It all depends on your income and how sustainable it is for as if you read The Price of a Bargain – The Quest for Cheap and the Death of Globalization by Gordon Laird published by McClelland and Stewart Ltd, Toronto, 2009. If your income is over the average then the price of a bargain is a good thing. If you are on the less than average, then it seems the world’s forces are working against you. In a service economy such as the one in the US, upwards of 40% of the economy is from consumers buying things or shopping. If the average person is looking for a bargain and the stores such as Walmart have done a great job in delivery of that model, then it means other things to the economy. One of Walmart greatest strength is its warehouses are built around just in time and bills only get paid when sales are done. It is the supplier that takes the risk of its stuff not being sold, not Walmart. Walmart has some of the best organization in its warehouses in the business and great enough strength that roughly 50% of Americans go to a Walmart once a week.

Walmart has also pushed prices down to increase volume or it keeps margins relatively low for a mass merchandiser. One of the many ways it does this new products. In the book,  a 2007 study examined an average of 650,000 UPCs annually over nearly a decade; more than 80% of the products available in 2003 did not exist in 1994. Of those 650,000 product codes, more than 60% had been discounted to the seller’s minimum reservation price. In other words, the majority of the products were sold at the very lowest price that retailers and manufacturers could tolerate.

The good thing for consumers is a vast selection of goods, hopefully reasonable quality at low prices, the bad thing is if consumers decide to change or not buy as much, the margins of error for the company are very thin and could lead to bankruptcy. If everything is treated like a commodity, there is a drive to lowest cost and lowest margins. The drive to margins means saving costs on waste; saving costs of wages; and saving costs on just about everything possible. It also means it does not take much for the system to show its flaws.

Linking to dividend paying stocks, it is worth admiring how the retailing industry works, there are numerous things to learn and see how the system adapts to trends and demands new items. It also expects most consumers to buy into the system. It is better for investing to look towards companies which have greater margins and are essentially regulated for as an investor you want a relatively consistent return over the long run. For you as an investor monopolies are a good thing; as a consumer you may enjoy the fierce discounting.

There are more questions than answers, till the next time – to raising questions.