Re: [DMCForum] Re: questionable eBay auction...

[Ryan Wright <ryanpwright@xxxxxxxxx>]

> You are right; someone is going to get it either way.  The retailer
> shouldn't be so lazy as to just add it to everything in the store so you are
> paying for a fee you weren't made aware of.  Another way to look at is the
> retailer is screwing everyone.

I disagree. The business is usually forced to absorb these costs. If a
business raises the price of everything by 2% and their competitor
across the street doesn't, they will lose customers.

I suppose an argument can be made that "everyone" raises prices to
compensate, but I don't think that holds water in our society. For any
given product in a typical market there is a point at which it's
creates too little profit to be worth selling. There is some
flexibility built in, but any other price is either too low (I sold a
hundred of them, but only made 10 cents each) or too high (I made
fifty bucks, but only sold 1).

If I'm making 20% profit on a box of twinkies and institute a 2% price
increase vs. absorbing the 2%, I'll sell fewer twinkies. Twinkies
aren't immediately worth an extra 2% to the public just because I'm
now accepting credit cards. I am often better off reducing my profit
to 18% in order to keep my twinkie sales at their current levels. I'm
going to lose some money, but if I pass the 2% on to the customer I
may lose more due to reduced sales.

Here's another example: Washington State minimum wage is now at $7.35
per hour. The voters (I voted against it, but whatever) passed a law a
few years back that dramatically raised the minimum wage and will
further raise it every year. In a few shorts years McDonalds went from
paying $5.15 an hour to $7.35 an hour.  Their labor costs have
increased by 70%, but the price of a double cheeseburger is still
$1.00. If your hypothesis is true - if retailers simply raised prices
to compensate for additional costs - double cheeseburgers would be
$1.70. But they aren't, because nobody would pay a buck seventy for a
crappy cheeseburger. So the guy who owns the local McDonalds franchise
is forced to eat $9,000 per month out of his pocket (based on 8
employees and 17 hours per day operating times). The alternative is
going out of business, but since he's still making a profit (a smaller
one, but a profit nonetheless), he eats the costs and keeps selling
product.

Of course, he's looking for ways to increase his profits and will
raise prices whenever he thinks the market will bear it - but he was
already doing that before. So you see, the consumer isn't really the
one getting screwed here. You were already paying as much as the
business owner could reasonably hope to get for his product. His costs
going up doesn't change that.

-Ryan

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