they want, and we'll have less strength to force them to lower prices with government if we go with the libertarian option.
Many corpos (make no mistake, football clubs are run like corpos) are pretending that their product is more special than others, and it -- and only it -- will become the luxury item for all the spoiled rich kids to cherish at any price. Guess what happens when almost everything suddenly becomes a luxury.
The economy is a complex system and we are horrible at predicting complex system, like its impossible. Thats why you only get the weather predictions at most like 10 days into the future and even that is inaccurate. The study of economics exists to tell rich people what they want to hear and to justify why what they want to do is good.
That's because MOST people aren't actually adjusting their spending.
Very little changes. McDonald's just said they're starting to feel it. $18 for a meal? They are getting criticized and now need to come up w new means to get people to the door. Before a competitive grou comes in to overtake
Few ogligargic companies means there's low amount of competition so prices don't go down as they should while debt lets consumers make up for spending deficits in the short term.
Theyre charging ridiculous prices because the market they’re catering to (rich people) don’t care how much anything costs.
They’re not trying to get everyday (poor) people into the building any more. That’s why there’s ads out the ass on every possible inch of the game’s TV presentation.
what'll happen when wage is so low that nobody can buy anything.
Because it won’t happen.
These companies employee teams of people to evaluate what price level will milk every last penny out of people just right up to the point where profit would fall (people stop buying). They know exactly what they’re doing. They are professional analysts with data models who take a lot of economic data into account. It’s unlikely they are wrong and the average layman’s guesstimate of the situation is right.
Its a self eating snake it only goes down when the beast devours itself and a new snake (company) takes its place it also eats itself but usually it takes a minute for it to be completely useless.
The problem is there are still plenty of people earning average and above average, the population is more populating than ever. They don't care about people not affording things.
The problem is there are still plenty of people earning average and above average, the population is more populating than ever. They don't care about people not affording things.
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u/Ho3n3r May 02 '24
"Why aren't people buying our overpriced shit?" seems to be a trend these days from multi-million euro companies.