Yup, stores realized they could make more money while simultaneously dealing with less overhead.
Eggs are a great example. Let’s compare a $2/dozen vs $6/dozen difference. With $2 per dozen, you need to sell 50 cartons to make $100. Consider that you also paid for each carton, had to ship them into the store, pay people to stock the shelves, pay rent for the store, pay to keep the store lit and cooled, unsold product spoils, etc… And your margin probably isn’t that great on that $100. Let’s say your overhead expenses are ~$1.80 per carton. You probably spent ~$90 in overhead, so you only actually netted ~$10 in profit.
Now let’s do the same math with a $6 carton. You only need to sell ~17 cartons to make the same $100. And since you’re selling fewer cartons, your overhead expenses have dropped; Some of the expenses (like rent and utilities) haven’t changed, but you’re not paying as much in shipping, there’s less waste from spoilage due to smaller back-stock, etc… Let’s say that all combines to reduce your overhead per carton by 5¢. So now you’re paying ~$1.75 per carton. That 17 cartons would have only cost you ~$29.75 in expenses. So now you have made over $70, instead of only $10. All while comfortably selling less.
And of course, there are two big losers in this scenario. The first is the producer. The egg farmers. Suddenly, their demand has dried up. Not completely, because food is a fairly inflexible demand… But people are increasingly avoiding them if they can find cheaper alternatives. And that’s exactly what we have seen; Farms are almost universally in the red right now, and Trump just followed that up with a one-two punch. First, he removed a lot of their cheap labor (immigrants) and then he killed a bunch of subsidies that would have kept those farms afloat. But hey, they got what they voted for, right?
The other big loser is the consumer, who is suddenly struggling to feed themselves and their family. And it’ll likely only continue to get worse.
It’s pretty easy to have an uptick in profits when you charger more. Eggs are still double what they were a year ago. Because why not.
Yup, stores realized they could make more money while simultaneously dealing with less overhead.
Eggs are a great example. Let’s compare a $2/dozen vs $6/dozen difference. With $2 per dozen, you need to sell 50 cartons to make $100. Consider that you also paid for each carton, had to ship them into the store, pay people to stock the shelves, pay rent for the store, pay to keep the store lit and cooled, unsold product spoils, etc… And your margin probably isn’t that great on that $100. Let’s say your overhead expenses are ~$1.80 per carton. You probably spent ~$90 in overhead, so you only actually netted ~$10 in profit.
Now let’s do the same math with a $6 carton. You only need to sell ~17 cartons to make the same $100. And since you’re selling fewer cartons, your overhead expenses have dropped; Some of the expenses (like rent and utilities) haven’t changed, but you’re not paying as much in shipping, there’s less waste from spoilage due to smaller back-stock, etc… Let’s say that all combines to reduce your overhead per carton by 5¢. So now you’re paying ~$1.75 per carton. That 17 cartons would have only cost you ~$29.75 in expenses. So now you have made over $70, instead of only $10. All while comfortably selling less.
And of course, there are two big losers in this scenario. The first is the producer. The egg farmers. Suddenly, their demand has dried up. Not completely, because food is a fairly inflexible demand… But people are increasingly avoiding them if they can find cheaper alternatives. And that’s exactly what we have seen; Farms are almost universally in the red right now, and Trump just followed that up with a one-two punch. First, he removed a lot of their cheap labor (immigrants) and then he killed a bunch of subsidies that would have kept those farms afloat. But hey, they got what they voted for, right?
The other big loser is the consumer, who is suddenly struggling to feed themselves and their family. And it’ll likely only continue to get worse.