Competition is GOOD!

Competition

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?

S

Not sure what to think of this one....

Sacre bleu!

I read in ze news that the French Senate has unanimously passed a bill that says online booksellers (read: Amazon) can offer consumers either a 5% discount or free shipping, but not both.

My first reaction was, "Why would the French government not want their constituents to get the best deal they could?"  Why, that's just downright un-American!  Umm....wait....

But then I realized they're just trying to keep the smaller booksellers from going out of business.  They're just trying to save jobs.  Hmmm...

But....but....free enterprise....the market....   

It's a real conundrum for sure.  Of course entrepreneurs should be encouraged to bring their new ideas to market.  What if the old school had tried to stifle Thomas Edison or Henry Ford or Steve Jobs?  But at some point you have to wonder how far this should go.  

It's one thing to keep the competition on their toes, but if pricing becomes so predatory (prices so low, sometimes at or even below cost....at least until they get a near-monopoly) they force the smaller competitors out of business entirely, is this really in the consumers best interest?

I think we're now seeing that airline consolidation in America is going to work against the consumer.  (Check fares on the "low cost" carriers.  They're not so low any more.)  It will be great for the airlines and their stockholders, but consumers will pay more.

And now that just 5 big banks control the majority of the banking biz, do you see yourself getting better service or lower fees?  When is the last time you got a free toaster from a hungry bank wanting to gain market share?  Their attitudes sure changed, didn't they?

Major appliance manufacturers are worried, too. That's why, contrary to popular opinion, the big box retailers (Home Depot, Lowe's) do NOT get better wholesale pricing than the mid-sized retailers.  They know that if the big boxes get better pricing and put the smaller guys out of business, then the 2 boxes will in effect "own" the manufacturers.  The manufacturers don't want to lose control.

So more competition is good.  The government should just butt out and let the market do it's thing.  And less competition is bad.  The government should step in and make sure the big don't get too big.  (Don't kid yourself.  Our anti-monopoly regulators are not at all pro-active.)

DOH!  See, conundrum.  We don't live in a black or white world anymore.  Think about it.

S

Dateline: Hotter 'n Hell, Texas

It's really odd for me to see weather reports from YankeeLand (defined as any place north of the Texas/Oklahoma border...aka the Red River) where it's hotter than it is here in Hell...er...Texas.  We're expecting 104 today, but it will feel more like 110 the weatherguessers warn.  While many will be at the area lakes today trying to keep cool, I won't be one of them.  Lakes just seem dirty to me, plus fish poop in there!

This would be much more my style, except on weekends it seems to be overrun with little kiddlettes.  I'm guessing all the divorced dad's get their DNA for the weekend and park them here while they admire the stunning 'birds' lounging around, showing off their attractive plumage.

Before it gets too much hotter K and I are making a run to the farmer's market for some cantaloupe, watermelon, corn, and whatever else looks good.  Probably have a bite to eat out, too.  I'm also going to Lowe's for some wood filler, as my dog Luke all of a sudden seems to think he's part beaver:

This particular window sits right on the floor, perfect for him to sit and see the world outside.  Apparently he was too lazy to get up and walk to his dog bowl, and this was the result.

That's all for now.  I've got to burn up the roads and get back before the concrete melts.  Stay cool everyone.  

S