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Thread: Why so inexpensive?

  1. #1 Why so inexpensive? 
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    Baffling economics.

    I purchased a 5 pound box of Mandarin oranges from Walmart. Originated in China. The cost was $3.89. About 30 oranges ( quite yummy).Why isn't the cost of this box of oranges 20 times this?

    Land is needed. The trees were planted, pruned, watered, etc. The oranges picked. Oranges transported to a packing warehouse. Truck then sent to a port. Cargo loaded on ship. . Unloaded at a port. Loaded on a truck to Walmart Distrubution centre. Loaded in a truck and driven a couple thousand kms to Calgary. Unloaded at store. Placed in store in produce section. Ran through the cashier.

    The box the oranges packed in quite sturdy. Cardboard printed. Labels, etc. Box had to be made somewhere in China and shipped to where the oranges were packed. Walmart has costs:Trucking, warehouse, store staff, managements, systems... Of course, they also do this to make a profit.

    .Even if labour cost was zero in China...and even if the box was full of dirt, how can I walk out of the doors of Walmart in Canada with a 5 pound box from rural China for$3.89? Walmart's cost and profit must be at least a dollar. Did the Chinese company sell it to Walmart for $2.89? How does China do it? I can't send an empty box this size 50 kms for $ 2.89.

    This is as enigmatic as quantum theory.


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  3. #2  
    Forum Radioactive Isotope cosmictraveler's Avatar
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    They make money because they sell thousands of tons of them. So that one box of them might cost them 15.00 each they make millions by selling allot of them.


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  4. #3  
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    There has to be to it than quantity. California produces more produce for our market and way more cost in the grocery shelf. Bananas from the Americas aren't even this inexpensive and they don't come in a box.
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  5. #4  
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    Quote Originally Posted by Fossilborealis View Post
    There has to be to it than quantity. California produces more produce for our market and way more cost in the grocery shelf. Bananas from the Americas aren't even this inexpensive and they don't come in a box.
    I have bought a few items from China, sometimes costing as little as $1 with shipping included. If I wanted to send something to China via UPS, it would cost me R400 (about $40). The reason is that they ship containers full of stuff. I suppose there is probably a cost per container and maybe a weight element as well. But the point is, if you worked out the shipping costs per item, it would be a tiny amount.

    Other factors might be that there is no middle man or that rural Chinese simply don't need as much money as Californians to live comfortably according to their local concept of it.
    Disclaimer: I do not declare myself to be an expert on ANY subject. If I state something as fact that is obviously wrong, please don't hesitate to correct me. I welcome such corrections in an attempt to be as truthful and accurate as possible.

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  6. #5  
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    Kalster. Same here. I've purchased parts for my guitars, microscopes, etc. from China. Once paid 1.99 for an electronic tuner and it was in my mailbox a week later. Spooky.When I go to Ebay for a specific item, I'll often first limit a search to China. Cheaper than getting it even within my own country.
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  7. #6  
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    Add in that China is the largest producer of containers for container shipping. Why ship out an empty container?
    China is the world's biggest producer and consumer of steel.
    The economics is a really complicated beasty. If it occasionally seems like someone understands it, remember that even a broken clock is right once or twice a day.
    On the down side, I have tools from china for which I cannot get parts. Seems a shame to have a once valuable tool that is worthless without a 25 cent part.
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  8. #7  
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    Quote Originally Posted by sculptor View Post
    Add in that China is the largest producer of containers for container shipping. Why ship out an empty container?China is the world's biggest producer and consumer of steel.The economics is a really complicated beasty. If it occasionally seems like someone understands it, remember that even a broken clock is right once or twice a day.On the down side, I have tools from china for which I cannot get parts. Seems a shame to have a once valuable tool that is worthless without a 25 cent part.
    On the flip side. In the 80's we ordered our microscopes from Switzerland. Several thousands of dollars. Any special lenses were another thousand. About a decade ago we turned to a manufacturer in China. Thousands went down to hundreds for the same quality. Better still, when we needed a replacement part it was custom made within days and off to us. I used to picture a cartoon like event happening. A whistle blows, a drawing of our specifications being put up on a big screen while workers all ran hither and yon. The part made. Another whistle blows. The part drops in a box carried by a guy on a bicycle pedalling out to the airport.
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    I work in retail grocery and in addition to the sheer volume buying power of Walmart, there is also the retail practice of 'loss leader' whereby specific products (often seasonal) are purchased with the specific intention of selling them at a marginal loss because they will bring people into the store. At this time of the year, mandarins are on almost everybody's list, the traditional 'Christmas Orange' for fruit bowls and stocking stuffers.

    Loss leader - Wikipedia, the free encyclopedia

    Very few people are disciplined enough to buy only the loss leaders. Those who are can do very well with their spending money.
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  10. #9  
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    Scheherazade...thanks. Makes sense. The Walmart has these boxes of mandarins at the front of the food section. Yup, lures me in.

    There is a large grocery store (Safeway) at one end of the mall...Walmart at the other. Walmart food prices are about 25 to 35 percent less. Weird thing is a friend at Safeway says grocery stores have little mark up on many items and impossible to compete with Walmart. It's common to see Asians at Walmart filling their carts to stock their own family store....like 30 jugs of milk, 25 tins of canned fish, etc.
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  11. #10  
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    Quote Originally Posted by Fossilborealis View Post
    Baffling economics.........This is as enigmatic as quantum theory.
    Sure is, and just like quantum theory what you get as a classical outcome is determined by an incredibly complex array of inputs.

    Unfortunately the consumer is so detached from these inputs that in their decision they may simply focus on one objective, best bang for buck.

    What they may not realise however (without sufficient product labelling etc.....say with Mandarins) is the potential that they may have actually tacitly supported in their purchase decision something that may actually override the benefits delivered by that purchase decision. For example, the conditions of farmers, labour standards and treatments, governmental interventions in the supply chain that may be used by countries to support for their own political stability......etc. Yes the cost effiencies of globalisation can be significant, but what is the actual price you pay?

    If in doubt regarding this.....and you are content with your local community.........then buy local. The additional price you pay for locally sourced product may be higher, but you may have better peace of mind that your money has been spent wisely...........(authorised and spoken by your local farmer) :-))
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  12. #11  
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    No oranges grown locally. This is Canada. Happy to buy globally...I remember when the only produce available in winter were root vegetables and apples. Now we have a wide variety of fruits and veggies 365 days of the year. Oranges from China, grapes from Ecuador, melons from Mexico. Sure beats processed crap. I like international interaction.

    Happy to buy Chinese products. China has invested over 20 billion just this past year in our local energy sector. More billions in the housing market.Our economy kept chugging along in the last decade while much if the world was tanking.
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  13. #12  
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    Safeway most likely doesn't have much of a markup. Walmart has a long history of using its buying power to force the companies to sell to them at a lower price then the would otherwise. It also has forced numerous small businesses under due to the lack of any way the mom and pop stores can compete with forced price dropping.
    If more of us valued food and cheer and song above hoarded gold, it would be a merrier world. -Thorin Oakenshield

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  14. #13  
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    CONTAINERS CONTAINERS CONTAINERS however here CONTAINER isn't cheap!
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  15. #14  
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    Babe...I find food on Maui expensive in the grocery stores. I could get bananas and tomatoes at less than half the price at roadside stands....also way tastier. However, only been there in February and March.

    Paleoichneum. Walmart has little impact on mom an pop stores here. More on the bigger grocery chains. Folks here go into a local corner store for the convenience, a cup of coffee, six pack, lottery ticket, etc. rather than price. I do 99% of my shopping at Walmart (5 minute walk) and thrift stores....the latter more for unique items.
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  16. #15  
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    What size town are you in? There are a number of small eastern Washington population centers where Walmart moved in and the family owned groceries/hardware stores have gone under as a result.
    If more of us valued food and cheer and song above hoarded gold, it would be a merrier world. -Thorin Oakenshield

    The needs of the many outweigh the need of the few - Spock of Vulcan & Sentinel Prime of Cybertron ---proof that "the needs" are in the eye of the beholder.
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  17. #16  
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    Quote Originally Posted by Paleoichneum View Post
    What size town are you in? There are a number of small eastern Washington population centers where Walmart moved in and the family owned groceries/hardware stores have gone under as a result.
    Generic small stores were vanishing long before Walmart came to Canada. Some for economic reasons and many because a lot more opportunities for the children. Small grocery stores were often operated by first generation immigrants. Their kids are now engineers, teachers, etc.

    Any entrepreneur needs to be innovative and offer a niche product or service to attract clientele. We have designer stores, health food stores, custom woodwork shops, etc. that do quite fine next to Walmart. The retail market here is quite healthy. New stores, malls opening all the time.

    You can't compete with Walmart on a can of Heinz soup for 75 cents, but you can offer an alternative organic soup for a dollar fifty.
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  18. #17  
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    Quote Originally Posted by Fossilborealis View Post
    You can't compete with Walmart on a can of Heinz soup for 75 cents, but you can offer an alternative organic soup for a dollar fifty.
    You may well have hit the nail on the head there, most small independent retailers just simply cannot match the economies of scale of the big supermarket chains. But the advantages of being independent mean they can offer a whole other product range to customers looking for more exclusive or even just different foods than all the same ones found in every other supermarket.

    I think they can also help to create that friendly and welcoming atmosphere that can so often just simply be lost in some of the vast food superstores that exist today, it's always nice to have that friendly local touch.

    Generally because supermarkets have to have mass market appeal they cannot cater to specific clientele which makes it's harder for them to have that luxury touch of the smaller unique stores, but it's all swings and roundabouts.

    It really just seems to be a choice of cost & convenience for the supermarkets versus the friendly individuism and unique products of the smaller stores, but there still seems to be a place for both to coexist.
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  19. #18  
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    Supporting the local businesses also has the advantage of keeping the money spent much more in the community.

    (Also I don't personally shop at Walmart based on the long history of worker rights complication and support of anti-LGBT legislation)
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    If more of us valued food and cheer and song above hoarded gold, it would be a merrier world. -Thorin Oakenshield

    The needs of the many outweigh the need of the few - Spock of Vulcan & Sentinel Prime of Cybertron ---proof that "the needs" are in the eye of the beholder.
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  20. #19  
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    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by Fossilborealis View Post
    You can't compete with Walmart on a can of Heinz soup for 75 cents, but you can offer an alternative organic soup for a dollar fifty.
    You may well have hit the nail on the head there, most small independent retailers just simply cannot match the economies of scale of the big supermarket chains. But the advantages of being independent mean they can offer a whole other product range to customers looking for more exclusive or even just different foods than all the same ones found in every other supermarket.I think they can also help to create that friendly and welcoming atmosphere that can so often just simply be lost in some of the vast food superstores that exist today, it's always nice to have that friendly local touch.Generally because supermarkets have to have mass market appeal they cannot cater to specific clientele which makes it's harder for them to have that luxury touch of the smaller unique stores, but it's all swings and roundabouts. It really just seems to be a choice of cost & convenience for the supermarkets versus the friendly individuism and unique products of the smaller stores, but there still seems to be a place for both to coexist.
    Yes, for sure. The classic case for me are hard to find grains, rices, beans, etc. We have a store that will bring in a few orders...then the owner emails a clientele list. She's provided an extra service and has built up a loyal clientele. Nice to have a place to drop in and also have a chat. If customers can save 10 dollars shopping at Walmart, it's 10 dollars they have to spend on some other product or service.
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  21. #20  
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    Quote Originally Posted by Fossilborealis View Post
    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by Fossilborealis View Post
    You can't compete with Walmart on a can of Heinz soup for 75 cents, but you can offer an alternative organic soup for a dollar fifty.
    You may well have hit the nail on the head there, most small independent retailers just simply cannot match the economies of scale of the big supermarket chains. But the advantages of being independent mean they can offer a whole other product range to customers looking for more exclusive or even just different foods than all the same ones found in every other supermarket.I think they can also help to create that friendly and welcoming atmosphere that can so often just simply be lost in some of the vast food superstores that exist today, it's always nice to have that friendly local touch.Generally because supermarkets have to have mass market appeal they cannot cater to specific clientele which makes it's harder for them to have that luxury touch of the smaller unique stores, but it's all swings and roundabouts. It really just seems to be a choice of cost & convenience for the supermarkets versus the friendly individuism and unique products of the smaller stores, but there still seems to be a place for both to coexist.
    Yes, for sure. The classic case for me are hard to find grains, rices, beans, etc. We have a store that will bring in a few orders...then the owner emails a clientele list. She's provided an extra service and has built up a loyal clientele. Nice to have a place to drop in and also have a chat. If customers can save 10 dollars shopping at Walmart, it's 10 dollars they have to spend on some other product or service.
    Hey I guess it depends on circumstances as well, when I used to live in Berlin I used to nip into the bakers and butchers almost everyday, but everything was on the doorstep virtually so it was easier to shop like that on the way home, I hardly ever used to drive as well, it was just a case of walking and using buses & U bahn so it encourages shopping more often in small shops. These days I live just outside of town but drive everywhere now I'm back the UK, it makes people lazier driving everywhere but it also changes peoples shopping habits because it's like twice maybe three times a week tops we go shopping and just load up the car, which kind of makes supermarkets ideal. If you're walking everywhere and on and off trains you don't exatly want to be carrying millions of shopping bags.

    These days it's kind of a luxury to go into the little independent type town stores, but I still do enjoy going round these occassionaly.
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  22. #21  
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    In southern Maine where I grew up, Wallmart was mostly the 2nd wave of big stores. Some twenty years before them other large retainers such as IGA, Target etc had swept through and driven many of the mom & pop shops out of business. Our little community went from four tiny shops which were close and convenient especially on short single lane paved and dirt roads, to one over a ten year period because it was easier to travel on improving roads to one of the larger retailers for groceries and other items and almost always save money doing so. The one surviving store ideally positioned in the center of town and had the HUGE advantage of having the town's only Post Office inside.

    As for why it's so cheap...1) large international companies have the distribution and economic reach to find the most impoverished parts of the planet where the choices are starvation or Just making enough to feed one's kids and 2) transportation cost are extremely cheap and disconnected from the actual cost of security and ecological damage.

    We often hit local seasons vegetable and fruit markets as local producers bring them to market.
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  23. #22  
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    Lynx...we get a lot of summer produce from your state...really delicious cherries. Some excellent Washington state wines.

    As for second wave...Walmart was a lot later coming to Canada. Target just arrived and opened a few stores here this past 6 months. The first big American box store was Home Depot 15 years or so ago. It was odd being in Mexico last week and seeing all the same stores. American business really gets around. The US and China really dominate what we buy. Oh well, people have complained about the USA and China taking jobs for years now. I never buy into the evil foreigner argument.

    Speaking of Walmart, need to walk over and get some AA batteries. Big packs of 24 from Indonesia or 9.99. I find they last as long as the pricey ones. Come to think of it, the package weighs a lot so probably similar economics to oranges.
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  24. #23  
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    It's all about currency exchange rates. 3.84$= 23.31 yuan. With 3.84$ you can buy few things but in China with 23.31 yuan you can buy much more (even if we accept that the low of one price-aka PPP- is true). Take into consideration that us dollar is one of the more expensive currencies in the world thus, you can buy cheaply almost whatever you want (with possible exceptions euro area and UK pound).

    China has a relative cheap currency. That has drawbacks of course but at least it lets Chinese enterprises sell at really low international prices. Plus, they are at a quite good productivity level, labour costs are still low (despite the tendency of continuous rising wages) and the large scale of production leads to really low fixed costs. US may have the same productivity but, since $ is so expensive, you can't realize how is it possible to earn any profit buy selling something as low as 3.84$.

    btw, in Greece, I've found some California red wines less than 2 euro=2.75$ per 1l. I'm an amateur winemaker myself and I can hardly believe that US enterprises make a profit be selling so low. My own wine is a bit more expensive than 2 euros/l.
    Also, some kind of unofficial dumping may always account.
    Last edited by Achilleas; December 13th, 2013 at 08:27 PM.
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  25. #24  
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    Quote Originally Posted by Fossilborealis View Post
    Babe...I find food on Maui expensive in the grocery stores. I could get bananas and tomatoes at less than half the price at roadside stands....also way tastier. However, only been there in February and March.

    Paleoichneum. Walmart has little impact on mom an pop stores here. More on the bigger grocery chains. Folks here go into a local corner store for the convenience, a cup of coffee, six pack, lottery ticket, etc. rather than price. I do 99% of my shopping at Walmart (5 minute walk) and thrift stores....the latter more for unique items.
    You buy them from the Farmers Markets.....like 5 papaya's for 3.00......NEVER at the store!
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  26. #25  
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    I buy EVERYTHING I can from local small business. It may cost me a little more, but I am supporting my community.
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