all set with chinese chit

[detbuch]

Originally Posted by spence

I think it's a fair observation that the "big box" stores in general have had a tremendous impact on modeling consumer behavior.

This "modeling" has been going on in the U.S. for well over a century. Walmart is just another in the line of department store types in which the new model finds ways to sell at lower costs. Just about all the usual brand items have gone through this selling process--even automobiles with Henry Ford's assembly line manufacturing and the growth of dealerships. And this "modeling" is based on the age-old model of haggling where the consumer tries to buy at the cheapest price. Any type of intervention to "model" the consumer into buying at smaller, single owned outlets at a higher price will have to overcome the natural and reasonable desire to save money, and will have to be done by force against free market principle. Whenever this has been done, either by price fixing or by socialist governments, economic activity dwindles, and instead of job growth, unemployment and shrinking economy results.

They can both leverage their buying power as well as squeeze the manufacturer to reduce costs. While the consumer might see an increase in variety and cheaper prices, the flip side is lower quality products or people buying junk they really don't need...while still racking up a lot of debt.

-spence

Reducing manufacturing costs should be the aim of competitive manufacturers. If lower quality results, then there will be a market for better quality producers. There are many niche products of all types that sell on the basis of quality at a higher price and they do well.

Have you been to a Walmart? Many, if not most, of the goods are brand items. It's not all junk. Most of it is not junk. And this is just a guess--I'd guess that most Walmart customers go there in order not to rack up a lot of debt, or to rack up less of it than they would if they had to pay higher prices.

[spence]

Originally Posted by detbuch

This "modeling" has been going on in the U.S. for well over a century. Walmart is just another in the line of department store types in which the new model finds ways to sell at lower costs. Just about all the usual brand items have gone through this selling process--even automobiles with Henry Ford's assembly line manufacturing and the growth of dealerships. And this "modeling" is based on the age-old model of haggling where the consumer tries to buy at the cheapest price. Any type of intervention to "model" the consumer into buying at smaller, single owned outlets at a higher price will have to overcome the natural and reasonable desire to save money, and will have to be done by force against free market principle. Whenever this has been done, either by price fixing or by socialist governments, economic activity dwindles, and instead of job growth, unemployment and shrinking economy results.

That's the academic analysis. I think what I've read in this thread is that people see the rise of Wal-Mart (and other similar stores) precisely as a product of the free market and they are concerned with the long-term impact.

Reducing manufacturing costs should be the aim of competitive manufacturers. If lower quality results, then there will be a market for better quality producers. There are many niche products of all types that sell on the basis of quality at a higher price and they do well.

I said to reduce the costs, as in total costs so they can buy at a lower wholesale cost. While some niche products do sell well, my observation is that they're increasingly being crowded out.

Have you been to a Walmart? Many, if not most, of the goods are brand items. It's not all junk. Most of it is not junk. And this is just a guess--I'd guess that most Walmart customers go there in order not to rack up a lot of debt, or to rack up less of it than they would if they had to pay higher prices.

I try not to shop at Wal-Mart often although I certainly have been inside them several times. There's quite likely a relationship between my experience and shopping behavior.

As for brand names, that's something a lot of people are concerned with.

It's very common for brand names to compromise their quality because of pressure to meet a retailer's cost targets. Much of this is hidden to the average consumer. There's a reason that same bottle of fruit juice costs 1/2 as much as the local grocery store, or that gas grill that used to be 500 dollars is now magically 250...and it's not just because of buying power. I work with these manufactures every day and see what goes on first hand...

Now obviously, a company is making a business decision to potentially tarnish their reputation in exchange for access to more consumers. But as retail is consolidated into bigger stores, there really is less freedom to do so. Yes, it's all the mechanics of the market, but back to what I'm hearing...do they see lower quality, lower wages and a proliferation of offshore manufacturing? or do people believe they're better off with convenient access to lower price products?

If the growth engine of the US economy is in small business, I'd think the market share of large corporations in retail would be an issue for discussion. To do so isn't a de facto endorsement for extreme government control, but reality is that the government does regulate commerce and quite often manages imports/exports for strategic gain.

-spence

[detbuch]

Originally Posted by spence

That's the academic analysis. I think what I've read in this thread is that people see the rise of Wal-Mart (and other similar stores) precisely as a product of the free market and they are concerned with the long-term impact.

I think there are various academic analyses that differ with each other. Don't know which one mine is like, but it is my observation ganered from sources other than academe and a little of that too--kind of irrelevant whether it's academic or this threadian. No doubt, the people in this thread think they are more perceptive than academics, and they probably are. They do often disagree with each other though. And, oh, by the way, I'm one of the people on this thread. And yes, the rise of Wal-Mart is a product of the not totally free market, and there is a long-term impact. I believe the long-term impact of companies like Wal-Mart is a corrective to artificially inflated costs, and will aid in a market driven spread of wealth worldwide. Those that fear the lower wages don't factor in the equalizing lower prices and the favorable impact that will have on American competitiveness--buying power won't diminish, may actually increase, jobs will grow, economic reason for war will diminish. What do you think the long-term impact will be?

I said to reduce the costs, as in total costs so they can buy at a lower wholesale cost. While some niche products do sell well, my observation is that they're increasingly being crowded out.

My observation is that there is the beginning of a growing specialty market, certainly in nutrition, health, personal care and fitness, entertainment, and a growth in single owner businesses, especially on the internet. I don't feel negative about prospects--just about various governments trying to squeeze more money to redistribute and the usual regulations against some in favor of others--the old winners and losers game.

I try not to shop at Wal-Mart often although I certainly have been inside them several times. There's quite likely a relationship between my experience and shopping behavior.As for brand names, that's something a lot of people are concerned with.

Yeah, well, everyone has their own individual relationship between their experience and shopping behavior. Probably, most Wal-Mart shoppers have a different relationship than you.

It's very common for brand names to compromise their quality because of pressure to meet a retailer's cost targets. Much of this is hidden to the average consumer. There's a reason that same bottle of fruit juice costs 1/2 as much as the local grocery store, or that gas grill that used to be 500 dollars is now magically 250...and it's not just because of buying power. I work with these manufactures every day and see what goes on first hand...

Now obviously, a company is making a business decision to potentially tarnish their reputation in exchange for access to more consumers. But as retail is consolidated into bigger stores, there really is less freedom to do so. Yes, it's all the mechanics of the market, but back to what I'm hearing...do they see lower quality, lower wages and a proliferation of offshore manufacturing? or do people believe they're better off with convenient access to lower price products?

If decision to lower quality "tarnishes" a reputation, that implies a negative response from consumers, which means their is room for a producer and retailer to cater to consumer positive response with quality. It is entrepenurial cop-out to fail in free market opportunity to satisfy consumer demand for quality. And it is contradictory to think business can be tarnished in consumer eyes by low quality and then think that consumers won't respond to quality. Those that see and dislike lower quality do search for better, and willingly pay more. If such quality does not exist, the opportunity is very ripe for entrepeneurs to provide it. And contrary to what you "hear," I see smaller quality outlets springing up.

If the growth engine of the US economy is in small business, I'd think the market share of large corporations in retail would be an issue for discussion. To do so isn't a de facto endorsement for extreme government control, but reality is that the government does regulate commerce and quite often manages imports/exports for strategic gain.

-spence

Government regulation, for best results, in my opinion, should be to make commerce regular, not to strive for gain. In trying to gain, free market principles are lost, creating a controlled market in favor or against so that consumer advantages derived from competition are lost. This kind of protectionism favors business interest against consumer interest. Sure, the other countries play dirty and don't freely allow us, but the reason our guys can't compete is our costs have been driven way up in artificial ways as well as natural growth. I remember a time when our manufacturers were able to avoid moving to Mexico when the cost of producing here was 4 times greater than it would have been there. When it became 7 times greater, even building the necessary infrastructure to go there made it too attractive to resist.

In the long run, as stated above, our lower priced competition can help to bring our costs more in line with our adversaries and make us competitive. Long ago, WE could deliver the goods more cheaply. Have we forgotten?