Tuesday, October 25, 2016

Competition is GOOD!


I just saw an American Express ad on TV urging its members to do business with small, local businesses and not just the mega corporations.  Awww....it's that nice of them, looking after the little guy like that?  How sweet.  What's that....ulterior motive?  Why yes, yes they do.

This reminded me of a conversation I had with a high-up-the-ladder marketing guy with Lowe's a few years ago.  He told me that consumers had the impression that, because of their volume, Lowe's (and Home Depot) received better pricing from appliance manufacturers than the smaller local retailers.  He said that was not true, and that they in fact paid a bit more.  I asked why that was?

He told me that the two large box stores combined already accounted for something like 50% of all appliance sales.  The appliance manufacturers understood that if they allowed the small retailers to disappear, and Lowe's and HD had it all to themselves, the two big boxes would effectively OWN the appliance makers.  They would bark "jump", and the manufacturers would have to reply, "how high, sir?"  Therefore they gave the small retailers a slightly better price to keep them competitive and in business. 

Until recently American Express was the only credit card the giant members-only store Costco accepted.  Ten percent of all Am Ex cards were issued thru Costco, and 20% of Am Ex total loan portfolio was with Costco.  Feeling like they had the power to pull American Express's strings, Costco demanded that Am Ex cut their processing fee and raise their rewards program, both benefitting Costco and hurting Am Ex.  

American Express realized the folly of having too many of their eggs in one basket and bid Costco adieu.  Now they're trying to boost their business with thousands of small retailers so as to never be held hostage like that again.  And that's, as Paul Harvey would say, "The rest of the story."

So with this in mind, please tell me why we let the Big Six banks (JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley) control roughly half of all American banking, with the other half divided up among roughly 6,000 "others"?  Tell me again why we shouldn't break up the Big Six?

Who do YOU bank with?



  1. We bank with Chase but I'' not particularly happy with them.

  2. They broke up AT+T and look how that turned out!!

    Oh, wait.

  3. I bank with Comerica which after decades being headquartered in Detroit moved to your neck of the words to save on taxes.

  4. We bank with Wright Patt Credit Union (she says self-importantly). Of course, we have credit cards through those other evil entities...

  5. Ha - your story is how we ended up with a free Costco membership. When Citigroup got the account with Costco, the employees there all got free one-year memberships. So my husband got one, too (during his last day of employment there, hehehe). True to form, there were some major issues when Citigroup's Visa card "went live" in Costco.

    We bank with a semi-major bank - they have branches throughout the Southeast. We try to stay away from the "big monster mega banks" (as Clark Howard calls them), but sometimes there's no way around them.