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Comment by rubicon33 | Hacker News Reader

That's not an uncommon nor unheard of tactic in business. Fuel growth, and capture the market for your brand, by selling at a loss.

The trick is always the transition to profitability. Generally, this comes through layoffs and maybe price increases.

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I think the problem is that a lot of these companies are trying this strategy with Juicero-like products. The moment they pivot to profitability, anyone else can just start squeezing at a lower cost.

Is Uber or We really making something that can't quickly be copied, even at a local level, once prices are doubled or tripled?

If you look at the scooter companies they are now charging $.29/minute (vs I think $.15/min a year ago).

If you rent it for an hour, that now costs more than $20 with tax. Not exactly cheap anymore.

That sounds like it's probably cheaper in the loan long run to buy a bicycle plus you don't look like an adult using a child's toy.

Imo this should be illegal. Taking a loss undercutting smaller competitors in a way that's only possible because you have piles of money unrelated to your actual business is going to distort the market in a way that's really bad for consumers in the long run.

Anecdotally I noticed this with Pita Pit in New Zealand. There used to be lots of independent pita places that had decent pricing, then pita pit started buying them out and replacing them with pita pit chains, while still competing on price relatively well. But as soon as they'd bought out all the competitors in the area they immediately almost doubled their prices.

What you describe is illegal in certain manifestations. It's called predatory pricing.

So during the expansion phase they are subsidizing consumers and as soon as the expansion phase ends they open up a space for competition again? Sounds pretty great for everyone except the owners of the independent pita places that go out of business.

I know retail stores in France cannot legally sell anything at a loss, except during government-decided 'sales' periods (twice a year, usually in January then June) which are mostly aimed at emptying stocks for the new 'season' (as if that mattered in the 21st century when most stores are a on a bi-monthly product cycle, but hey, that's the inertia of law/gov).

Not sure about businesses in general but I seem to recall it's a general law for commerce.

The problem is that retail is thus basically unable to compete on price beyond a certain (very mild) degree, notably forbidden to say "I'll sell item X at a loss to attract customers, and then make up for it on other items they buy". It's just illegal to do it in France.

A little bit too reminescent of a planned (communist) economy if you ask me, because it applies to each and every item taken individually, not the store overall or over a certain period of time. Needless to say this doesn't help thwart the collapse of retail versus online shops, especially in the way of services — and consider that foreign online businesses don't even have to follow such regulation, obviously, so...

It's a very, very grey area to regulate, and government being just awful at understanding how business works makes it ill-suited (often misguided) to regulate such things. I think branch negociations (within a given sector) is a much better approach: let actors (businesses) decide how they will compete, and only regulate if there's anti-consumer (cartel) behavior, not prior to any wrongdoing! — it reeks of a view that 'capitalism is bad' yadi-yada (typical French view) and hurts consumers' purchasing power in the end.

Wow.

So if a merchant buys in too much stock and can't offload it - they're literally banned from selling it below cost?

I assume they can still sell it on a secondary market (just not direct to customers)? Or do they actually have to eat it entirely and just like, burn the stock or something?

I'm not an expert in accounting but I assume there's a legit way to write it off as some exceptional loss and offload it, maybe even to customers; what's however certain is that if you get audited by fiscal authorities, you better be able to prove it's not fraud. (and yes, it'll be subjective, ultimately a judge's ruling I guess)

But don't quote me on that part, it's been a long time since I've worked in retail (10 years). I just know that as a brand store (Esprit de Corp) we would simply send unsold items back to the mother ship and they'd deal with it. I think the maximum allowed sale discount is around 20% outside of the bi-yearly governement-decided national sales (called "les Soldes" in French, and a high time for shopping amateurs, mostly women historically).

This all feels so 19th century / communist, I'm appalled just sharing it. But it was true as of 2008.

But hey, we get e.g. Black Friday online like everyone else, and Amazon does their Prime Days too, so... dunno what's up with that. I just know street retail is dying big time here, more than in most comparable European cities in my anecdotal experience.

Edit after the fact: called my ex-boss, she kindly reminded me that as a company we would store goods for months and sell them during "les Soldes", so yeah you get twice a year a 6-weeks period to offload your stock.

Sorry for the confusion. Note that this only applies to non-perishable goods, food for instance is treated differently. Each sector in France falls under different regulation, it's a mess, very hard to navigate.

That's the thing about these non tech companies though. They have fixed costs per transaction, something pure tech companies don't. So tech companies can grow at a loss because their marginal cost for each customer is zero or close to zero. As long as you are selling more, you are getting closer to profitability.

This does not apply to all these "unicorns" that have a non negligible marginal cost on their services.

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