Hacker News Reader

Comment by locallost | Hacker News Reader

No wonder prices are spiraling out of control when market influence is so concentrated in a handful of companies.

There are many mom and pop grocery stores. Their prices are higher because of two things, they try to carry local produce and they don’t have the advantage of scale.

As noted elsewhere, the grocery business is one of very low margins. These aren’t the people the admin thinks is gouging people. They are not causing inflation. The monetary policy, price of money and the price of energy are driving inflation.

Not everywhere. All the grocery stores near me are either Albertsons/Kroger owned, or from smaller chains (Fresh Market, Trader Joe's). And Whole Foods, but that's Amazon now.

Trader Joe's is part of Aldi Nord.

I guess the operations are kind of freestanding.

Yet retail grocery businesses have low single digit profit margins. Why would a seller resign itself to earning meager profit margins if it had pricing power (I assume that is what you mean by “market influence”)?

https://www.macrotrends.net/stocks/charts/WMT/walmart/net-pr...

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

https://www.macrotrends.net/stocks/charts/COST/costco/profit...

https://www.macrotrends.net/stocks/charts/ACI/albertsons/pro...

https://www.aholddelhaize.com/en/investors/quarterly-results...

The answer is that retail grocery business is highly competitive, and that price increases at retail grocery is because their costs are increasing (food vendors, labor, land, etc).

I think the question you ask has it backwards. Why should society allow a critical industry to become so concentrated that it has enough pricing power to cause harm?

It shouldn’t. But the post I responded to claims that the industry already has pricing power, and already is using it to cause harm, contrary to the data.

I see. Thanks for the clarification. If enough large companies are able to merge then we will end up in a situation where regionally there is too little competition. This is what has happened with producers of food products. A few companies control too high a percentage of the products. I think this naturally leads to cartel pricing.

American ISPs are also universally terrible and also make no money. They engage in tons of anticompetitive practices and leech state money for no results. What if you can’t measure competitiveness by a single number?

Because the assumption is that the people leading/owning these businesses want to earn more money, so if people had the power to earn more money, they would.

Also, ISPs earn profit margins that are multiples more than grocery retail businesses:

https://www.macrotrends.net/stocks/charts/CHTR/charter-commu...

https://www.macrotrends.net/stocks/charts/CMCSA/comcast/prof...

https://www.macrotrends.net/stocks/charts/T/at-t/profit-marg...

https://www.macrotrends.net/stocks/charts/VZ/verizon/profit-...

https://www.macrotrends.net/stocks/charts/TMUS/t-mobile-us/p...

ATT and Lumen have terrible management wasting money on bad investments, so their profit margins are variable and not so hot. But competent businesses like Verizon/Comcast/Charter can easily milk their wired customers who only have 1 option for ISP.

If you're going to compare ISPs and grocery stores, you might want to include turnover in your model.

(the person who invests in groceries, and turns over their inventory 15 times per year, faces a very different business from the person who invests in speculative software, and sees a handful of exits per career; the person running an ISP is likely somewhere in between those extremes)

It is fairly obvious that a business does not need to show a profit for its upmost management or owners to get/remain filthy rich through it.

Isn't there a balance?

If there were tons of mom-and-pops, prices would be even higher due to lack of scale economics. There are a ton of mom-and-pops where I live and they are extremely pricey -- I never shop at them.

Reply on news.ycombinator.com