This page has been archived and commenting is disabled.
Big Media Finally On The Case Of The Amazing "Value Deflation" Inflation
Two months ago Zero Hedge first touched upon the topic of relative "value deflation" whereby prices for products are kept constant, even as the actual product provided is far less. Back then we recalled the experience of one Walmart shopper who shared the following story: "I noted with interest that the Wal-Mart I shop at had cleared the shelves of "Great Value" brand coffee in 39 oz cans for about 2 weeks. Today the new can appeared, with the following differences: 1.) Can is now 33.9 oz, down from 39 oz. Also conspicuously missing is the conversion of 2lb, 7oz therefore no comparison in pounds is easily made. 2.) Price for this smaller can is up from $9.88 to $10.48, by my rustic math an approximate 20% increase! 3.) Contents of can are no longer 'Premium Columbian' Decaffeinated. Now labeled '100% Classic Decaf'." Indeed, for people attuned to change in prices much more than to changes in amounts, this is the best, if most despicable, way to mask what is rapidly becoming an accelerating inflation problem (and with food prices now officially at their highest levels ever merely compounding the problem). Today, with the traditional two month delay, the mainstream media finally draws attention to this increasingly more troubling development.
While at just two minutes, the following ABC segment is better than nothing, and should provide a sufficient alert to the peasantry just how much less their raped and ravaged dollar goes these days, even if on a relative basis it is actually outperforming the European continent's own one-ply infinitely dilutable piece of toilet paper in the past month or so.
d
»
- 24246 reads
- Printer-friendly version
- Send to friend
- advertisements -
Where's the beef ? Bitchez
From the video: If you complain, they will give you a "coupon to fed up customers". LOL!
I can hear it now: "But you can't eat coupons!".
When a company gives you less product for the same price, the first thing you want to look at is profit margins.
Are companies responding to inflation and simply trying to make the same money with less product in the packaging, or are companies cutting the products to INCREASE their fucking margins and then using inflation as a fucking excuse?
Here's Wal-Mart's profit margins for the past 10 years:
http://ycharts.com/companies/WMT/gross_profit_margin
Their profit margins have steadily increased over 10 years.
That's pretty damn interesting, because that suggests Wal Mart is giving you less so they can make more.
Is that an argument for inflation, or is that an argument that America's largest retailer is trying to make sure every quarter is a penny better than the last?
So after decades in business, Wal-Mart just suddenly decides to employ this shrinking-packaging tactic to exactly coincide with the current run-up in commodity prices, eh?
Really, RNR, the disingenuosity of your posts is increasing at an almost exponential rate. I will, however, give you credit for your increasingly shrill and desperate attempts to deny the growing statist and neo-fuedalistic reality all around you.
The point of the article is to suggest that Bernanke-induced inflation is the cause of why you're getting more for less at retailers.
My point is that retailers are still increasing profit margins, and I think that is immeasurably important to the debate.
Please explain how increasing gross margins are somehow not a factor.
I never said that increasing profits may not in fact be a contributing factor --- I know little or nothing about the subject, but I am certainly not going to take your word and simplistic analysis as the gospel truth on the matter.
Regardless, it is not an either/or proposition here, despite your attempts to make it such. Whether their profit margins are increasing or not is rather irrelevant to the fact that this dishonest and purposefully confusing downsizing of food packages just so happens to coincide with the recent and significant run-up in commodity prices, which you are attempting to imply is just a coincidence, which is as disingenuous an argument as I have ever heard. I had some small measure of respect for you earlier, as at least you are willing to engage in debate, no matter how tortured, but that respect is now fractured if not gone.
I know little or nothing about the subject, but I am certainly not going to take your word and simplistic analysis as the gospel truth on the matter.
Thank you for finally posting something that makes sense.
Now...
If you admit you know absolutely nothing about the subject, why are you debating me?
I love how anytime anyone admits any deficit of knowledge, you pretend like you know EVERYTHING about the subject at hand.
Never admit ignorance, remain ignorant forever. Par for the course.
You still have not attempted to answer or rebut my point.
I have come to the clear conclusion that you are nothing but a dishonest troll who is only willing to engage in sterile sophisty instead of honest debate, and to judge from your vehemence in defense of everything statist and status-quo, quite possibly a paid disinformation agent.
I might also point out that it is YOUR posts, not mine, that routinely receive double-digit numbers of junks. Now just why might that be? Oh yes, you are always right, and everyone else is wrong, is that it?
I don't think that's the point. The name of the game is disinformation - spread just about enough lies to seem authentic, thereby confusing the less confident/knowledgeable, in order to cloud the issue.
Being right or wrong doesn't matter.
You are correct, of course.
This Johnny-Bravo-come-lately is getting to be just as annoying and infuriating as the first one.
And has anyone else noticed how the tone and content of RNR's posts lately differ radically from his quick partisan one-liners of the past?
akak, why are you jumping on RNR's shit so harshly?
He didn't say anything inflammatory originally (his suspicion of corporate profit "inflation")
What's the big deal?
Did he call your mother out somewhere else on ZH?
and it aint cool to pull the "Hey everybody! has anyone else noticed how trollish he is..."
That's weak. RNR has got the balls (or indifference...or indifferent balls??) to take the junks and he's HERE....cut the man some slack...besides, Fox news truly does SUCK BALLS....let the man wave his balls about....won't you?
nope.
You still have not attempted to answer or rebut my point
Your questions are just variations of the same - there isn't a different answer for me to give, than what I've already said. Gross profit margins at the world's largest retailer are increasing and that's exceptionally important to this discussion.
According to the chart I provided, one could strongly argue that Wal Mart is reducing product volume to make more profit. That is a perfectly viable argument, and leads one to believe there is more to this argument than this article provides.
Regarding trolling, I simply made a very sold argument and backed it up with a very solid chart as proof. You are the one just aimlessly attacking me, while simultaneously admitting you know nothing about the subject.
If you want to pick up your cross-bow and fire an arrow squarely through my argument, you need to start talking about profit margins at companies that Wal-Mart buys from. They are the ones who are facing shrinking margins, but that just presents a different riddle: how much of that squeeze comes from the top and how much from the bottom? After that stalk of corn filters through so many hands and companies - from the farmer to the truck driver through the commodity futures market to ADM to another truck driver to corn syrup distributors to Coke to bottlers to the grocery stores and finaly to you - how much of the price increase that you paid can be attributed to inflation rather than various different hands sneaking in higher profit margins, then blaming inflation?
But since you guys are being nothing but jackasses to me, I'm not going to answer that riddle for you. If I need to provide you with both the questions and answers to debate me properly, then I just need to wait for the next interesting thread.
You understand nothing about honest debate, preferring to instead engage in juvenile and arrogant sophistry while consistently avoiding or deflecting the real subjects being discussed. You are nothing but a disingenous and antagonistic troll, and I am done trying to engage you in meaningful discussion, as such is clearly beyond your capability or desire.
RNR, you are one of the most dishonest and despicable trolls I have ever seen in this forum.
Dear Redus Neckus,
Your point is well made, however it contains what are potentially severe inaccuracies. For instance, you need to provide more than one chart to subtantiate your claim. Wall Fart is merely one of the many players in the business. Show me the trend and I'll start to listen more carefully.
Also, your argument will fail if it turns out that Wall Fart has improved profitability through measures that are mostly unrelated to margin improvement -- i.e. cost cutting and improvement of operational efficiencies.
Your argument will also fail should it turn out that supply inputs are relatively inelastic while demand continues to grow exponentially (i.e. 6BN people that will turn into 12BN at current rates within 70 years).
I won't even bring into the equation the fact that packaging and serving size is not determined by Wall Fart, but by the manufacturers.
I'm not negating your inflation argument, but just trying to caution you when jumping to easily misleading populist conclusions.
P.S. Homework for tonight -- a little game theory: could you possibly use inflation as a tool to reign in a particular WTO member who manipulates labor wages and manipulates currency exchange rates in its favor? Who knows, maybe in a century history will be kind to Bernanke...
I'm not sure how many charts you want, but here's one of McDonald's, who is also suppose to be very sensitive to commodity prices.
http://ycharts.com/companies/MCD/gross_profit_margin#zoom=5
As you can see, over the past 5 years, gross profit margin at McDonald's has risen, too. I choose WalMart and McDonald's because they are are in every neighborhood in America, and they have customers who can least afford price increases.
The WalMart chart and the McDonald's chart clearly demonstrate that these two companies are raising prices faster than costs per item are rising.
So, again, this absolutely matters if you're debating why you're paying more and getting less.
Also, your argument will fail if it turns out that Wall Fart has improved profitability through measures that are mostly unrelated to margin improvement -- i.e. cost cutting and improvement of operational efficiencies.
Incorrect. Your comment is in reference to profit margin. I'm talking about gross profit margin, which is much different. My original chart referred to that, as did all my posts since then.
I won't even bring into the equation the fact that packaging and serving size is not determined by Wall Fart, but by the manufacturers.
Don't fool yourself for a moment. WalMart controls everything.
>I'm talking about gross profit margin, which is much different. My original chart referred to that, as did all my posts since then.<
I'm pretty sure I know the definition of cogs. Again, out of all the possibilities, why do you insist on choosing the one answer that just happens to fit your theory? Why can't it be a mismatch between supply/demand that drives equilibrium to new price levels, or globalization (COGS cutting) that achieves better economies of scale, or simply more poor people eating at McDeath's (in that context you're really measuring the impoverishment of society and not inflation)?
Again, the flaw in your logic is that you're making grandiouse claims without eliminating some of the plausible answers. What about the guys that Wall Fart drove out of business? If I can show you that their gross margins were shrinking prior to their bankruptcy, are you going to change your tune to deflation? :)
I would love nothing more than to jump on the inflation bandwagon. We need a decade or two of decent inflation. I just don't see velocity picking up till people have more paper to chase the same amounts of goods and services. Look around you, do you honestly see that happening? Have you seen that invisible mental switch inside people's heads turn to "let's buy shit we don't need for the sakes of buying shit we don't need"? That might have been the case in the past, but now?
Merchants like Wall Fart will try raising prices and will ultimately fail because they will reach the hard limit of available disposable income. You can't spend what you don't earn. That's where it gets interesting.
You really are a simple simon. The issue is whether WMT is fostering the misperception of stable selling prices (i.e. no inflation) using a specific brand of coffee it sells as an example. Your analysis of gross margins at WMT over the last ten years is simply an exercise in mental masturbation and I doubt you were able find a breakout of WMT's gross margins on coffee anywhere in the financial footnotes.
Coffee prices rose approximately 72% in 2010. This created margin pressure for everyone in the supply and / or sales chain (the coffee growers, the processors, the retailers). There are two solutions - raise prices and / or reduce costs. Companies have reduced their operating costs dramatically during the Great Recession. Therefore, the only alternative to offset higher commodity prices is to increase selling prices.
Given the pressures facing many consumers, I would surmise that retailers have the most difficulty in successfully implementing price increases. Therefore, in a stroke of marketing genius, retailers along with their suppliers (processors) maintain their margin by keeping selling prices flat and simply shrinking the size of the package (e.g. the overall sale price remains the same, but the per unit price increases substantially). Since the average citizen is too distracted and too deficient in math skills they can continue to convince themselves (with the undying support of Bernanke and Krugman) that their is "no inflation".
Your whole tirade on increasing gross margins at WMT is a specious argument. Only your BFF MCTW would buy-in to this crapola.
Nail on the head.
Your analysis of gross margins at WMT over the last ten years is simply an exercise in mental masturbation
No, it's not. You guys don't understand what the definition of gross profit margin is.
If gross profit margin is increasing, that means WalMart is raising prices faster than costs are rising.
This is especially relevant when we're having a debate on whether prices for consumers are rising do to inflation or a company's desire to make more gross profit, per item.
That´s the inflation effect. Every dollar is inflated. So even gross profit margin is inflated, nominal terms of course. Get it?! Or do you want me to draw something?
I think the vast majority of people on ZH know the definition of gross profit margin. You should stop posturing like you are the only one who does and it's akin to understanding integral calculus.
You constantly rail against the biases of the Republicans, the Tea Party, etc. but your own biases (WMT = BAD, Obama Government / Ben Bernanke = GOOD) results in a specious argument. Okay, gross margins are higher at WMT and it's probably true at 95% of the large, multi-national companies. So what.
I can only conclude that the fallacy in your agrument is due to a greater desire to perpetuate the Bernanke / Krugman myth that there is "no inflation" and higher gross margins at WMT are the result of greedy management. If this no inflation premise was true, wouldn't WMT simply increase the price of coffee and keep the original package size? Shrinking the package size and keeping the price flat indicates otherwise.
My argument / conclusions are simply based on the facts:
(1) Price of underlying commodity is up 72% in one year
(2) Sales price of retail product unchanged
(3) Package size of retail product reduced = per unit price increased
Conclusion: WMT is using this simple and stealthy strategy so it would appear optically that there is no consumer inflation despite sharply higher commodity prices. I'm sure that many other companies are employing a similar strategy. Your whole gross margin argument is simply a political side-show.
No, it's not. You guys don't understand what the definition of gross profit margin is.
If gross profit margin is increasing, that means WalMart is raising prices faster than costs are rising.
It would actually appear that you don't really understand the definition of gross profit margin.
Sales - COGS = Gross Margin
(Price x Volume) - COGS = Gross Profit Margin
You concluded incorrectly that increasing gross margins is solely the result of "raising prices faster than cost are rising". As I showed above, net sales is comprised of both price and volume. Much of WMT's increase in gross profit margin could be the result of higher sales volume vs. higher selling prices. Tech companies (INTC, DELL, etc.) are a perfect example - over time unit sale prices decline, offset by higher sales volume, smaller increases in COGS, resulting in higher gross margins.
Don't drive him off, junking him makes my day :-}
http://www.youtube.com/user/BrotherJohnF?feature=mhum
Arrogant cock.
That has never stopped you before.
Hey Red. We all know you know everything there is to know about inflation. It is what makes your girlfriend change from two to three dimensional.
I was not debating you on that point, as I clearly stated, you reprehensible, dishonest and dissembling sophistry artist.
I think that you are both master debaters.
Green's Law of Debate: Anything is possible when you don't know what you're talking about.
Don't get me wrong, I lurvs me a good grudge match, but when I open a thread to read new posts on a topic of interest, and the only new comments are 2 guys in a pissing contest...well...
I think you meant mass-debators ?
Guys, its very simple.
Smaller containers, equal profit margins.
When the price of everything is going up,(And it has for over 1.5 yrs),I psoted this same shit happening then.
Cost of eggs, 1dz, $.089,2 weeks later $1.89, same eggs.
Bread, different items pricing fluctuating wildly.Going down, then up.And vice versa.
Costs of getting product to vendors UP, cost of fertilizers, up, less production per acre.
Fuel costs.
Insurance costs,etc,etc,etc....................
I have been around a LONG ass time, and this is a relatively new phenomema, the smaller containers en masse.
Sure its happened selectively, but now everyone is doing it.
Think you are really getting gallon of fuel at most pumps?.
One thing we know for sure is the employees are not reaping this NEW profit margin, if it is for real.
OScumma Care just went into effect partially, for 2 people at a huge company, our costs went up (out of pocket NET dollars 10% more per year).
That's $2,500.00 more than any prior year,ever.
Thanks to no one except the NEW policies.
NO ONE.
I am sure if you check, you will find you got the same screwing.
This is not a new thing you know. I've lived through a few inflationary periods and this iw what they do. This happened before - wait until you see the magic shrinking toilet paper rolls.
I don't think anyone is arguing that this deceptive package-shrinking tactic by manufacturers and retailers is anything new --- but what IS new is the degree to which it is being used in the last year or so. No, I have no numbers to quantify the extent to which it is being employed, but regular grocery shopping combined with much shared observation suggests that the practice is conclusively on the increase, while even a modicum of logic would strongly lead one to conclude that it is NOT being employed due to some sudden and inexplicable burst of corporate greed, but is obviously due to rising commodity prices (obvious to all except RNR, perhaps).
There was a terrible bout of inflation in the 1970s. I can remember living quite comfortably on a very small salary, I think it was $50.00 a week and paying about $70 a month for rent and chicken was 29 cents a pound. Then prices starting going up and up and up. Every week my grocery bill was higher. Cigarettes went up. Beer went up. Gas went up and up and up. Life became very difficult for many for quite a long time, because salaries didn't go up as fast as the price of everything else. That was around the time Nixon closed the gold window, though I didn't make that connection at the time. Then there was the problem with OPEC. My parents bought a house in 1964 for $17,000 and wondered how they would every be able to pay for it, but they surfed that wave of inflation and on the other side of it, the bank found their mortgage so piddly they couldn't be bothered with it and offered them a deal to pay it off early. I tell you this is nothing new.
I'm not buying it - literally. Screw WalM*rt. Who needs toliet paper? Just don't buy it. Leaves and rocks work just fine when you shit in the woods. Better yet, shit in the parking lot at WalF*rt.
LOL!
And I bet if you did that, some Wal-Martian would just slap a yellow happy-face "Lower Price" sticker on it, and some typically sub-human Wal-Mart shopper would promptly pick it up and buy it.
that is very funny, akak...........leaves definitely work. never thought to try rocks though..........next thing Walmart will read this and before we know it America will be exporting natural toilet paper to Asia.........just imagine how much green can be raked into one of the giant high speed container ships owned by Sam Walton.........full steam ahead on that and get the Baltic Dry up along for the ride.
Well thats understandable, because they need the extra
paper for more money printing.
Not just Walmart profit margin is up in the last two some decades, MOST of Fortune 500 companies' profit margin is also up. That have MUCH MORE to do with outsourcing to China and other emerging economy than anything else. Most of cost increase due to higher commodity price has been absorbed by China's sweatshops up until a year ago. And now they CANNOT do it any more. Plus, now Chinese sweatshops have to raise the workers' salary there, otherwise they CANNOT find anyone willing to work for them. This will force ALL U.S. companies either transfer higher price to the consumers, or sacrifice some of their own margin, or both
or even<gasp!Ghod fohrbid!> move a couple of factories back to the US
"Gross" profit margin doesn't mean jack, fool. Companies have more overhead nowadays (especially with things like ObamaCare in the pipeline). More gross margin is necessary to keep heads above water.
Net is everything.
Take a look at corporate earnings (for the non-FIRE sector) and get back to us.
I think you might be unfamiliar with the difference between gross and net.
Gross profit is selling price minus cost.
Ever-increasing overhead like insurance factors into net profit.
Umm... that's exactly my point.
Bottom line to a company's success or not is net profit, not gross. You just posted a chart of gross profit, which is meaningless by itself. A company can have huge gross profit and still go bankrupt.
You simply don't understand this discussion.
If you want to discuss commodity price inflation and how/if that is being passed to the consumer you would not discuss net profit and/or how ObamaCare might affect net.
Gross profit margins means everything in the context of this discussion.
You have to raise your GP so it covers higher SGA costs. Raising GP can be raising prices, cutting raw material costs, more efficiency etc... GP and NP aren't mutually exclusive.
The packaging games and cheapening of product increases during inflationary pressures but goes on continually.
Look at Arby's, they used to slice real roast beef for your sandwiches, now I wouldnt feed that crap to my dog if i had one. Their cheese sauce? makes great waterproof caulk.
Bad news. I tried the cheese sauce as a caulk, it's not waterproof and it sucks.
Yes, Arby's caulk sucks. I said it and I'm not ashamed.
You can suck my caulk :-p
Cash for caulkers.
Winterize!
http://www.youtube.com/watch?v=Ag6ZLSW_dD8
I guess i'm one of those naive people that measure inflation by comparing prices and sizes of items from last year to this year.. If only I knew how to properly define inflation and profits.. My grocery bill might go down with such knowledge..
I have a great piece of advice for Americans or people world over in general looking to lower their grocery bills. Buy less. Consume less. It's really that simple.
Don't buy packaged crap. it's usually terrible for you. Don't buy aerated drinks. They are terrible for you.
Food is like anything else. Quality always trumps quantity. Add to that the fact that we all consume too much. Way more than we need.
Scale back, so no one scales it back for you.
ORI
http://aadivaahan.wordpress.com/2010/06/30/snake-eyes/
I thought gross profit margin would also include the cost of the products. I've sold to Walmart directly and I can tell you that my arm is still hurting. A large part of their improved margins stem from supplier cost reduction, not necessarily pricing. In addition, their logistics processes are best in class and always improving, further driving down costs. Finally they get the benefit of scale economics. I can't dispute your pricing hypothesis based solely on gross margin, but you can't assert it either without a lot more analysis
What I would fucking like to know is if unit volume/weight is used to normalize the fraudulent CPI numbers. Is it? I really don't know, just asking. But this to Redneck's point. He was unfairly junked. He is indeed correct that fiat money is behind such insidious inflation. No, it did not start since QE, but has been ongoing for decades. Hence the current rock/hard place. And YES it IS still a rock/hard place for all you indoctrinated Keynesians with short attention spans. "Profits" under such a debt-based ponzi scheme are nothing but a transfer of wealth.
Let's play connect the dots..
What does the US and Myanmar (Burma) have in common?
Answer: No metric system
Why? They say: "Americans will be confused"
Is it that? or is it that they want you to stay confused with inches and feet, ounces and pounds, and so on?
Central planning. But.... the cliff is hidden and it's near
The answer to your first question is that they will use any metric that suits them to show a rosier picture and they will invent adjustment techniques to subvert the truth
This takes me back a decade or so when the join U.S. Euro Mars probe crashed really hard into the face of Mars. Seems the bright boys on one team or the other didn't do their English/metric conversions and had the final approach speed WAAAAAY wrong.
And I'm assuming they weren't even trying to confuse each other.
Same thing that happenned with the main mirror on the Hubble telescope. Had to give it a pair of glasses via a three day spacewalk.
Not really -- a simple, yet expensive test on Earth would have found the spherical aberration on the Hubble main mirror, but some bean-counter put the kabosh to the test. After all, the computer simulations said all was right with the mirror...
they'll never change the football field. it is sacred. no matter how many great reasons you can come up with, you will never out vote the football field
Your post is an imperial barrel of shit. Not an english barrel of shit. If it was an english barrel of shit it would much worse. :)
Oh and numbers don't lie. -> the fuck they don't
You can't cheat an honest man. -> the fuck you can't, in fact it's easier that way.
I do love our little wisdoms that get passed around to sew deceipt. Nice to see so many people catching on.
Yes, we all understand that you hate profits, and subscribe wholly to the labor theory of value.
Funny that it isn't just the store brands that are doing this, but ALL brands. You never pay attention, and that's why you never understand what is going on.
tmosley
In December, you said that 95% of your money was in silver and gold. I remember it well, because I ridiculed you for your "zero hedge" strategy.
In 2010, gold was up almost 30%, while silver was up 60% (or so).
Yesterday, when arguing with someone, you told them you had 83% gains last year. If 95% of your money was in silver/gold, how did you post 83% gains?
This has really been bothering me. Please clarify.
<face plant>
"Or so" was 83%, you bloody moron.
ok...83...that doesn't matter.
If the returns were 83 and 29, how could you have netted 83?
How much silver did you own last year, oh most junked one?
http://www.youtube.com/user/BrotherJohnF?feature=mhum
<face palm>
I think you might have brained yourself on that face-plant there RNR
<breathes on fingernails and polishes them on tailored shirt>
*note* temporarily removing my self-imposed restraint to use less profanity on zero hedge this year...
Yo, R 'n R...
I was fucking wondering if you can fucking make any fucking arguments without using the fucking word "fucking." It fucking makes fucking mincemeat out of any fucking point you might be fucking trying to fucking make.
Is it an indication of some deep-seated need you feel you must fill? Are you not getting enough fucking?
*Restraint back 'on'*
Whatever RNR will say, he's just a very good performance artist, a credible and sophisticated troll. He manages to hide it very well in most of his messages, but in some of them, less.
Why would someone spend so much time and energy trolling on ZH? Because it's the best place to troll on the Web: no censure, and thousands of tense and sensitive libertarians ready to spit on your face.
what the fuck does WALMART's margins have to do with the margins of the companies selling them the products???
Answer: nothing.
Walmart is the retailer; in many cases, they are PAID to sell products. They earn no matter what the cost of the good is. Grocery stores SELL their real estate to companies intending to sell products there, and in many cases, the store has fuckall to do with the pricetag! And the store gets paid no matter what.
Walmart may be able to preserve its own pricing leverage while its suppliers are being forced to downsize product. WMT doesn't give a shit so long as they can get the tag price.
The suppliers control the quantity of goods in a package. WMT cares only about how much they can sell space for and/or how much they pay versus how much they flip it at. None of these are related to commodity prices or dollar inflation.
.....and there's the arrow.
But don't be mistaken, the notoriously heavy-handed pressures that WalMart puts on their suppliers is very much responsible for shrinking volumes.
Wal-Mart's purchasing power even concerns free market economists. Usually survival of the fittest (or cheapest) forces efficiency of scale and increases productivity as it lowers prices for consumers. This is the pro Wal-mart argument and its one of those economic principals that creates greater wealth in societies and can be used to promote social welfare, etc. (In the US the productivity gains create wealth often in disparity and the gains fund the Iraq war, but that's a different topic.)
However, Wal-mart can also artificially cause good companies to fail. Was the Tupperware story discussed? In the 90's resin manufacturers colluded to raise prices world wide and were eventually caught via an informant and an FBI sting operation that lured Japanese execs to Hawaii with the promise of golf. That's a good story - maybe for a movie someday, but the effect was that Tupperware was forced to raise prices. Sterilite makes competing products, but it's petroleum not resin based and Wal-mart used this leverage to force Tupperware to keep prices low otherwise they would take away shelf space. Tupperware was willing to let the consumer decide, but Wal-mart was not. Tupperware fell into crisis on losses and was acquired by another company for a steal and now with resin prices back to market value and petroleum at a premium they are probably making a killing.
In a free market economy, the "good" in good company for comsumers to decide. Value is subjective
the movie is: "Wal-Mart, The High Cost of Low Price"
http://www.walmartmovie.com/facts.php
I may be wrong, but I could swear that Tupperware story is told in this film. . . what is definitely told is how Wal-Mart subsides it's "business model" by encouraging the "crew members" to sign up for food stamps, medicare, etc. to supplement their low wage / variable hours from week to week.
also receive huge subsidies from cities to locate a store, supposedly to create "jobs" before vacating to the next town, leaving behind their monstrous buildings & parking lots. . .
but hey, 4 Waltons in the top 20 Forbes Rich List!! amrkn sucksess story.
OK, but the issue under discussion is the deceptive downsizing of retail products with no corresponding decrease (or with a corresponding increase) in price. Whether Wal-Mart engages in that practice or not is somewhat beside the point (I can't speak from experience in this case, as I refuse to shop at that disgusting chain), but clearly SOMEBODY is doing so, either the manufacturer or the retailer or both, and so again the question stands: Is this in fact a reflection of rising commodity prices, or not? I think only the most naive, ignorant or disingenous (and RNR wins on all three counts) could possibly answer "no".
Please answer this question:
If gross profit margin is increasing, which is increasing quicker: price the consumer pays or the wholesale price WalMart paid for the exact same product?
I don't give a damn, troll. You might as well be ranting about the exact diameter of the planet Jupiter, or how many angels can dance on Tim Geithner's pinhead, for all the relevance your off-topic obscurantism bears on the subject at hand.
Now you answer the pertinent question here: Why is this deceptive product down-sizing taking place NOW, during a period of rapidly rising commodity prices, and was not nearly as much in evidence before the commodity price spike? The answer is obvious to everyone here, everyone that is except for you ---- which is why you are garnering a near-record number of post junkings in this thread, because your arguments are specious, disingenuous and deflective from the real issue under discussion.
I don't give a damn..
Well, you should, because that's a massive part of the debate that everyone is just fucking ignoring or not understanding.
When gross profit margins are increasing, that means the price the consumer is paying is rising faster than the wholesale cost per item sold.
Here's an easy example:
Selling price of Big Mac in 2005 = $1.00
Cost of Big Mac in 2005 = $.75
gross profit margin = 25%
--
Selling Price of Big Mac in 2010 = $1.35
Cost of Big Mac in 2010 = $.95
gross profit margin = 30%
Here, you can clearly see that, although costs have risen (inflation, transportation, whatever), the gross profit margins are increasing, too. This means prices to consumers are rising faster than wholesale cost, per item. Thus, companies are making more gross profit per item than before, and using the excuse of inflation to jack you for more profit.
To be fair, here is the exact opposite: Safeway Grocery Stores
http://ycharts.com/companies/SWY/gross_profit_margin
They're getting fucked with rising prices, and unable to pass it on to customers.
All this masturbation and financial jargon turn us back to one thing: you can't create wealth out of paper and words. I'm sure all the financial analysts in the world would produce more value working at a farm than trying to reverse engineer the success of innovative businesses.
I don't give a fuck about your gross margins. The only thing I know is that it is pretty much an interesting coincidence that Wal Mart decides to downsize everything when at the exact same time you have the biggest increase in commodities in decades.
Their margins could have increased for whatever reason: offshoring on some parts of their business or among their suppliers, for example?
Sure. Fine.
Are you going to feel the same way when you find out they shrunk the volume to make more money off you? They gave you 50 less squares of toilet paper, but 30 less squares was due to inflation, while the other 20 less squares was to jack you for more profit, while telling you that it's all because of inflation?
That's ok with you?
I'm just trying to show you that there is more to the story.
No, you are ignoring "the story" while dancing off on a tangent.
Indeed.
RNR is another perfect example of the adage:
"If you can't dazzle them with brilliance, baffle them with bullshit."
You really are a determined troll and disingenuous son of a bitch.
Your off-topic ranting about gross profit margins is uttery IRRELEVANT here --- the topic is the presumed and apparent correlation between deceptive retail product downsizing and the recent spike in virtually all commodities. By your own charts, gross profit margins (at least for McDonalds) have been rising for years ---- but the product downsizing campaign has only really snowballed in the last year or so, exactly coinciding with the rise in commodity prices. Until you address that subject, the REAL subject of this thread, you will continue to just go further in proving yourself to be the dishonest and dissembling disinformation agent that most of us can already see you for.
When Wal Mart was made in America only, I was alright with them. But everything they sell is foriegn now, so fuck them they are the problem.
Flaw 1 in your theory: There was no "excuse" offered. It was done surreptitiously. There was no Wal-Mart "Inflation is here; blame the government, but keep buying our stuff" announcement.
Flaw 2: Why would they have waited so long if raising prices also increased profits?
I understand your statement.
BUT consider this.
When price controls were put into place in pre-hyperinflation markets, businesses start to increase prices in *advance* of the expectation of price inflation. So their profit margins were always ahead of cost increases.
The better way to see this is as a sign that Walmart sees price inflation on the horizon.
Tyler,
Sorry to butt in here at the top of the thread but it's time to impose position limits on threads. While both guys below may or may not have valid arguments is beside the point if it takes 4 posts to make that point and then degenerates into a pissing contest that runs into 15 posts. If you want to turn this place into digg.com where the noisiest commentators run the place have at it.
While I'm here I'll make my view on the hiding inflation through shrinking packages debate. The great "mogambo guru" made a similar argument years ago when (Palladium was trading at $200 at the time).
This Phenomenom is nothing new in other words. Whether it's becasue of inflation or for higher profits Companies do this shit all the time. They penetrate the market with cheap pricing and then shrink packaging rather than raise prices. While the consumer may perceive it as inflationary it might be simply Walmart etc squeezing a few more pennies from the consumer. While I'll agree it PROBABLY IS inflationary pressures we are seeing it would require a little more analysis than this article contains.
A famous example of good old fashioned trickery by companies is to widen the opening on containers on your dish washing liquid, toothpaste etc so that you inadvertantly use more than you normally would. Sometimes they will put 1 less match in a box or only have one strike surface on the same box of matches. My age is showing now :)
My point here is that sometimes it's as simple as cost cutting to squeeze a few more pennies or pushing the price to as far as the consumer will put up with. Until someone takes the time to figure out if manufacturing and delivery costs have risen on the coffee etc then it's all educated speculation but it's still speculation.
Red Neck Repugnicant
I don't understand why people are focusing on WALMART. Fucking candy bars and ice cream has been shrinking for years. Who is giving HERSHEY or MARS shit?
31 junks? the fuck?
the coupon is actually your magic ticket to gitmo.
The beef is mixed in with the horse meat, you just have to poke around a bit.
...damn, I'm laying off the angus beef ....might be a label misprint.
+1000 thanks for the laugh.
Even if mostly lips and assholes...it is still 100% beef.
Raise your own grass fed, or know the rancher and butcher really well. Prions, bitchez!!!
"Even if mostly lips and assholes...it is still 100% beef."
Not quite 100%, I believe there are still allowable levels of rat feces in most processed meats.
andybev01
You do understand that Horse meat is a staple in some nations. Fuck dude ever see a pic of a Chinese market with bugs and snake on a stick?
Stop thinking like a "MERCAN" ( In both senses).
fuck the ROW. We invented everything, they didn't.
standing arse to face in 3 feet of manure waiting for their feedlot GMO corn dinner.
The upside is that we get a much wider and deadlier variety of e-coli to choose from..
new improved e-coli chooses you.
I could have sworn you guys had this thread up a long time ago.
www.nacocapital.com
Is this spam on Zero Hedge?
70% in 2010.
If you bought 2000 ounces of silver on January 1, stacked in a safe, locked the door, and forgot about it without any stops or trades or singing and dancing you would be up over 80%. But who would have thought to do that? ;) The only investment that did not go over 50% was ballistic wampum which appeared to stabilize -- but it will definitely go up now with everything else driven at least by fuel costs.
1 minute commercial.. ugh... commercial inflation?
Did they learn nothing from the 'Caveman' sitcom fiasco?
Commercials? On the INNERWEBZ?!?
Someone needs more practice operating their computer-machine device...
There is no inflation. My Deli Ham indicator tells there is no inflation. I just paid $3.99/lb , Same price i paid 2 years ago. Repeat, There is no inflation
Deli Ham is PEOPLE!
If you can afford Boars Head, Go for it. I will stick to my crappy cheap Deli ham. Also try Wunderbar german Bolonga. First ingredient is Pork Lips, But its $2.99 and fucking delicious
Boars Head is...RICH PEOPLE.
Thanks for the LOL :-)
+100 for soylent green homage and general hilariousity!
More than appropriate use of the word 'fucking'!
Is there such a thing?
Yeah, that's what's going on. It's the financial Pork Lips, and nobody seems to get it other than a bunch of ZH readers.
from this past Aug
Deli Ham from a company called Zemco in Buffalo??? vomit - you get what you deserve even at $3.99/lb
http://articles.cnn.com/2010-08-24/us/meat.recall_1_deli-meat-zemco-indu...
Although only marginally related to the topic, the 'Zemco' reference made me think of this http://www.bimbobakeriesusa.com/our_brands/bimbo.html, and the saying 'You are what you eat'.
ARE YOU SURE IT"S HAM? CAN"T FIND MY CAT!
No need to starve when the food disappears from the shelves!! Introducing USA's new "Support America Population Surplus Grant" administered via JPM, inspired by Jonathan Swift:
”I have been assured by a very knowing American of my acquaintance..., that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food...”
(a satirical recommendation that Ireland's poor escape their poverty by selling their children as food to the rich)
Baby Veal?
Hey, where do think "Swift's Premium Meats" come from, anyway?
"Come on baby let's eat the rich."
Motörhead
Pork being dumped on the market because grain feed is too expensive. Stock up on ham, Spam, etc.
I have been buying the bonless pork loins for about $1.69. Cut of each end for a Roast and slice the middle for chops. Yum.
Water added.
There are plenty of games to play with meats. Substitute fattier crappier meat stock, go to molded pieces rather than solid cuts, more and more water/broth added etc.
artificial growth hormones in everything from meats to dairy. . . add HFCS (High Fructose Corn Syrup) in everything else.
seriously, review your food choices with the awareness that the gov't is NOT interested in your "health" - in fact, the more ill you become the more the system profits. . . amrka is like one giant feedlot.
One of my brothers is a veterinarian; a dairy specialist in fact. In Vet. school he was taught that the byproducts of the artificial growth hormones stayed in the cow; it was physically impossible for them to cross the membrane barrier and get into the milk.
After he went into practice he did a little messing around with actual milk and he discovered...something different. He won't say anything because he knows people who have spoken up, and Monsanto and the USDA have destroyed them.
I second your last paragraph 1000%.
I have a Molecular, Cellular, and Developmental Biology degree.
I know many of the food and biotech companies inside and out.
We milk our own cow, thank you very much.
What a bunch of big girls' blouses; I find a touch of pus in the cream adds a silky texture to my morning coffee that I just can't get from your 'natural' ungulates.
Listen to TM, your Deli Ham may have not increased, but thats ONE item.ONE.
Also you do not know whats been added , or taken away from YO DELI HAM,likely pig/hog parts.
Remember the Toilet paper spot?, how many more times could you have wiped yo ass, with that OLD roll v.s New roll?.
Figure it out, cost per wipe.
If the US had to display price per 100g or price per Kg it would make it a lot simpler for the ordinary shopper.
But even in the UK they try to fool you by putting still putting some things in difficult to calculate amounts especially the liquids as some are still in pints for some and they sell the same product in litres alongside
that is funny
yes, silly me, the metric system is far too complicated for the US shopper
The metric system is dead, Long Live SI.
Which is obviously why they failed to put someone on the moon, while other, metric-using nations trod all over it. Oh, wait. The percentage of stupid people doesn't vary much between most places.
No, the main problem is that people have a memory for past prices tied to specific units. A lot of merchants took advantage of this, somewhat in reverse, with the Euro changeover. Some people want to use gallons or pounds or cubits or whatever the hell, so that's what they use. Anyone competent enough to be using math for real things (an endangered species, it seems) can estimate and convert back and forth between the different systems easily anyways.
The real reason we never went metric in the USA is because of the big gummit/corporate graft that dominates every other relationship here.
Government has contracts with every industry in the world, and no matter how you do it, someone wins and someone loses when you make a break from SAE to metric, and when you're talking about a multi-billion dollar contract for cotter pins, there is so much legal wangling that it simply never gets resolved.
If we had a functioning Congress, this would be trivial, but those idiots would rather protect individual lobbies than do anything for the benefit of the country as a whole.
Dudes, of you cant figure out cost per ounce, or unit...I'm jus sayin.
Heres the way you STOP this crap, STOP buying name brands Period.
Except for ones that are ALL you will eat.
We would be surprised how quickly it's Profit margin, or Increaed Inflation.
What is really funny is the 1 L container of cooking oil on sale for $6 and right there on the shelf next to it are the 500 ml containers of the same product going for $2.50.
Was I suckered? No Way!! I'm an investor so I'm waiting for the 2L container to go on sale at $15. BTFD!
Go to Wal-mart and look at the price of Shout! stain remover. Cheaper per oz. to buy a new spray bottle than a "value"-sized refill.
Or so I'm told - I don't fucking shop there. Or do my own laundry. God.
I've been noticing that on a lot of products. A higher per-unit price on "economy" sizes.
capitalising on the fact that most shoppers "remember" price cuts on economy sizing - couple that with the notion that many people are "stocking up" while they're still earning - it's sooooo corporate mindset, eh.
There is no consistent price/unit policy in stores. Some use them, some don't. The ones that do may use different units of measure on similar products to avoid comparison. Most consumers won't take the time to whip out a calculator and say F it. Most Americans wouldn't know how to convert units of measure anyway pints/oz/gallons etc...
Or with drugs for fucks sake! I can buy a gram or an eight ball, an ounce, a pound or a kilo? WTF? Is there no justice? How much does it really cost?
If companies started incorporating the "8 ball" between gram and ounce, I bet more people would become smarter shoppers.
Bolweevil
"Or with drugs for fucks sake! I can buy a gram or an eight ball, an ounce, a pound or a kilo? WTF? Is there no justice? How much does it really cost?"
No shit dude. When I cleaned up my act twenty odd years ago I was talking to some teenager. He had just bought a nickle bag which weighed five grams, even claimed it was a quarter ounce. I had to point out that seven grams were in a nickle bag and fourteen in a dime, twenty eight in an ounce. Or one finger, two fingers, all the way to four finger ounces.
yeah, we used to buy Lids.
I'm short on pot
My Casio fx-451 does all those pesky conversions for me...
If the US had to display price per 100g or price per Kg it would make it a lot simpler for the ordinary shopper.
Because... shoppers in the U.K. keep a spreadsheet of the prices of everything they buy, so that they'll know when prices go up per unit?
Somehow I doubt it.
I can save about 25 to 50% on my shopping by researching before I go out shopping... I only buy the items that I know are good value and wait for the other items to be discounted another time... the lure the shoppers into the supermarket trick items... but I only go for those items LOL
I do find it amazing that you can save sometimes up to 30% for the same type of item in the SAME shop on the SAME day... just by keeping your eyes open