Monday, August 28, 2006

Thought of the Day

Got this from Libertas:

Why is Wal-Mart evil for popping up everywhere and putting it’s competitors out of business but not Starbucks? I’ve done it: I’ve slammed evil corporate America while holding a Starbucks double latte, but it feels… Oh, I don’t know… Hypocritical?

I'll let you stew on that for a bit.


Matthew J. said...

You know, I never thought about that. Thank you for opening my mind to the hypocrisy that I so naively have held on to.

Matt said...

I love Wally World...sadly there isn't one for about 15 minutes of our apartment now...I guess that no different than it was in Texas...*shrugs*

But I despise it when people get mad at businesses for having a successful business plan.

If we think that Starbucks, Wal-Mart, Microsoft, and others are doing things unfairly, then we need to get our Congress and Senate members to legislate change.

If not, then we need to shut it and enjoy their products!

JTapp said...

That Libertas site is pretty interesting. I'm going to hope that the movies aren't as badly slanted as he makes them out to be. If not, I'll get depressed.

I think I'll probably end up using this example in class. That's a very good thought.

The difference between Wal-Mart and Starbucks:
Wal-Mart is out to sell goods cheaply. They drive local competitors out with lower prices.
Starbucks is out to sell goods expensively. $3.00 for a cup of coffee. The product they offer is higher-priced than normal competitors because consumers want to pay the premium for "Fair Trade" coffee.

So, Starbucks makes itself out to be both environmentally friendly and doesn't "exploit" its workers. Wal-Mart doesn't.

For another coffee place to compete they have to work hard to really differentiate. Offer pastries or an atmosphere that Starbucks doesn't have.

Most competitors don't do that. Nor do they use non-Fair Trade coffees and sell lattes at lower price (which I don't understand, I don't think consumers in Waco are THAT picky).

I buy my coffee as cheaply as I can get it. Thus, I no longer shop at Starbucks, nor do I shop at their equally high-priced competitors.

JTapp said...

I'm sorry for the wordiness of my previous comment, I guess i was thinking out loud.
I'll sum up my thoughts.

Wal Mart through supply chaining and bulk purchases provides goods very cheap. They pay their workers as little as possible to keep these prices down.

Starbucks through supply chaining and bulk purchases provides gourmet coffee relatively cheap. But, they actually pay their workers (home and abroad) huge benefits, thus selling gourmet coffee expensively. Rich people look at these things and say "everyone wins."

Wal Mart reduces poverty in this country through low prices.
Starbucks provides an expensive good to relatively wealthy people.

Wal Mart covers a host of goods with substitutes.
Starbucks apparently provides a good that there is no substitute for: gourmet coffee. If Folgers was a substitute, then rational people would buy more Folgers and put Starbucks out of business.

Currently, Starbucks and Wal Mart are facing declining sales as the economy slows.

In Starbucks case it's much worse off. It sells a luxury item. People will consume less if they earn less $. If the economy hits a recession next year, Starbucks will really suffer.

Greatmoose said...

I love it when our resident Econo-Expert pops in. Well done! Love ya, Tappy!

On topic, there's an interesting phenomenon with coffee (maybe Tapp can 'splain it). When MissSpeech and I were in Seattle this summer, we noticed that on nearly every street corner, there is a coffee shop. Not only that, MANY of those corners have a coffee shop on EACH corner. There's one we saw that had a Starbucks, a Seattle's Best, another common one I can't remember, and a local shop. You know what the crazy thing was? The local place had HIGHER prices than the other three, and it seemed to be doing well. Maybe coffee is like designer clothes. It's more expensive, so it MUST be better. Eh, whatev.

JTapp said...

Of course having all those shops together should keep prices down overall, but I'm amazed they can all exist in one market. My guess is the same as yours: designer coffee, designer price.