Rick Scherle 
Member since Sep 24, 2014


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Re: “The Dark Side of Amazon

It is a common misconception that enterprises like Walmart and Amazon suck money out of the local community by forcing local businesses to close and raking the money into faraway coffers.

In reality, the exact opposite is true. Small businesses, because they are inefficient and lack purchasing power, charge everyone in the community more money for things than big retailers do. But that money doesn't stay in the community. Some of it goes into the pockets of the few people who own or work in local retailers, but the majority of it leaves the community because small retailers pay higher prices for the things they are reselling.

In essence, this inefficiency is a tax on the entire community, with the money being paid to wherever the merchandise is produced (whether that is Cincinnati or China).

Large efficient retailers produce what economists call "consumer surplus," the difference between what consumers are willing to pay for a commodity and the actual price paid by them. Consumer surplus is money in everyone's pocket that they can use however they please.

If you live in a community of 10,000 people who save $20 every week they go to Walmart, that's $11.4 million being poured into the community every year. It raises everyone's standard of living by increasing their disposable income.

Sure, there may be a few less jobs and small stores in the community, but those weren't free. They were being paid for by a fraction of those higher prices. But again, most of that money was leaving the community or just evaporating in inefficiencies (the retail equivalent of friction and heat).

I am not trying to justify Amazon's or Walmart's business practices. I believe that everyone deserves a good job and a good wage. But the idea that communities don't benefit from the lower prices provided by efficient retailers is simply wrong.

13 likes, 15 dislikes
Posted by Rick Scherle on 09/24/2014 at 5:00 PM

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