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Deto t1_j9gdq93 wrote

Reply to comment by daveed4445 in [OC] How Walmart makes money (they just released earnings for the fiscal year ending January 31) by IncomeStatementGuy

It also looks extremely fragile. If the cost of sales goes up just a little faster than then revenue then BAM, all profit gone.

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TypicalCraft7 t1_j9hgnid wrote

That's not how it works at all. If costs go up, guess who pays? You do. It doesn't come out for their bottom line unless demand drops.

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Deto t1_j9hv2i7 wrote

Not all goods have inelastic demand. Costs going up means people will buy less.

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TypicalCraft7 t1_j9igy75 wrote

It's Walmart. Most of their products have relatively inelastic demand in that the are low cost consumer goods.

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Deto t1_j9ihlp3 wrote

I mean, if your suggesting that Walmart could raise prices and make more profit then why aren't they doing that already? Like if the price right now is X, then the only reason it's not X+.50c is that they've determined they would sell less at the higher price point - enough less to not offset the increased profit.

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TypicalCraft7 t1_j9ihtb1 wrote

They can't do that because they have competition who would charge less.

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drapparappa t1_j9i4xex wrote

I guess nobody has been paying attention to inflation

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LanchestersLaw t1_j9hk5h1 wrote

Walmart is the biggest purchaser of many goods which puts it as the counterpart to a monopoly; a monopsony (single purchaser instead of single producer).

Walmart has incredible negotiating power, when there is a price shock Walmart forces its suppliers to take the hit with the threat of never buying from them again; which it can do. One of the efficiencies of Walmart’s economy of scale is that it pays below market rate for most of its goods because of bull purchase efficiencies and negotiation power.

https://www.econ.ucdavis.edu/events/papers/1014JustinCWiltshire_JMP.pdf

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Real_Jackraps t1_j9hdiz2 wrote

Only if you have absolutely no idea what you're talking about.

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incraved t1_j9hgf01 wrote

I feel like they probably factor that into their business model somehow

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