It usually doesn't work that way though. You are more likely to have 3 vendors selling an item at $7.00 versus 300 vendors selling an item at $3.50. The more competition there is the more beneficial to the buyer. And you won't have 300 vendors selling an item at $3.50 unless they are making a profit at that amount.
I don't think I agree with you on this. Perhaps if there was the case of a monopoly, the price might be higher than the 300 vendors, but as long as there's two or three HUGE companies competing against each other, you can be sure that the price is going to be driven down to just about as low as it can possibly be.
Think about it. Say Walmart is selecting either Vendor A or Vendor B (both are wholly independent of each other) to provide them with product X to stock in their 600+ stores nationwide (which is a HUGE amount of business).
Do you think that those two companies are going to mess around with high prices, or instead try to offer the lowest imaginable price to Walmart?
I think they're going to opt to try and offer the lowest possible price...
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But you see, those two or three HUGE vendors aren't in just one area. That would not allow them to acquire and turn the kind of volume they need to turn to get the prices down and still make a profit. I think one big box store that was not part of a much larger network would not be able to compete as well with the Mom and Pop stores because there would not be enough price and variety differential that the customers would give up the personal touch and convenience.
So take office supply. We used to have maybe a couple dozen or so smaller office supply stores in our market area. But once Office Max came in followed by Office Depot and Staples, there are now several of each of those big box stores in our area all competing with each other. They employ a lot more people than the small stores employed, but they offer a much wider variety and much lower prices than the small stores offered. And there are hundreds of each scattered across the country.
To compete with them in a nearby mountain community, a shop owner does stock most essential office supplies--pens, mechanical penicils, paper clips,, avery labels, etc. but also is the local UPS outlet, maintains a limited quick copy and fax service, as well as offering some additional products that people buy when they neeed them. When folks need just one or two items they'll dash in there and get it, paying a considerably higher price, rather than drive the 15 miles to the nearest vendor in the city. There are creative ways people find to compete.
Still, when we lived in that community, we fought tooth and nail--successfully--to keep a Wal-Mart Super Center from coming out there. We did not want to lose the quaint character of the rural community, we LIKED our small quaint shops and stores, and a Super Center woiuld have put most out of buisness. We figured Wal-Mart had plenty of other places they could locate.
If what you say is true, that the people who lived in that community didn't want a Wal-Mart, then Wal-Mart would not have had any customers, the customers would have remained loyal to the quaint shops and stores. Wal-Mart would have gone out of business rather quickly due to lack of customers. The big box stores put small stores out of business. The owners and employees go to work in the big box stores and have fewer problems and make more money than if they had stayed in business themselves.
There is almost no way that a big box store can compete with a well run and creative independent.
Communities that fight major stores usually end up with the store moving a few miles down the road. They still suck customers off the poorly run small guy who still goes out of business.