> The people choosing to shop at the cheaper store are also benefiting, otherwise, they would not have switched from shopping at the higher priced store.
The strategy is as follows:
- Move into small town that can only support one store.
- Undercut existing store, using corporate resources to stay afloat while doing so.
- When other store closes, raise prices.
- Enjoy your monopoly position that's near-impossible to disrupt due to town not being able to support two stores.
Yes, you are correct that some consumers briefly spend a couple of months benefiting from lower prices during step two. The raised prices in the years following make up for that, not to mention the decrease in quality and variety, and the destruction of the town's local businesses, speeding the demise of the town.
Once the new store raises prices, why can another cheaper store not come in and do the cycle over again?
My contention is the cheaper store’s success is not the root cause, the cheaper store’s success is the symptom of a sufficient portion of the local populace losing purchasing power.
It's hard to push into an existing market already controlled by a corporation worth billions. They have so much money in the bank that they can win any war of attrition. So nobody ever really tries.
> Once the new store raises prices, why can another cheaper store not come in and do the cycle over again?
Well, then the first dollar store can lower prices to prevent that. Doing this requires a large war chest. The store needs to take a loss for months to years until its competitor dies.
A Dollar Tree or a Dollar General can do this easily against a locally owned store. But once a Dollar Tree has moved in, a Dollar General won't, because both companies have the resources to back an individual store indefinitely, and neither will make any profit. So there's no use. Having one corporate-owned dollar store in a small town is a very stable minimum.
> My contention is the cheaper store’s success is not the root cause, the cheaper store’s success is the symptom of a sufficient portion of the local populace losing purchasing power.
Completely disagree. The cheaper store's success is a symptom of abuse of the market by a larger company. In places without discount stores, people get along just fine, and in fact protest against the opening of such stores in their town. These stores don't open stores in places where "the local populace has already lost purchasing power" and are seeking somewhere new to buy things, they open stores in places where they can create and enjoy a monopoly position due to the relatively small size of the local population.
This isn't something you'd see in an urban area. But there are countless examples of this happening across Eastern Oregon or Nevada.
> The people choosing to shop at the cheaper store are also benefiting, otherwise, they would not have switched from shopping at the higher priced store.
The strategy is as follows:
- Move into small town that can only support one store.
- Undercut existing store, using corporate resources to stay afloat while doing so.
- When other store closes, raise prices.
- Enjoy your monopoly position that's near-impossible to disrupt due to town not being able to support two stores.
Yes, you are correct that some consumers briefly spend a couple of months benefiting from lower prices during step two. The raised prices in the years following make up for that, not to mention the decrease in quality and variety, and the destruction of the town's local businesses, speeding the demise of the town.