Question for a capitalist - Page 2 - Politics Forum.org | PoFo

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#14792682
Saeko wrote:Wait it out how? Walmart may be operating at a loss, but the poor suckers waiting out for Walmart's demise would be operating on nearly zero sales.

You seem to be presuming that markets are a lot more efficient than they actually are. There is substantial stickiness in retail markets, where consumers are slow to shift the bulk of their shopping to other retailers. It's also the case that there can be considerable scope for engaging in non-price competition, playing up a retailers localness and Irishness, as happens in the Irish market. The growth of Aldi and Lidl in Ireland are a case-in-point: their market share has doubled in the last decade to control about 10 percent of the market each, but their displacement of Irish-owned stores hasn't been total and it hasn't been as rapid as people here seem to imagine.

So I would reject the idea that local shopowners would suddenly go from profitable to running deep into the red at near-zero sales. It might be tough for locals but their competitors tactics are inherently unsustainable and the idea that the encroaching retailer would fight tooth and nail for a relatively small slice of market share seems improbable - the spell of competition will unlikely last long enough to drain their entire revenue. What's more, from their perspective as other local firms fold, the shoppers who have a preference for local retailers increase their demand for their own goods, so their situation improves the longer they hold out.

So to answer your immediate question, loans and strategic downsizing, forming producer co-operatives and purchasing the stores of failing rivals at distress prices when possible.

Saeko wrote:Sell them to who? If selling overpriced goods was profitable, there never would have been a problem in the first place.

If the foreign retailer are supplying goods efficiently then when a local retailer buys up their goods they are creating conditions of undersupply in the market that they can sell into. Unless, of course, the foreign retailer pumps an effectively infinite amount of product into the market, in which case that's just increasing the unsustainability of their operation.

On your second point, there is no reason that a local firm needs to represent as itself.

On a further note, this practice is difficult to engage in within retail markets. However, it has been successfully deployed as a strategy in other markets historically.

AFAIK wrote:So the best way to avoid large impersonal, lifeless out-of-town supermarkets from destroying small locally owned businesses is to replace the small businesses with large, impersonal, lifeless out-of-town supermarkets.

Isn't that the core complaint people make. That they prefer to have vibrant town centers full of shops staffed by people whose names and faces they recognise.

The complaint that the OP was making is that Walmart can push their prices up and not that they're a soulless corporate.

Though, if people end up purchasing from a soulless corporate over the charming local retailer, though, that implies that consumers believe themselves better off purchasing their goods from the soulless corporate. I don't think we should subsidize local retailers on the basis of the cognitive dissonance of their market - esp. when, by revealed preferences, it would leave the people in that market worse off.
#14793132
AFAIK wrote:Isn't that the core complaint people make. That they prefer to have vibrant town centers full of shops staffed by people whose names and faces they recognise.

If that's what they prefer, they are perfectly at liberty to patronize such establishments. I do not believe that is the case. Your actual complaint is that people DO NOT in fact prefer to shop at such places because they are inefficient, and must charge higher prices than faceless mega-stores like WalMart in order to make a profit.
#14793154
If people love shopping at supermarkets so much why do they oppose granting supermarkets planning permission?

Riddle me that!


Small business owners who donate to local politicians want to protect their business so the push local politicians to deny permits and fund groups to recruit opposition.

There is real opposition to Walmart among the general populace of course but most people don't actually care and would rather save a buck than a local business.
#14793168
Not a real cheerleader for Walmart but the local merchants before Walmart were worse. Most seemed to be second generation who had a business handed to them. I used to joke that there marketing slogan was, "If we ain't got it, you don't need it!"
#14793462
Vlerchan wrote:You seem to be presuming that markets are a lot more efficient than they actually are. There is substantial stickiness in retail markets, where consumers are slow to shift the bulk of their shopping to other retailers. It's also the case that there can be considerable scope for engaging in non-price competition, playing up a retailers localness and Irishness, as happens in the Irish market. The growth of Aldi and Lidl in Ireland are a case-in-point: their market share has doubled in the last decade to control about 10 percent of the market each, but their displacement of Irish-owned stores hasn't been total and it hasn't been as rapid as people here seem to imagine.

So I would reject the idea that local shopowners would suddenly go from profitable to running deep into the red at near-zero sales.
So would I. What happens is that their margins are whittled away and they get out in order to cut their losses.

It might be tough for locals but their competitors tactics are inherently unsustainable and the idea that the encroaching retailer would fight tooth and nail for a relatively small slice of market share seems improbable - the spell of competition will unlikely last long enough to drain their entire revenue. What's more, from their perspective as other local firms fold, the shoppers who have a preference for local retailers increase their demand for their own goods, so their situation improves the longer they hold out.
Nah, Walmart could sustain predatory pricing at a given store indefinitely. Only it doesn't need to because the local little guys it displaces cannot.

Competition with other big chains is a different matter.
#14793508
AFAIK wrote:If people love shopping at supermarkets so much why do they oppose granting supermarkets planning permission?

Riddle me that!

The first place to look for the source of opposition to grants of planning permission is landowners who already have planning permission, because the more exclusive their privilege, the more money it puts in their pockets. Virtually all opposition to planning permissions is driven by the greed of those who already have permission. Greed for unearned wealth is the most powerful force in politics, as in everything else.
User avatar
By AJS
#14797284
Why wouldn't new entrants come in once Walmart increases its prices?

Also important to remember that Walmart isn't the only big supermarket. Wouldn't Carrefour or Tesco or Casino want some of those huge profits? Wouldn't independent retailers find some gaps in their offering?

The idea that free markets lead to monopoly has never really been borne out by reality.

Not so long ago Microsoft was apparently all powerful in the operating system market. Then Android and Apple came along.
#14797409
AJS wrote:The idea that free markets lead to monopoly has never really been borne out by reality.

Not so long ago Microsoft was apparently all powerful in the operating system market. Then Android and Apple came along.


Microsoft had a monpoly on the desktop and still has it to a large degree. Attempts to break into the desktop OS market failed. Similarly Android has a quasi-monopoly on mobile. It would be incredibly hard if not impossible to break into the mobile OS market. In fact Microsoft failed with Windows phone despite putting lots of resources into it. Nokia fell because their dominance wasn't so much based the software part. Needless to say Microsoft raked in a lot of monopoly profits during its dominance and still does.

Free markets can lead to monopolies but it strongly depends on the characteristics of the market. Also monopolies don't last forever.

P.S. I don't think Walmart qualifies as a monopolist.
User avatar
By AJS
#14797415
You could have an Apple or not have a desktop at all. I haven't opened mine for months.

That's probably the point. The huge profits Microsoft made from it's monopoly attracted great investment and development and rendered the initial monopoly less important.
#14797554
AJS wrote:You could have an Apple or not have a desktop at all. I haven't opened mine for months.

That's probably the point. The huge profits Microsoft made from it's monopoly attracted great investment and development and rendered the initial monopoly less important.


Apple entered new markets/services (mobile, music) where Microsoft was not dominant respectively missed the trend (touch screens etc.). I'd say the profit in those markets allowed it to push for more deskop market share (desktop includes notebooks).
User avatar
By AJS
#14797753
Indeed.
It also depends how you define a monopoly. Monopoly of what?

Microsoft still have a near monopoly on desktop operating systems, but that doesn't mean as much as it did. Sending an email 10 years ago would almost certainly require using Microsoft software. Now it just doesn't.
#14806182
I live in a small town (6,000 people) that is an hour away from "the big city". A Walmart showed up here 6 years ago with prices lower than the local competitors charge. I noticed, however, that items that local stores don't sell and you would have to go to "the big city" for, are priced higher than what you would pay on Amazon or in the big city. But still, 6 years later, items that are sold locally are priced lower than local prices.

Some have said this isn't true and Walmart has a pricing "algorithm" I'll call it, and so their prices are what their prices are with no messing around to undercut anyone. Aside from my observations to the contrary, why on earth would anyone thing any store would not charge the highest price they could get for any item? Of course they will, ... and do.
#14807767
@truthseeker2006 Please don't double post, you can edit posts by clicking edit next to the little gear.

In capitalism only the wealthy win.
#14807964
sadowclone wrote: 2. Because Walmart has huge amount of resources, they can operate at a loss by offering lower prices for the same quality of products offered by local small businesses.
As others have already pointed out - thats a very, very harmless variant of what usually happends. In reality its more like this: Walmart can produce the same product much cheaper, because they have the advantages of being able to buy the best and most efficient machines to do so, and the advantage of being able to mass produce in the first place. Thanks to producing large volumnes, they also can get the materials cheaper etc.

sadowclone wrote: 3. Once all the local small businesses starved out, Walmart slowly raises its price higher than what the local businesses has offered in the past.
Again - in this scenario, the moment Walmart raises prices again, new competition would reappear, because now they could compete again. Thats why usually thats not whats happening.

sadowclone wrote:6. This is bad, therefore, government should adopt a protectionism policy to help small local businesses.
I dont know any general way of protectionism of small companies vs large companies in the same country. If you have such a scheme, please share it. I would be massively interested in a working scheme to archieve this.

In the given scenario however, Walmart is external. It has to be kept under control with appropiate tariffs so local production can compete with Walmart offers. This way Walmarts superior productivity cannot be abused to destroy local production.

Thats how ALL formerly agraic countries - like for example my own, germany, in the first half of the 19. century - became industrial. They protected their local industry with tariffs, allowing them to compete over a superior producer. In the case of germany, that was England. England was the first industrialized country, the only one that never needed protectionism. Thats also why England is the mother of the free trade ideology (by David Ricardo) which states that any kind of protectionism is evil. Ricardos ideology was actively fought by other economicsts on this; for example in germany Friedrich List - without these people germany might still be agraic !

Free trade between economic equals (same productivity) is perfectly OK, however free trade between an undeveloped and a developed country makes sure the undeveloped country can never develop their own industry, since they cannot afford the investment for the state of the art machinery the developed countries already have (plus usually the knowhow etc that only develops over time).

sadowclone wrote:How would a capitalist or a free enterprise advocate response to such rationale?
I'm no capitalist but I know how it works.



Suntzu wrote:Competition is a central tenet of capitalism.
I disagree. Competition only exists in the beginning. The central mechanism of capitalism is monopolization - AVOIDANCE of competition. Thats because capitalism doesnt just rewards success - it awards it far too much. In the end, in capitalism, most fail, but few succeed and take over.

If anyone could actually manage to keep competition alife there would be a lot less issues with capitalism, if any at all really.

Suntzu wrote:Regulating/preventing monopolies is not anti-capitalistic.
Mostly its just futile; nobody ever truely succeeded at that.



Hindsite wrote: Capitalism can't work with out competition.
Capitalism naturally always tries to avoid competition. Most markets nowadays are already at neglible competition. What many people apparently dont realize - a market that has degenerated to maybe half a douzen companies that control half the market has already no actual competition left. Thats because these six companies will do (illegal, but hard to detect) agreements between each other and will have basically unlimited control over prices.

How exactly monopolys behave in reality once they are installed varies very wildly. Some monopoly companies behave downright like benefactors, keep the prices low all by themselves, and offer good products even if they dont really have to. Thats very atypical behavior, though. And its not guaranteed to last, either.



Rugoz wrote:Microsoft had a monpoly on the desktop and still has it to a large degree.
Microsoft is by far beyond the border at which one can start declaring a company a Monopoly. Controlling over 90% of the market, despite having an awful mess like Windows as a product, constantly torturing the customer with even worse products with hardly anyone protesting - thats true Monopoly power.

Apple, by the way, aint so hot either.

Linux is FREE and STABLE and in many respects the best - yet theres not many installations with it.

The practical purpose of competition is that companies are forced to make good products and sell them for fair prices - the operating market is far from any such state.

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