Topic: Retailers make more profit than wholesalers during inflation. - page 4. (Read 946 times)

It’s true situation at all the time,the retailer will face the people on the close end.So they can sell at any price they want.They can sell at any price or with any percentage of profit even a 300 percentage of price above the real price.The whole sale guy will gain profit immediately with less effort,but the retailer will hold the product and make the people to come and buy and earn huge from it.

Despite the fact that we all know that there is inflation, the OP meant that retailers make more profits than wholesalers simply because they sell to final consumers after purchasing goods from wholesalers.
The problem is that they put a high profit margin on their goods because of inflation, even if they keep the goods in their store before the price increase; most of those retailers make more profit than wholesalers who sell to them in bulk.

Simple reason is that the people don't have enough money to buy wholesale due to the rising prices, hence the ones who can are presented with an opportunity to sell the goods with a slightly higher markup to allow other people to buy it in bits and pieces. Also, the wholesalers have no other choice but to keep their markups at the minimum to still make a sale and may even result to them closing shops or slowing down their restocking since not a lot is buying anyway. It's a chain reaction that is not pretty to look at.

Inflation times are the only one way opportunity retailers, brokers ans and middle men takes advantage of market price knowing that supply is low and demand is high, but it's actually a factor that brings more detriments to the economy of market orice and it stability sinfe whenever they inflated a price, the deflation of the same commodity price becomes difficult to be achieved since individuals have control over the current market price value they offer for an item, it's a thing of desire and satisfaction of needs, if the price offered is favourable or not the constant thing is that there will always be a demand, but it's killing the economy on a long run effect on price stability.

Transportation has often been touted as the most expensive charge in many economies and it looks like it could be the same here (perhaps that and the processing of the flour). Those two are technically owned by those who have made the biggest investment (vehicles and machinary) in order to produce the flour and deliver it so I think it makes sense they're first to put up their prices from inflation (it might not be or seem fair though).

Retailers are more harder to sell their products if they're looking for huge margin, while wholesalers they're sell their products much cheaper with bigger quantity which mean there's a big cash circulation. Retailers will buy the product from the wholesalers and there's no guarantee many customers will buy from the retailers. During the inflation either wholesalers and retailers just increase their price, so there's no reason if retailers is better than wholesalers.

Well, that's the time they can take advantage of using inflation as part of their business. Supplies are getting more expensive and at the same time, they can put more for their mark up prices.

Just look at these oil companies, the OPEC has cut the supply while their retailers are going to take advantage of it despite having the supply on their tankers that has been there even before the price increase and the increased of inflation rate.

Well, they've been in the business for so long and they know how to play this game and they don't care that the consumers, us, are the ones sufferring a lot.

I feel like companies are using the rising inflation as an excuse to increase prices more than necessary and making things worse. Especially companies that sell essential commodities are aware that consumers can't stay away and have to keep buying no matter what the prices. The politicians keep talking about economy downturns and that things will get worse, yet many companies have strong revenues and pay their employees big bonuses. I wish the government would keep an closer eye that companies don't increase their prices too quickly. Every price raise that is not necessary except to make higher profits will increase the inflation even more. Once the overall inflation is above 10%, the government should step in. Otherwise we face the risk of a downward spiral.

I don't know how did you come up with this conclusion. You should find and post some valid and accurate statistical data to backup your theory. Using one bakery shop as an example isn't enough.
The rich don't always buy from wholesalers. The rich are rich because they have big income and lots of assets, not because they are buying from wholesalers instead of retailers. The retail shop owners have costs and their costs are increasing during times of high inflation. The same thing applies to the manufacturers and the wholesalers.
The retail shop owners usually increase the prices as the last resort. They don't want to increase the prices, because the retail industry is so competitive. Maybe the bakery shop in your area doesn't have any competitors, so the owner wants to take advantage of his "monopoly".

My view, Perhaps a lot could happen under such conditions and there is no doubt that retailers and wholesalers make more profit, but the question remains where the money is made. The price of goods and assets is determined by the value that sellers receive for their goods and assets. The only way for sellers to receive more than what they get for the goods and assets they sell is if the goods increase in value.

Your analysis might be correct from some perspectives. But during inflation, the currency loses value and there is an increase in the price of goods and services. This would definitely lead to an increase in the cost of production. What the manufacturer simply does is increase the price of the goods and the wholesaler would push this extra cost to the retailer and finally, the consumers pay for all the extra cost. There might be some benefits of buying in bulk but the difference is sometimes not significant. Also buying in bulk also depends on your family size, house space, and electricity supply. It is also important to note that there are some essential goods that you cannot buy in large quantity because they are perishable or easily expires. Generally, inflation doesn't have any positive effect on any of the actors in the chain of distribution except the prices of goods and services are not adequately regulated and controlled by government agencies.  

 
You just calculated only the selling price of the bread. You didn't consider that the value of the currency has been reduced because inflation reduces the buying power of people. Also, the wholesaler incurs other costs like transportation, shop rent, etc, that would have also increased. Yes, the wholesaler is making a profit but inflation has the tendency of making it lose value. Inflation affects all businesses regardless of the goods they sell because they have to buy raw materials and pay for other services.

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The sizes of your pictures are too large. I think it would look better if you reduce them. You can consider reducing their size using this  

Do you think reduction in calculation of the wholesaler profit down to 12% is correct ? He also have increase in price after reopening the bakery, so if there is an increase his profit should increase also. It won't drop from 14% to 12% because his price didn't drop.

Price increase is what every business benefit from. It is a circle but maybe the retailer can benefit more for selling each one but to compare the turn over, the wholesale has more profit and advantage to sell more and have more return. And bread perish more in the store of a retailer than a bulk/wholesaler store. You also need to calculate the amount of bread that likely to perish in the retailer shop and remove it from the profit expectation.


What I see is during inflation and the increase in price that the percentage of increase result in more profit than what it is before the inflation and this is why it is inflation. When price change profit increase and the money lose value to the ability to buy more product. It move from one store to another, one commodity to another like a circle, you gain profit while you are selling your commodity in your store but you also can't purchase with at old price of the goods or commodity you need so you add more money to do that. That is how inflation is. It affect the business because you need more capital or money to restock your goods/commodities when they finish. The market price won't remain the same in inflation and it affect the economy.

There is a say that 'the rich gets richer and the poor gets poorer'. Retailers are making more profit than the wholesalers and manufacturer during inflation. The poor always buy from retailers because they are the final consumers, while the rich buys in bulk this means they buy directly from the wholesalers. Last week the bakery in my area closed down,due to inflation in flour price,thinking this will be the solution. There was no bread for three days. After three days,the bakery opened and everybody was happy but this time,the bread price increased with 40 naira. A pack of 6 was sold at 410 naira wholesale price,80 naira for one retail price.This shows that the retailer gets 70 naira profit after selling a pack of 6 which is 480 naira. When the bakery reopened a pack of 6 is sold at 450 naira to the retailer, the retailer now sells 100 per one,i.e 600 for the pack.The wholesaler buys from the bakery at the rate of 360 naira for a pack before shutdown and sells 410 naira, after re-open he buys at 400 to sell at 450 naira.
 

 From calculation we can see that before the bakery shuts down,the wholesaler was making a profit of 14% but after the bakery reopened he makes a profit of 12%. The retailer was making a profit of 17% before shut down but after the bakery reopened, he makes a profit of 33% which is almost double of his profit.
 Is it that as long as you are selling essential commodities, inflation doesn't affects your business instead you make more profit.