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by arrosenberg
2081 days ago
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However you want to define it, store brands in the current environment are being used to play pricing games. Perhaps it makes more sense to say that retailers are a participant and beneficiary of the bad behavior of whoever is selling the water to both Costco and Nestle. In either case, it gives companies like Costco/Walmart/Target the ability to gain greater market share in ways that aren't accessible to small businesses. If you don't mind economic concentration, I can see why this wouldn't seem like an issue to you. I believe that America functions best when wealth and economic activity are geographically well distributed, and when individuals have greater control over their own ability to be productive. That means diminishing chain retailers and giving more agency to individual retailers. Pricing games are the number one way that retail chains are able to drive small, local retailers out of business — they've been doing it with varying levels of success for over 100 years. > Yes, that is how market power works. A participant with greater market power can use that as leverage to negotiate pricing. This is an acceptable use of market power; for example, it is the basis behind insurance pools, coops, group discounts, etc. That's not an acceptable use of market power. It specifically disadvantages small businesses that do not have access to private label brands. It's a competitive advantage exclusive to chain stores that allows them to engage in discriminatory pricing games. Employer healthcare also creates an anti-competitive advantage for larger companies for the same reason, but that's a separate issue. |
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That's not an acceptable use of market power. It specifically disadvantages small businesses that do not have access to private label brands.
Small retailers can also have private label brands. Many do. There are a great many suppliers, large and small, to service all retail market niches. Gelson's, for example, is a CA grocery chain with 27 stores. It has its own store brand.
Most small stores and chains don't have store brand products simply because it's not worth the costs. With a store brand, the store is on the hook for all marketing spend, and that's in addition to the money they spend on the inventory itself, which generally isn't materially cheaper than brand name products purchased at wholesale.
And customers don't go to a store for the store brand products (Costco aside), they go for the name brand products like Coke and Nabisco. Do you honestly believe companies spend billions on marketing for nothing?
Employer healthcare also creates an anti-competitive advantage for larger companies for the same reason, but that's a separate issue.
Employer healthcare is a product of the world war ii wage controls that has survived due to favorable tax treatment. Small companies can also offer health care, and many do without issue.
That means diminishing chain retailers and giving more agency to individual retailers.
Do you know why chain stores are successful? It's because their market power allows them to acquire products cheaper from suppliers, which lets them sell those products for cheaper than smaller stores. Lower costs = lower prices = customers benefit. It's silly to say that we need the small store to survive if it sells product X for more than the chain store without offering any other benefit than merely providing the product.
Small/indie stores have survived in the markets where factors other than pricing drive customer purchasing decisions, such as apparel, recreational outdoor equipment, restaurants, etc.