Like why can’t a head of lettuce go back to costing 1 cent?
Or, maybe more realistically, after dealing with crazy inflation for the last couple of years, why can’t prices just go back to pre-pandemic, pre-inflation levels, once the factors that *caused* the inflation in the first place have been resolved?
In: 5
The price you are charged at a store (or online) for a product is set by the retailer based upon covering quite a few expenses that they are juggling. The obvious cost is that retailer has to purchase the item you are buying either directly from the manufacturer, or sometimes they buy through a distributor who also raises the wholesale price a bit to cover their (the distributor’s) costs.
Additionally the price has to cover a number of other costs including:
* shipping (to the store or a warehouse)
* the cost to rent and operate that store or warehouse
* the salaries of their staff including the sales team, accountants, HR staff, workers who handle the actual inventory, etc.
* they have to cover losses from items that are spoiled (damaged during storage or shipment, etc.) or “shrinkage” (theft, either by a customer or an employee)
* Then there are a variety of taxes and fees that they have to cover. Some businesses have to pay for special licenses to sell certain products, etc.
* Overwhelmingly most businesses use debt to fund startup costs or growth, so they have to repay that debt with interest.
There’s probably several other costs involved that I’ve forgotten to mention, but you hopefully get the point that before the a retailer makes any profit they have to factor a lot of expenses into the price they set. While some of those expenses tend to fluctuate up and down, over all the costs involved to do business tend to go up. Even when one of these costs drops significantly, it often only has a modest impact upon the price that the retailer needs to charge to cover the other costs and turn a profit.
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