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Comment by uncfrj | Hacker News Reader

What is preventing you from opening a non greedy supermarket?

Taking the question at face value, the answer is: massive amounts of capital. And barriers to entry like that make the 'the free market will solve this' argument less convincing.

That’s what loans and investors are for. Massive amounts of capital is one of the easiest issues to overcome if the business is actually profitable.

> Massive amounts of capital is one of the easiest issues to overcome if the business is actually profitable.

That requires convincing investors the business is actually profitable (which is unrelated to the actual profitability of the venture)

But you just said there is more capital than ever before! The people who ended up with this capital will be looking to invest it. So it should be easier than usual, maybe easier than ever before, to convince investors ...

That isn't how it works.

The mature businesses dial up the greed when there is no competition and dial it down to crush threats. Once the threat is extinguished, up the dial goes again.

Along with all your startup costs, you will be competing against entrenched businesses willing to run at a temporary loss to bleed you dry. They can afford to do this because greed will pay after you are dead.

Capitalism does not create efficient competitive markets offering good value to consumers, government intervention does.

>The mature businesses dial up the greed when there is no competition and dial it down to crush threats. Once the threat is extinguished, up the dial goes again.

You’ve just described what is called “competition”. Having to lower prices to keep up with competitors.

Also, if there is a clear winning pattern of a single player takes all market, that’s super attractive to competitor investors because they only need to outlast your warchest.

What you’ve described is a very unstable game theoretic condition and it’s basically a non-issue everywhere in the US except for markets with regulatory capture (i.e. high government regulation).

I challenge you to point out an example of a one grocery-store city where that strategy has worked to keep competitors out.

> You’ve just described what is called “competition”. Having to lower prices to keep up with competitors.

Suppose a larger company is selling a product that competes with yours at a loss so as to undercut you due to other sources of profit. Do you think that sort of competition is fair? Does that result in the best product winning the most market share?

> I challenge you to point out an example of a one grocery-store city where that strategy has worked to keep competitors out.

Not the GP, but recommend The Wal-Mart Effect by Charles Fishman.

In my area, there are Indian, Japanese and Chinese grocery stores within a few miles of Costco and Trader Joe's. Considering these grocery stores are decades old, Costco and Trader Joe's have done a bad job at dialing up the greed.

First of all, from what I've heard, Costco and Trader Joe's are, at worst, middle of the pack among large companies as far as greed goes. And assuming incorrectly that the thesis is that all large corporations are equally greedy, then using a couple of specific examples of corporations that are less greedy to disprove it, just makes for a terrible argument.

Second, it's exactly that kind of differentiation (offering a niche product that the larger, more generic stores don't want to) that makes it easiest to avoid being undercut and run out of business by larger players.

Now, if you said you had several different small local grocery stores thriving without any specific niche, that would be somewhat more surprising.

So why can't fully greedy companies undercut half-greedy Costco and Trader Joe's? When exactly have "greedy" supermarkets driven out smaller competitors through price manipulation? Please be specific.

You would have to overcome the "barriers to entry", including large up front costs associated with a supermarket, before demonstrating profitability.

There are quite a lot of independent supermarket brands around and they seem to struggle to even match the major companies, let alone undercut them. It just seems very unlikely that there actually are huge, unreasonable markups being had here.

The mom and pop grocery stores in your local area do not have massive amounts of capital.

If they represent any meaningful profit margin, they get swallowed by capital unless a government prevents it.

There are no "mom and pop" grocery stores in my area. We have "Metro" or "Express" versions of the mega chains instead. You can stand outside one and see two others and there won't be a single independent until you get into a different area that the chains don't consider sufficiently profitable.

They don't have the purchasing powers of their big competitors either.

I can’t see my main grocery stores margin because they are private. Kroger’s margin is said to be 1.5% in the last decade and hasn’t gone up in the last couple years.

https://www.macrotrends.net/stocks/charts/KR/kroger/profit-m...

Actually Publix does very well at 7-8% and it’s the largest employee owned company in the US.

https://www.barrons.com/visual-stories/what-publix-can-teach...

The article and my comment makes no mention of supermarkets.

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