this post was submitted on 21 Jun 2023
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For real. This "our profit margin hasn't increased" argument is BS. If it's a percentage, it's increased at the rate of YOUR inflation. That's why you can simultaneously make the profit margin argument, while toting record profits at investor's meetings.
If I sell lettuce at $1 and make $0.10 profit, I have a 10% profit margin. Mark every step of the way up to my store and sell the same lettuce for $10 and make $1 profit, I STILL have a 10% profit margin. But now I can also tell my investors I have increased profits 900%
I'm sure there's lots of arms length vertical integration to spread these higher costs around to as well. Example: Rogers stores, service techs, etc are all "technically" subcontractors. Numbered companies with Rogers logos on everything.
I'd be pretty damn surprised if Loblaws et al don't have their hands in the logistics ends of their businesses. ___
They're so vertically integrated that they charge themselves several times along the chain, and apply as many hidden markups as they want. IIRC, eg, they own the property the stores are on, but they hold the real estate under a separate company so they can charge themselves rent. They own or are major investors in the transport and logistics.
I often see people arguing online that private profit leads to efficiency but we see here that it is doing the opposite. Lawblaws isn't obliged to maximize good to society, or even consider most harms to non-investors. They could be using their deep integration to minimize cost for consumers while still covering all their costs and making enough fair (ideally regulated) profit on that to attract the necessary equity. Instead they do almost the exact opposite, by structuring their business to maximize cost to consumers to the most they can tolerate. I really hope we can do something about it, but Canada was literally created by corporations to exploit humans and natural resources, so I won't hold my breath.
I saw McDonald's use this tactic in The Founder. They franchise (No Frills) to remove additional costs for themselves, but it also means they can bully owners with the leasing rates. win-win
"Well we had to increase our prices because rent went up so much recently. We've managed to keep labour costs low, though!"
Same way Ticketmaster operates.
They use "demand based ticket pricing" and own all the third-party resellers.
So they can release tickets, buy them all themselves through their third party resellers, claim high demand and increase prices.
Corporate landlords are doing the same thing with homes.