I love to listen to talk radio. I agree with conservative talk most of the time. This morning I was shouting at the radio in disagreement. I hope the driver in front of me didn't see me in his mirror and think I was saying some choice words about them!
The discussion was about the minimum mark-up law. If you are not familiar with it, booze, smokes and gasoline, all highly taxed items, must be marked up a minimum of 9% over cost. All other products cannot be sold for less than cost, with a few exception like closeout sales.
What really upset me about the discussion, no, it was more of a lecture, was the premise that the consumer was getting a bad deal presently. People, a business does not thrive on a 6% mark-up let alone selling at cost!
I hope our schools are teaching mathematics so our young consumers can figure some of this out. For example, if Kohl's is having a 50% off sale, what is the least that their mark-up could be? Give up? 100% I'm thinking that even at 50% off, there is still profit to be made so the mark-up is probably at least 110% or better.
So, who can sell at only 9% mark-up or none at all? General some multi-store business trying to put Mom and Pop out of business.
You've heard the phrase, "The rich get richer..." For a store just to buy a product, Mom and Pop are at a disadvantage. The middleman, called distributors, have layered pricing on their products. Buy above a certain dollar amount and you pay less for the items they distribute. Buy even more and you pay even less. Have more than one store? Now you really get the buying power. Become so big that you no longer need to buy from a distributor and you really make the money. Next time you buy something from a big box store, check out the tag. Often it will say "Distributed by..." themselves. Right there you are probably looking at at least a 10% to 25% savings on cost to the store . That means that you can often sell an item at the cost of what Mom and Pop PAY for it, still make a bit of a profit and put Mom out of work and Pop in the hospital with a coronary worrying about how he can make the business survive!
This marketing has made Waukesha lesser for it. We've lost convenient grocery stores. We've lost hardware stores. Downtowns suffer for it. Enjoying the quaintness of it and spending a few dollars here and there does not keep the doors open nor does it make the sale of the business attractive to anyone. Our downtown likely will not change much in the years to come. However, keep your eye on downtown Oconomowoc. If they do find a developer for Pabst Farms, Mom and Pop businesses will fold like a bad hand in Texas Hold-em. And it will not be another Mom and Pop doing the damages.
