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This is very silly, and the evidence for it is in the world all around you. Walmart is cheaper for most things. If they did not in fact pass the cost on, then

This is very silly, and the evidence for it is in the world all around you. Walmart is cheaper for most things. If they did not in fact pass the cost on, then there is the idea for your startup business: a grocery supplier to small neighborhood retailers.

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pitpatagain 2y ago
My comment is not whether the article's claim re this particular market inefficiency is empirically correct, only that it doesn't logically simplify to "if larger stores couldn't get preferential deals, prices for consumers would be significantly higher." That depends on a lot of things. Grocery suppliers are, eg, agricultural producers who need to offload whole crops of perishable goods. The industry is full of well known market failures, examples of monopsony buying power, etc, so an argument from an idealized market I don't find very persuasive.
ocschwar 2y ago
Walmart is cheaper for the customer (modulo the expense of driving to a Walmart). But Walmart is also a lot cheaper for Walmart. One delta is larger than the other.
- haroldp 2y ago
  Walmart has been making around 2% profits for a decade. Do you think that Walmart is less than 2% cheaper than small neighborhood grocery stores?
  - TimK65 2y ago
    No, but only because it illegally coerces its suppliers into giving it sweetheart deals with lower wholesale prices, and nobody is enforcing the law to stop it from doing so. As the article explains, the reason for most of the price differential between large grocery store chains and small independent stores is that suppliers, forced to artificially reduce the prices they charge the large chains, have to recover that loss by charging higher prices to small stores. Also, traveling to a store that's farther away isn't free. The trip has a marginal money cost and, more importantly, a time cost.
    - stonogo 2y ago
      Walmart also pays workers so little that its employees receive over six billion dollars in public aid: https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... A significant cost savings.

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pitpatagain 2y ago

My comment is not whether the article's claim re this particular market inefficiency is empirically correct, only that it doesn't logically simplify to "if larger stores couldn't get preferential deals, prices for consumers would be significantly higher." That depends on a lot of things. Grocery suppliers are, eg, agricultural producers who need to offload whole crops of perishable goods. The industry is full of well known market failures, examples of monopsony buying power, etc, so an argument from an idealized market I don't find very persuasive.

ocschwar 2y ago

Walmart is cheaper for the customer (modulo the expense of driving to a Walmart). But Walmart is also a lot cheaper for Walmart. One delta is larger than the other.

haroldp 2y ago
Walmart has been making around 2% profits for a decade. Do you think that Walmart is less than 2% cheaper than small neighborhood grocery stores?
- TimK65 2y ago
  No, but only because it illegally coerces its suppliers into giving it sweetheart deals with lower wholesale prices, and nobody is enforcing the law to stop it from doing so. As the article explains, the reason for most of the price differential between large grocery store chains and small independent stores is that suppliers, forced to artificially reduce the prices they charge the large chains, have to recover that loss by charging higher prices to small stores. Also, traveling to a store that's farther away isn't free. The trip has a marginal money cost and, more importantly, a time cost.
  - stonogo 2y ago
    Walmart also pays workers so little that its employees receive over six billion dollars in public aid: https://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... A significant cost savings.