Bill that's a great lesson on retail economics.
The problem is that, in anticipation of a price REDUCTION, the retailer
should IMMEDIATELY drop retail prices to the consumer. We all know that
won't happen when prices are falling, so naturally we're tired of providing the
cash flow during the upswing!
The blame for the price gouging doesn't land on the retailers anyway, but
on the producers. That's where we need to put some regulatory price
controls in place to keep monopolistic pricing tactics from extracting
abnormally high profits during high travel season.
In a message dated 3/10/2005 8:41:46 A.M. US Mountain Standard Time,
bill@freeholder.com writes:
Well,
let me just comment on a couple of aspects of retailing. I have
been
in retail and associated fields for 35 years.
Let's say I have
a store that sells gizmos. I currently have 25 gizmos in
stock, and I
paid $10 each for them. Since I am a small retailer, I sell
them for
$19.95, which gives me 50% gross profit. That is considered
pretty
standard for smaller or non-discount retailers. The big
discount stores,
like Wal-Mart, work on more like 30% to 35% gross
profit.
Anyway, let's suppose that I get a new price list from my
supplier, and my
cost for gizmos has gone up to $15, because the dollar has
fallen against
the yen, and gizmos are made in Japan.
Now, if you
aren't knowledgeable about retailing, you may think that I will
need to
raise my price as soon as I run out of the gizmos I have in stock,
but
that's wrong. I actually need to raise my price right
now.
Why? The $20 I get for gizmos represents the 50% I paid for
them, and the
50% I need to run my business. If I sell my current
inventory of 25 gizmos
for $20 each, I will realize $500 total. $250
of that is needed to run the
store, leaving $250 to buy more
inventory. The problem is that $250 will
only buy about 17 gizmos at
the new cost of $15 each, not the 25 I sold. If
I continue working
like this, pretty soon I don't have enough inventory to
stay in
business.
So, any business has to sell their current inventory for a
price that is
based not on what the current inventory cost, but on what it
will cost to
replace it.
How does this affect gas? If the
price of crude goes up, refineries have to
immediately raise the price of
their current inventory, which means
wholesalers and retailers have to do
the same thing, so the new price hits
the gas station on the corner pretty
quickly. A gas station can't afford to
sell their current inventory
for less than it will cost to replace it, no
matter what it cost them to
begin with.
I would like to pay less for gas, too, but that doesn't
blind me to basic
business realities. Besides, we have the cheapest
gas in the world.
Bill in Willcox
-----Original
Message-----
From: az-geocaching-bounces@listserv.azgeocaching.com
[mailto:az-geocaching-
It went from $1.99 to $2.08 for regular unleaded
overnight here. If there
is still a myth that those living close to
refineries getting lower prices
on fuel, it's a bunch of crap. We
have 3 refineries in town, and we're
paying as much right now, if not more
than places like Phoenix.
I seem to remember in the past that
when crude prices hit new highs it took
'several weeks' to see the impact
on the refined fuel markets. But I've
since learned that 'several
weeks' translates to approximately 3
days.
____________________________________________________________
Az-Geocaching
mailing list listserv@azgeocaching.com
To edit your setting, subscribe or
unsubscribe
visit:
http://listserv.azgeocaching.com/mailman/listinfo/az-geocaching
Arizona's
Geocaching Resource
http://www.azgeocaching.com