> Think Walmart vs Amazon. Online shopping is actually a completely different product.
This is actually a great example, but not the way you intended it.
Amazon isn't beating Walmart. They haven't even dented Walmart's revenue[1]. They're just killing everyone other than Walmart.
Walmart is now unbeatable because they're so big, they can demand wholesale prices that no one else can. If Walmart wants to buy 100M tomatoes from you, you'd sell them barely above cost because otherwise you're stuck with more tomatoes than you could ever sell.
To put it another way: you can't compete with these companies because they abuse their market power (either directly or through regulatory capture), not because they're actually that good at anything.
Dollar stores are certainly stealing a lot of Walmarts lunch in rural illinois and Iowa.
Why would you go 35min to Walmart if you just need 10 things when there's a dollar store 10 min away that's almost the same price as Walmart and much better shopping experience.
Yeah, and they're one of the reasons the poor stay poor. Dollar stores are a terrible value.
Walmart made a name for itself with its "rollback" program, where products would appear cheaper than competitors' because the SKU contained one less ounce/gram/unit. Dollar stores takes Walmart's own game to extremes; you buy a quart of watered-down bleach for $2, where buying an entire gallon (4x the volume) of the real thing would cost you $3 at Walmart.
Or, $20 for a 14-pack of Monster drinks at Walmart is a terrible deal when they're "just" $3 (each) at the gas station!
You see the same thing with people buying individual packs of cigarettes instead of an entire carton. The math works against them. They don't understand it.
There was a analysis, recently, that amongst users of the New York subway, the most common fare type amongst the poor was the pay per ride card. Even though it had the highest per-ride cost, it turns out that poor people living paycheck to paycheck simply cannot stump up the upfront cash to pay for the better deal. (As a result the new fare system combines both with automatic caps on pay as you go fares.)
Amazon Prime still cannot offer same day delivery.
But Walmart+ can.
As terrible as Walmart is, Amazon is a worse brand.
At this point, I'd rather direct my fund towards the ghost of Walton who during his life treated employees with respect versus a company that can only maintain profitability by treating workers terribly.
> Flyover country and flyover states are American phrases describing the parts of the contiguous United States between the East and the West Coasts. The origins of the phrases and the attitudes of their supposed users are a source of debate in American culture; the terms are often regarded as pejoratives, but are sometimes "reclaimed" and used defensively.
I've been reclaiming the phrase to mean the coastal states. Living in TX, California and New York are what I fly over to get to actually good places in Asia and Europe.
You can't compare Walmart to Amazon, Walmart is a northamerican thing, Amazon is global. Walmart has zero influence in the prices of the tomatoes grown in Europe.
Their international scale is similar, though I'm sure not in exactly the same places. Amazon had $118 billion in non-US revenue in the most recent fiscal year while Walmart had $101 billion.
If you limit it to only retail, Walmart probably comes out ahead.
Alas, them deciding to shut-down Book Depository means I can't purchase English/American books anymore free of customs-related taxes (I live in a Eastern European EU county), which makes me not purchasing those books at all (in many cases the taxes would end up doubling the purchase price, so it's not worth it). I'll never forgive Amazon for that.
The chart shows that Walmart revenue has grown 18% in 7 years, well below US GDP growth. Maybe they haven't dented revenue, but it's entirely possible they've dented revenue growth.
It also important to note that a corollary of this argument is that incumbents will still dominate their own sector - IBM still dominates mainframes. What matters to incumbents is whether or not those sectors are still relevant after disruption - mainframes less so, in-person grocery and shopping maybe more so.
Keeping prices low is a great thing. I wish Walmart and Amazon every success in that endeavor.
Abusing a monopoly is when you increase prices because you can. Offering lower prices is the opposite. If you can’t compete, then you’re in the wrong business.
To a first approximation, yes, but this also forces things like small farmers and retailers being unprofitable, and all the societal changes that come with that, and of course then the tendency for consolidation and the inherent risk of more monopolisation from that.
Free market is great when it's full and noisy and no-one is large enough to control or manipulate it, the aim should be to keep it in this state (because then keeping prices low falls out naturally without terrible second order effects)
> ...this also forces things like small farmers and retailers being unprofitable...
Nobody is "forced" to be unprofitable. If a business is unprofitable it can shut down. You're putting half the no-win argument - when Amazon makes a big profit people complain they are too powerful. When they don't make a big profit, this is an argument that they've squeezed the supply chain too much. There is a tiny line here that is theoretically acceptable, and I doubt either side of the no-win argument agrees where it is.
And this isn't what is driving the consolidation, the monopolisation is probably being driven by credit. Big players get much sweeter deals when dipping into the pool of printed money. If credit was not the driving force then it'd be much less common to see big conglomerates and small nimble players would have an easier time. Like how in housing credit booms tends to put smaller buyers in a worse position because they only end up living in about the same house as they already would have managed anyway but they have to sign away more of their life to get it.
>>Nobody is "forced" to be unprofitable. If a business is unprofitable it can shut down.
Check out the state of chicken farming, where chicken producers corral farmers take on huge amounts of debt to grow bigger to meet their requirements, then squeeze them hard, to the point of bankruptcy. The only winning move is to not play, but that means not selling to the buyers who control the market so likely losing the family farm. It's become just a matter of whether you lose it this year, or after a few years of churning under the producer's debt load.
There are numerous ways that a large monopoly can abuse their position of power such that the only real choice for smaller players is to play along in a losing game.
I’ve said it before and I’ll say it again: Progressively increasing asset taxes are the way. Make it more expensive to control a lot of resources to counteract the natural monopoly effect that comes from controlling large amounts of resources.
Isn't zero profit the point of a fully efficient economic model? Profits are excess money after costs by definition so in such a system you'd want profits to tend to zero.
If the prices are low because the quality of products is low, the treatment of workers is shit and any other negative environmental externalities are ignored, then low prices are actually a bad thing leading to artificially inflated demand.
I’m not saying any or all of this applies to Walmart or Amazon necessarily, but it’s not an unambiguous good to lower prices when it is not supported by all the reality around it.
I’ve had this discussion before but essentially it’s that nobody (very few) really want to buy low quality products.
They do if that is the only thing they can afford because of other shortcomings of society.
I'm not sure I understand. Resources are inherently limited. It would be nice if everyone could have whatever they want, but that's not reality. Until then people should be allowed to sacrifice quality in some of the things they consume to raise the quality of others.
Define quality more accurately than the poster you're replying to. Their definition of quality included goods produced while accounting for externalities, and non-abusive/exploitative workforce treatment.
It is not okay for a manufactured product built on the backs of slave/child labor/conflict to be sold in a market. There's a reason Conflict diamonds are verboten. There's a reason why it should be a big deal when a large industrial actor is found to be using these things as part of their production chain.
We cannot allow those that would sacrifice other's humanity to participate in our economy. Once you accept them, you've set the bar everyone else will quickly clamber to meet.
I think the OP was saying they abuse their monopsony power, that being a monopoly puts them in a monopsony position which they then abuse to maintain their monopoly.
The traditional endpoint-consumer-facing side of the market is just one part of the transaction web.
> Keeping prices low is a great thing. I wish Walmart and Amazon every success in that endeavor.
I don't. Our collective fetish to reduce prices to an absolute minimum has had nothing but terrible effects on pretty much everything.
It has increased poverty, it has decreased product quality, it has reduced the vibrancy and competitiveness of our economy, it has encouraged the worst aspects of our society.
And it hasn't made anything better for anybody. It's nothing but a collective self-destructive race to the bottom.
I disagree that Walmart abuses their market power.
Any supplier is free to bid on a Walmart request. They can walk away if it doesn’t make economic sense to them.
The Vlasic pickle story keeps coming up, but come on, Vlasic is huge, they knew what they were getting into.
If they were stupid enough to agree to lose money on every single jar of pickles, they should re-examine their business strategy.
Google tells me Walmart is 25.5% of all grocery sales. You can have a thriving business with the other 75% if you don’t think you can get a fair deal with Walmart.
This is actually a great example, but not the way you intended it.
Amazon isn't beating Walmart. They haven't even dented Walmart's revenue[1]. They're just killing everyone other than Walmart.
Walmart is now unbeatable because they're so big, they can demand wholesale prices that no one else can. If Walmart wants to buy 100M tomatoes from you, you'd sell them barely above cost because otherwise you're stuck with more tomatoes than you could ever sell.
To put it another way: you can't compete with these companies because they abuse their market power (either directly or through regulatory capture), not because they're actually that good at anything.
1. https://fourweekmba.com/amazon-vs-walmart/
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