"It also is not unheard of for Wal-Mart to demand to examine the private financial records of a supplier, and to insist that its margins are too high and must be cut."
Sorry if this gets too tangential, but ... you ever notice how people are horrified by that, but at the same time actively advocate that the government use its "bargaining" (monopsony) power to force down drug prices, and believe the only downsides will be to drug company profits?
Probably because people consider small businesses (within a certain scale) to be indistinguishable from individuals. So, in both cases its the 'giant corporation' screwing over individuals. However with regards to healthcare, gouging people on prices is immoral. So its a different situation to a random retail product.
This is an incredibly facetious example. You have to remember that the drug companies have effective monopolies for many expensive drugs. Do you actually believe that the government should be forced (by legislation) to accept unilaterally decreed prices by drug companies? These prices are not set by any market, so they have no relation to the cost of the drug or the research & development that went into discovering it.
> You have to remember that the drug companies have effective monopolies for many expensive drugs.
I think it is funny that the people demand the government force companies to lower prices caused by the government granting a monopoly to said companies why way of the patent system....
First of all, consumers get lower prices at Walmart, it doesn't just have the effect of higher profits.
Second, the real danger in both cases (though people only see it in one, hence my point) is that you're killing off the OEMs this way. No one wants to bring innovative new products to market if some monopsonist will just force them down to the mandated n% profits.
1) Walmart doesn't pass savings to consumers, it passes them to shareholders, as they have a fiduciary obligation to do. The "lower prices" thing is just marketing; WM's prices aren't particularly low once they've driven away their competition.
2) If drug companies want to charge a R&D premium for bleeding-edge innovative products, that's fine. What's not fine is price gouging consumers for drugs they depend on to live, that are not innovative in 2017, and that are cheaply available in other countries, like the EpiPen.
Post-patent drugs usually have insane prices due to reasons outside of what can be effectively combatted by the bargaining power of universal healthcare (e.g. regulatory capture in the case of EpiPen). That tactic is rarely necessary once generics enter the mix, as long as nothing is artificially preventing them from getting to market.
Walmart does not in any way, shape, or form have an obligation to pass savings directly onto shareholders instead of reinvesting it in customer satisfaction.
> Customer satisfaction only matters to the extent that it increases shareholder value.
Which it does, so it is a completely valid option.
There is absolutely nothing forcing them to pick any particular use for the money. Both uses benefit the company in some way. Both uses are fine. It's not like they're burning it.
When companies are able to do this, they should be broken up, period. Unfortunately we are in a system that's essentially the worst of capitalism with none of the good (and especially not with regulations), so there is no hope left and more jobs will migrate to China.
That's what Trump should tackle if he wants to stop job migration, but it seems like he's focused on anything but regulating BigCos.
Amazon has been forcing cheaper books back when it was mainly a book store. What do you do about something like that?
Back when Barnes and Noble was the big book store, same thing, they pressured better prices. What do you do, split up the book store into two companies, who still control the same market share and will both still put pressure on the book companies?
Last I read, Amazon mainly fights for cheaper kindle prices, because it's considerably cheaper to sell a 12 meg file than a 200 page physical book. Which I agree with publishers, only benefits Amazon and not entirely fair, but for the most part, not much ahs changed, most kindle copies are MAYBE a dollar less.
> Amazon has been forcing cheaper books back when it was mainly a book store. What do you do about something like that?
In Germany, book prices are regulated: the printer sets the price, and the price the customer pays must be this price. Only exception are damaged (e.g. books with CD-ROM, but the CD is missing) or used books.
The prices the retailers have to pay at the printer are of course different and may well be based on the # of books the retailer has purchased, but the system right now successfully prevents price wars. And yes, I am happy with that, because it ensures that authors get proper funding instead of having to fight for the scraps.
> Last I read, Amazon mainly fights for cheaper kindle prices, because it's considerably cheaper to sell a 12 meg file than a 200 page physical book
The printing and distribution costs of a book are not that high, once you have a significant enough mass of books. What Amazon wants to do here is squeeze the authors off their profit, and this must be prevented.
Books are culture, and culture must not be bowing to the demands of predatory capitalism or else we'll sooner or later live in a Idiocracy world with a movie called "*ss" the sole Oscar winner... (okay, that was an exaggeration, but still, it's a danger to culture!)
Copyright is the much larger "danger to culture". We invented it to try to keep artistic recompense safe, but like most idealistic propositions, the sharks have moved in and gamed it and now we are all worse off. Allowing anyone to make any type of contribution without fear of a crackdown from Big Legal leads to a much more prosperous culture.
This is already becoming reality as the internet has made traditional copyright completely unenforceable on the general population. For example, Adobe no longer sells Photoshop as a standalone unit, but as an ongoing subscription, which gives the impression that the vendor is an active participant in usage.
I've heard that the golden post-copyright era ushered in by the internet is coming for a long time, but all I've seen is indie game companies going out of business, games/applications including online features no matter how unnecessary, and much of Hollywood switching to a spitfire methodology. Not exactly advances for culture.
I don't mean that the internet will create unbounded prosperity for authors or creators. We can see that its effect is in fact the opposite (large companies are only somewhat isolated from this by their massive legal war chests and latent political clout, derived from employing a significant portion of a representative's constituency).
I mean that culture prospers more by allowing people to create and publish whatever iteration, derivation, or alteration they want than by ensuring a small group of well-moneyed "idea owners" can utilize the force of the state to monopolize significant cultural icons and stop people from going "too far" in their cultural iterations (that is, too likely to win the favor of the public as compared to the "owner's" offering; being too desirable and competitive).
The viability of establishing a revenue stream from this cultural lather is separate from the value or existence of a fertile culture itself. Creation will always occur. Copyright is just a matter of how far those creations are allowed to grow and/or spread before they get crushed by someone else's bank account (which can have chilling effects on the back-end, preventing the incubation of certain ideas due to uncomfortable legal risk, but it won't stop the ideas from germinating).
Culture is in a bad state when disseminating the wrong ideas in the wrong medium can result in the complete forfeiture of all earthly freedoms. If you sell T-shirts bearing Mickey Mouse's image without the permission of the "owner" of that cultural icon, you may very well find yourself not only deprived of your possessions through a costly legal battle (which you have lost before you begin), but potentially also deprived of your liberty when you're jailed for criminal copyright infringement. All because our concern for an active "culture" somehow translates into preventing derivatives, iterations, or improvements, blocking normal feedback and optimization processes and hopelessly distorting the market.
Fanfic authors have been sued for getting too close to the "owner's" trademarks. It's an entirely unnatural state of affairs and it stifles our cultural maturity.
Personally, I would suggest that people stop expecting passive IP-based revenue streams to cover them, because I don't think there is a lot of money in that down the road (because the internet makes it impossible to practically enforce copyright). You'll have to create a need for an ongoing service, paid for in small units, to get people to part with their money. Software vendors like Adobe have already accepted this.
I'm highly skeptical of the claim that printing and distribution costs are not that high. I get that they are not a high part of most publishers margins, but isn't that mainly because they have already invested in the infrastructure necessary to do these things. I would guess at a long timeline for deprecation write offs. This does not make them cheap, by any measure. (Indeed, just try printing a few thousand copies of a book personally, and see how small of a part of your margins this would be.)
Same is similarly true for ebook distribution. It isn't like the infrastructure to do that at scale is free, either. Both in technical of copying the bits around, and in the physical of authors/editors/etc.
However, I fail to see any way in which the advantages do not weigh in on the ebook side heavily.
> What Amazon wants to do here is squeeze the authors off their profit, and this must be prevented.
Authors typically get a 10-15% cut of print books. Amazon wants to squeeze the publishers off their profit. While they can be heavy-handed and exploitative, they are much less so than traditional publishing. It's not abnormal for an author to make more money of a $9.99 kindle sale than a $25 print sale.
Can't that be said for every goods manufacturer? That would be like saying their needs to be regulation on the price of DVDs. Should we eliminate the 1 dollar DVD bin at WalMart now?
I've long wondered, with the rise of the internet, is prosecution really necessary to address unsavory business practices like these? Why not force the company into the light, posting this information in a useful form that informs the public and shames the malefactor?
I'm a strong proponent of open <EVERYTHING>. If shady behavior arises in business, government, public services, and even public discourse, I'd love to see a moderated form of public disclosure become the standard way to reveal and address such 'discrepancies'. Now that the 'net is ubiquitous, I don't see why age-old small town arbitration principles can't be applied to redress virtually all forms of grievance, as long as the public exchange is conducted decorously, as a judge or strict moderator rules could ensure.
IMO, the state of AI is getting pretty close to enabling this sort of moderator service, making it impossible for 'conduct unbecoming' to persist out of the public eye. What cellphone videos are doing to police/perp misbehavior ought to be possible for general business practices too.
> I'm a strong proponent of open <EVERYTHING>. If shady behavior arises in business, government, public services, and even public discourse, I'd love to see a moderated form of public disclosure become the standard way to reveal and address such 'discrepancies'. Now that the 'net is ubiquitous, I don't see why age-old small town arbitration principles can't be applied to redress virtually all forms of grievance, as long as the public exchange is conducted decorously, as a judge or strict moderator rules could ensure.
The problem is, there is no such thing as a moderated public exchange. Everything can be bought off, be it a journalist, a policeman or a judge. Mass media outside of countries with well-funded public media stations (think BBC or the German TV/radio stations) is always aligned to corporate interest, not to public/journalistic interest. And for what it's worth, state-funded journalism is often enough also subject to meddling by politicians.
> IMO, the state of AI is getting pretty close to enabling this sort of moderator service
lol even Facebook's content AI, which may very well be the strongest in moderating (Google's strength is lying more in content comprehension!) is not able to distinguish between an iconic Vietnam picture and child porn or remotely good at detecting propaganda. I certainly would not want the Facebook AI as a political moderator.
Because ultimately most people won't care enough to stop going with the cheaper option, especially when all you can point to is negative effects for vendors. It's not like Amazon is going around creating spurious libel lawsuits against people for publishing criticism of their business practices, or paying for people to muddy the waters with counter-articles. It's just that the information largely fall on deaf ears. I'm not sure what a judge or moderator would do when there's no real back and forth.
A lot of conduct unbecoming like this becomes public (Intel is a good example). How many people stopped buying their products even with literal judges finding them guilty of some particularly nasty anti-competitive practices?
> Because ultimately most people won't care enough to stop going with the cheaper option, especially when all you can point to is negative effects for vendors.
Indeed. If people could get cheaper clothing if slavery was made legal again, they'd do it in a heartbeat. Witness to a lesser extent the general sentiment on HN that Uber is "helping drivers", when they're indentured servants.
I wouldn't call it consumer excess when you're exploiting someone with limited options.
Honest question. How do companies in the US go about assessing the solvency and financial status of suppliers. In Sweden annual reports are public records for all limited companies, not only public companuee. How would US company determine that a supplier is solvent and not at risk of bankruptcy, which would be a risk to build into supply chains etc?
In the US, Dun & Bradstreet [1] is a company that attempts to provide a sort of "credit report" for both public and private companies of all sizes. Companies are required to have a DUNS number to do business with the government and it can act as a sort of unique ID.
However, like other credit agencies, it isn't infallible and is only as good as the information it is able to gather through information sharing agreements. They have also branched into the "Improve/Monitor your D&B score" business which is pretty shady. [2]
[Edit: We also have vendors require references if we are looking to establish a line of credit. We also provide references saying how much credit they have and how often they pay on time. It is a manual process.]
20 years ago my father ran a small business and routinely relied on D&B reports to provide insight into the creditworthiness of unknown suppliers or customers.
Of course investors and larger institutions use Standard & Poors and Moody's to provide credit ratings and background histories on public companies and their stocks and bonds.
A lot like this, as I understand it. Publicly traded companies have a fair bit of information generally available, but for a private supplier you might well demand some financials to establish enough confidence to pair with them.
What's distinctive here, I guess, is that Walmart has the weight to get that info and then start making demands instead of just deciding whether to trust the partner.
In 2002, Walmart did more business than its next 6 grocery and general-good competitors combined. Something like that is presumably still true if you restrict to brick-and-mortar spending. If you sell something mass-market (e.g. pickles), a huge portion of all shopping happens at Walmart - you can get beaten by a competitor just for not playing ball with one retailer. Similarly, struggling companies can be saved by Walmart (e.g. Levis), but only if they concede to whatever Walmart demands.
I'm not going to take the anti-capitalist tack, here. When Walmart tells Levis to fix their supply chain and introduce products at a lower price point, that's how markets should work. They demanded reform, and that's what saved Levis - they might not even have needed to sell at Walmart if those changes had come sooner.
But the larger pattern is troubling. Walmart has so much power over smaller suppliers that it's like informal ownership - they're vertically integrating with none of the legal conditions or risk. And that helps them drive pretty serious ethical issues without ever taking direct action. Everything from monopoly creation to violation of labor laws to environmental devastation (mostly overseas) stems from Walmart's pricing demands.
They may not ask for anything unethical, but asking for a 5% price cut every year means something has to give. With such enormous legislative influence, they can bend laws and trade agreements to favor their model. With the freedom to change suppliers and limited legal accountability for their suppliers' actions, they can work with whoever's willing to behave worst, and give them a market that cripples everyone better behaved. So you don't have to sell for Walmart, but in a lot of industries you can expect to suffer for those scruples.
"Free" in the sense that they have the 1st Amendment right to do so. Not in the sense that they actually can, especially once Walmart gets to be a significant customer to them.
How is that any different than any business that has one large customer?
And if you're creating a valuable product at a good price, then you have leverage over Walmart. If you're selling a commodity, then be prepared to get squeezed. That's how it should work.
I recall a story about one vendor deciding it would be more profitable to separate from Wal-Mart and take the declining sales hit versus the dictated profit margin. I believe it was a lawn mower company?
Wal-Mart is pretty infamous for squeezing suppliers & vendors on price and operating procedures. Hard.