Stuff costs too damn much

[DrFaroohk]

What happened to the notion pricing an item based on the cost of materials plus your time plus expenses. Was it ever like that?

Nowadays it seems like the price for everything is materials + time + expenses + imaginary numbers made up to justify the insane price + a new beach house + cocaine + BMW.

I've heard it called hollywood economics, but it can be used anywhere. My favorite example to use is the gas station I worked at - they claimed that the little paper coffee cups cost like a buck apiece. So that's why they have to charge so much.

Except the little paper cup does NOT cost 1 dollar. It costs about 12 cents. I know this because I have personally seen the numbers. However, when we write off a cup, the idea is that it COULD have been sold, so the store is out 1.85, not 12 cents.

Even though those numbers are complete madeup bullshit they're allowed to get away with it. Shit costs too much.

[Andara Bledin]

I'm pretty sure that writing off unfilled cups at more than value is probably a very petty form of fraud. There's just not enough money to make it worth the effort to pursue versus places that are actually hurting others with their activities.

As for getting only what it took to produce an item... why would anyone go into business if they weren't going to be making any money?

^-.-^

[protege]

As for getting only what it took to produce an item... why would anyone go into business if they weren't going to be making any money? ^-.-^

That's why some of the 'cost' figured into a product, is actually profit. Companies can figure out what it costs to make, for example a vehicle, add in a little extra, and they're in business. They also know, that people will gladly pay whatever price the market demands--why do you think that many Toyota dealers were able to tack on a premium when the Prius first came out? They knew that they had a product...which was very much (and still is) in demand....and that people would pay for it.

They could get away with charging BMW money for those things. Years on though, the cost has come down somewhat. Not Cavalier money, but they're more reasonable now. They seem to be selling somewhere in the $20ks instead of in the 30s.

...and before people start going on about price gouging, it really isn't. Some people, just *have* to have whatever the hot item is. They want to be first to have it, so they'll pay more for the right to own it. Supply and demand.

Look at it in the reverse--remember when the Beanie Baby craze died off? Those stupid animals, which were then commanding serious cash...became worthless. You couldn't give them away, because nobody wanted them. Not as much demand, the prices came down.

[HYHYBT]

On your cup example: it depends. If you run out of cups and therefore lose drink sales, it's costing you the selling price of the drink (minus the cost of the drink itself, which is probably the same or less than the cup it goes in.)

[DrFaroohk]

Some of these people who are well off will go on about their expenses..."OMG my business costs me 100 billion dollars a year to run!" Well ok, that's great...so you made your 100 billion to cover that, but now you want ANOTHER 100 billion just because you feel entitled? And now you're all upset because your company went under? Wait a second, wtf happened happed to that 100 billion you just took in? Oh I see, your company went under because you took all that money out of it. Yeah, here's a bailout check.

[Andara Bledin]

In a pure supply and demand economy, how high a price is allowed to get is set by the consumer, not the provider.

This is a common complaint that comes up in video games with player economies. It never fails that the buyers will start bitching and whining about how high the prices on some items are. But if other people weren't willing to pay those prices, the sellers would bring them down.

Of course, the reverse also happens; sellers complain that it's the buyers' fault when prices are too low, but it's actually other sellers that set the lowest price of the market.

^-.-^

[bara]

I was working at a retail store back in high school and saw the markups on some of the items. Shoes were the worst.

The highest I saw was a markup of 2300%. I think they are making a teeeensy bit of profit there.
The lower markups were on electronics, they generally didnt exceed 110% but were often in the 50% range. Game systems sold at cost.

When I saw a 1000% markup on a 10 dollar shirt I remembered why I stopped buying shirts there. They were cheap and fell apart within a couple of months.

I wish I was making those numbers up. I really do. I was making 4.25 an hour at the time. I had started at 3.75.

That was minimum wage at the time and I could make that go a hell of a lot farther than I can with 8.00 an hour now working less hours.

[MaggieTheCat]

As a small business owner, I have to also be aware of things like overhead.

I make polymer clay charms. Polymer clay comes in 2oz blocks and the blocks can cost anywhere from $1.10 to $2.50 each depending on where I get them, how many I get at a time, if they're on sale, etc. I can usually get 12-16 charms per block of clay, so that's about $.21 per charm at most (and about $.07 at least.) I charge $4/charm, so I'm making usually at least $3.80 in profit per charm. I can usually make around 5 an hour, so that's about $19/hour for my time.

That might sound like a pretty good deal, but consider that I have to pay for booth fees, gas fees, hotel fees, parking fees, and other equipment/services (table, chairs, displays, electricity, etc.) At a GOOD convention, where it's in my city so I don't need pay for hotels, gas is maybe only $20 for the weekend and parking is another $30 for the weekend, I'm still paying around $200 just to be able to vend. Double or triple that if it's out of town and I need to drive further and/or get a hotel. If that's the case, at least 10 hours of my work is going toward just paying to be able to vend.

Obviously big box retail chains don't have to crunch numbers quite as much as I do, but they still have to pay things like electricity, heat/AC, maintenance on the building and grounds, etc. Yes, they do mark some things up way more than is necessary, but please don't expect anyone to price something based on cost of materials + time to manufacture alone. There's more to it than that.

[Greenday]

Wow, wait until I tell you about how most drugs cost less than a penny a pill! Then, if you don't have insurance, you could pay $5-$10 a pill! Talk about extreme markup.

I know they claim it's to make up for all the research and clinical trials and such, but damn, this is stuff people need to be healthy.

[Rapscallion]

There's also the way that humans react well to offers of 'save lots on this item we're making a loss on so you don't notice the extra profit we're making on other stuff'.

Sometimes those markups are strategy.

Rapscallion

[jackfaire]

There's also the way that humans react well to offers of 'save lots on this item we're making a loss on so you don't notice the extra profit we're making on other stuff'.

Sometimes those markups are strategy.

Rapscallion

*nods* Like giving your customers "free" text messaging but then charging them more for their rate plan to cover the difference

[protege]

Some of these people who are well off will go on about their expenses..."OMG my business costs me 100 billion dollars a year to run!" Well ok, that's great...so you made your 100 billion to cover that, but now you want ANOTHER 100 billion just because you feel entitled?

I don't see any "entitlement" here. People go into business to make money, not to break even. If they're only covering expenses, what's the point? There's no money to expand, or develop new products or services. Profitable companies don't sit on their asses. They're constantly working to stay ahead of their competitors. Those that don't...go out of business.

Look at what happened to the "Big 4" (GM, Ford, Chrysler, and American Motors--remember them?) in the 1970s. They were still building the same vehicles that they did in the 1950s--huge land yachts with shitty gas mileage. Sure, there were imports--VW Beetles, Hondas, etc. but the Big 3 didn't take them seriously. They felt...that such vehicles were a "fad." Bigger is better, in other words. Then the oil embargoes started, and people wanted more economical vehicles. What had happened, was our automakers ignored what was coming, and allowed imports to gain market share. What followed? American Motors nearly went out of business (AMC was taken over by Renault...and eventually sold off), Chrysler went bankrupt, and both GM and Ford had to rush new products to compete. They fell behind, and firms such as Toyota, Honda, and others...were able to get the jump on them.

Wait a second, wtf happened happed to that 100 billion you just took in? Oh I see, your company went under because you took all that money out of it.

Uh, you do realize that the $100 billion you were referring to went towards expenses, right? Things like employee salaries, utility costs, rents (or mortgages), insurance, delivery costs, vehicles, repairs, taxes (sales, income, and real estate), advertising, loan payments, etc. all of which are necessary for the business. If that's the case, that's where the $100 billion went. Contrary to popular belief, not all the cash made by a company goes directly into someone's pocket

[DrFaroohk]

No one said anything about breaking even.

Sometimes I Just feel like people have too much money and the balance isn't really right. The guy who actually pockets 10 million dollars could just as easily live comfortable on a a 10th or 20th of that amount.

Or, as I said before, someone's business FAILS, which means you didn't do your job, and yet you still get your massive 6-10 figure check, while the people you stepped on to get to the top in the first place are now out of a job and going to lose their homes.

[protege]

Sometimes I Just feel like people have too much money and the balance isn't really right. The guy who actually pockets 10 million dollars could just as easily live comfortable on a a 10th or 20th of that amount.

Sooooo if someone risks their own money and starts a business, they shouldn't be able to enjoy what they've worked for? What about celebrities? Granted, the lot of them are idiots...but would that mean they should fork over 90% of their fortunes, because you think they "have too much money" and could "easily live comfortable on a 10th or 20ths of that amount?" Aren't they directly responsible for driving up the cost of entertainment?

Or, as I said before, someone's business FAILS, which means you didn't do your job, and yet you still get your massive 6-10 figure check, while the people you stepped on to get to the top in the first place are now out of a job and going to lose their homes.

On this, I actually agree with you. Bonuses should be tied to the company's performance. Not because some tool from Harvard (or Yale, or Princeton, etc.) got himself/herself a good lawyer to negotiate. What I think should happen, is that if the firm has a good year, the employee gets a pay raise. A shitty year, means that they take a pay freeze or a cut.

[DrFaroohk]

Yeah I know a lot of what I'm saying doesn't make much sense to y'all...you're probably right about most of it.

I just get pissy when I hear them complaining. If you pocket more than 5 figures a year, you have NOTHING TO BITCH ABOUT when it comes to money. And I hear people woh make 100k, 250k, a million, ten million, complain about people like me, who are "Draining" all their money away and ruining their bank accounts.

Yet they are the ones in control of most of it. Ya know why you're losing money? Cuz you charge so much for your stuff. How about instead of making a 10 dollar profit on one item no one buys, you make a 1 dollar profit, and hopefully sell more than 10 of them.

Then there's no good help. Oh woe is me people at my business are lazy and they steal! Well gee whiz, that's what happens when you fire good employees like me because of either 1 little mistake, or just to be a dick and assert your penis, and then keep hiring your homies, or hiring criminals to make it look like you care about people, or hiring idiots to keep wages down.

And then oh no people (like me) are receiving some government assistance! And that's all on their tax dollars! Oh woe is me! Ya know what, if they didn't fuck with me on my employment, I'd still have a job and wouldn't need any of that. Don't like paying taxes? Then just pay ME, and instead of sitting on my ass collecting your money, I'll actually come work for you. Oh, don't want to do that? Then fuck off. And quit crying, because no one feels sorry for you!