.
It is not an arbitrary number to decide upon. If competition exists in the market then profit will fall to a level where it is in balance with profit in other parts of the market and represents the number that people are willing to accept. The number will change as the times change - in more desperate times people will settle for less profit, and in good times people will want to gain more.
I am afraid that “a fair profit” is a concept that I cannot grasp because you see, if the consumer does not think the price is right, under normal circumstances they won't buy the product, no matter what the profit margin for to the retailer is.
Nevertheless, imagine you are a retailer in the business of selling simple buttons but you also sell designer clothes.
Your buying price is 1 cent per button from the manufacturer.
The designer lets you have the frocks for $1,000 each.
Clearly if you sell the buttons at 10 cent each, you’re working with a considerable profit margin but it doesn’t seem extortionate.
However, if you sell the clothes by applying the same percentage increase, each frock would be $10,000. That may seem rather extravagant with the great Alpha and Omega in the blue yonder considering the fairness of the profit margin but ….
my conclusion is that "What is a fair profit" may be an inconsequential question as it boils down to "supply and demand" which dictates what the consumer considers acceptable to pay for the goods.
Here's the thing Grasshopper. You already know that I am limited in my experience because I have NEVER owned my own business so all I am is a consumer. But it seems to me it should be easy to figure out a profit that would satisfy both the manufacturer/producer and the consumer. Not a cheapskate consumer nor a greedy manufacturer. Would you say 50% net profit is fair? What about 500% profit? 10%? 3000%? As radical as some of those figures seem I have no doubt there are companies making profit like that. You jack up Epi-pen from two for $100 to two for $605! You jack up the price of a pill from say $90 each to $750. Is that fair? I understand markup in the jewelry business runs around 300%. I don't know when or where that figure came up or if it is even true. Is 300% fair to you? I'm not trying to be argumentative here m'dear. I KNOW there are vagaries in business that make establishing prices quixotic sometimes and predictable sometimes. Even so I still think fair-minded people ought to be able to establish fair benchmarks in life and among those would be prices that are not egregious. So now it's your turn to disabuse me of this view if you have the time. We don't need $10,000 designer frocks to live. We do need meds that are life-saving and food and shelter. I don't worry about the wealthy because they often pay no taxes. They can afford expensive tax accountants the cost of which they can also write off. It's people like Jim and me who live on social security and modest pensions that concern me. I don't know what your fniancial situation is my dear and of course that will determine your view I expect. Thank you for your thoughtful reply! :)
It is hard to say what numbers are right because volume is to be considered. If I make my own wine with my small field of grapes I will want to make a very very large percentage profit from that because I will sell very few and cannot make more bottles and I have only the limited number of grapes that I grew that year. Maybe I can make only 200 bottles, then if I make only $5 a bottle it is not enough profit and not worth the time because $1000 does little to feed my family. If I sold 20,000 bottles it would be different and $5 a bottle would be perhaps a more reasonable profit.
What i find interesting is that many people thing "fair" profit means whatever the market will bear.
I think of "fair" as an ethical term, as in Fair Trade the ethical business run by Oxfam and Community Aid abroad to assist people in rising out of poverty.
I think of fair as not harming environment, animals, workers or consumers, either in underpaying or overcharging. One need's only to earn sufficient to live modestly well plus a little extra, say max 10%.
I'm not saying what is, only what I think would be better if it were so. I am not one who believes that might
I am not one who believes that might has any automatic ethical right to determine what's right.
What's unfair is that most coffee in the world is owned by mega-companies who ay less than a livable wages to the workers who grow it and do not own the land. They live in abject poverty with no clean water or sewerage, no education or medicine, and no alternatives, virtually slaves.
It's possible to buy Fair Trade coffee at health food shops which is guaranteed (and easy to double check) to have paid the workers a fair price. It's no more expensive, but the middlemen take less of a cut (still make a good profit.)
That's an example of what I mean by fair.
First thank you for a very fine analysis in answer to my question hartfire. I appreciate it. When I talk about profit I mean after all expenses are paid of course. You know what the cost of materials will be, all your overhead costs including rent, utilities, employee benefits, wages, pensions, profit-sharing, whatever. As the cost of these components rise a business will increase the cost of its product to the consumer. That is only fair. We understand that a business isn't in existence for our benefit. They are after all the ones who gamble. The consumer simply chooses which products to buy when they come to market. What I would like to see would be what the cost of goods sold is. Complete transparency. That way the business can't gouge the consumer. If cost-of-goods sold is $7.50 per unit I don't mind paying around $10 . But I do mind paying $100 and so if I know what the markup is I won't buy the product. Now we both know that information will NEVER be made public because it holds the manufacturer's feet to the fire. I think around 25% profit is OK. Some companies share the profit with the employees so the more profit it makes the larger the bonuses for the employees. Which the company writes off as a business expense so it loses nothing. It can reinvest or increase salaries or provide better health care at less cost to the employees. The salary increases and health-care costs are deductible as business expenses. Everybody wins. But that profit might be peanuts to some. They may jack up their prices by 300% or 500% so their profit is enormous. I don't know. The pharmaceutical companies routinely gouge the public. They say they have to recoup their research costs. But we don't get any details about how much those costs are to develop a drug or when they've recouped the investment. So we just pay what they charge. I think that is unconscionable. I'm going to ask the question and see what others think . Toss it out there. I'
'm pretty I'll get ridiculed for asking it but so what? Happy Tuesday m'dear! :)
I disagree StuB. Thank you for your reply and Happy Tuesday to thee! :)
Of course "fair" is not the same to everyone. If you are the receiver (manufacturer)you want as much as the traffic will bear. If you are the giver(consumer) you don't want to be gouged. So the goals are incompatible and i guess always will be. Th
ank you for your reply hartfire! :)
And it's possible - not to mention a fact - that not all companies can be painted with a single broad brush by saying that they're all run by horrible, evil people who mistreat all workers. That's bigotry on your part. There certainly are instances of this, so which specific companies do you have in mind?
The only point I was making is, using my coffee example, that the hard-working people running grocery stores - owners of small ones and managers of larger ones - are concerned with making a living and keeping their businesses afloat. They're not involved in mistreating farm workers. And within that context, there's nothing unfair about each of them making as much of a profit as possible. That's just capitalism, which is not inherently evil. Most of these folks are not getting filthy rich anyway.
As for the farm workers, people such as Larry Itliong and Dolores Huerta (AWOC) and Cesar Chavez (NFWA) long ago (starting in the early 1960s) organized them into what is now the United Farmworkers Union to protect them from being mistreated.
Are there recent instances of such mistreatment that informed your comment, or were you just generalizing off the top of your head?
I guess we need to agree to differ, Stu B.
I'm a vegetarian because in part because I don't want to be part of the chain of events that causes suffering to animals in the commercial system.
Of course, I find it impossible to be a purist on all matters in my life, so i have far too many blurry bits of hypocrisy.
For me, every action has a ripple effect, and to the extent that I know what that effect is, I try to minimise harm to the best of my ability.
I don't try to impose this on others, but I also don't mind occasionally discussing issues around it either.
I don't object to middle-men earning a fair living. However, a vast proportion of the goods imported from third and fourth world countries do not pay a fair living wage to the workers -very easy to check. - and very well known and publicised - at least here in Australia.
There is no set % that is fair. It is all supply and demand.
I know that's how it is m2c. But I still think exorbitant markups are greedy, egregious and unfair. I know charging whatever the traffic will bear is the way of the world. It's all about the bottom line. If something costs you $2 to make and folks are willing to pay $1000 for it well he** why not? That is how it is. Is that how it should be? Thank you for your reply and Happy Wednesday. If you are the only game in town and people are willing to pay to play
why not take them for every penny you can get out of them? That people think that's okay is what is not okay to me. But who am I to begrudge anyone extra bucks? :(
Like you, I have noticed that when I ask controversial questions, some of the responses include ridicule. I don't take it personally. Sometimes they leap to conclusions based on assumptions which are mistaken. Or perhaps some don't enjoy discussions in which some of the ideas others come up with might challenge their preconceptions, or perhaps even their beliefs or values.
It is possible that if I were more careful in how I phrased the question, I might draw less of the less thoughtful answers - but like you, I think leaving it free for others to choose their responses is more interesting.
I prefer trying to keep at least a somewhat open mind. But best of all I like hearing and learning how people think. There's nothing quite like hearing their voices in their words. And as you predicted, I am discovering some highly intelligent and original thinkers here - and really enjoying it. Sometimes they trigger me to rethink all my premises - refreshing, to say the least. :)
Hello Rosie:
If your house was for sale, would you sell it for LESS than it's worth?? What if it's worth a LOT more than you paid for it?? If you did accept an offer, would you be taking the buyers for every penny you can??
excon
I'll give an example for you. Canned tuna, and other products of tuna (cat food) use tuna caught by slaves in boats of the coast of Thailand. Fishing industry slaves, literally. Cambodians immigrants who came to search for a better life (job) getting forced into labor. All because of wanting vast amounts of tuna fish for the various purposes humans create.
An article from nytimes explaining about it
Man are insatiable. Supply and demand should not decide what the profit should be. There should be a code for fairness and ending systems that creates exploitation and abuse.
Mmm - I accept that the world is and always will be "imperfect" according to human needs and perceptions. The definition of perfect is subject to human interpretation -- debatable and mutable -- unless one is dealing in mathematics, logic, or specialised disciplines susceptible to minute control.
Nevertheless, broad change does occur. There was a time when to own another human being was legal and very few thought it immoral; when a patriarch had the right of life and death over members of his family; when no one questioned the right of humans to torture animals for research or to make some species extinct for the sake of perfumes or placebo aphrodisiacs.
Once a broad consensus is reached that some wrongs should not be tolerated, change can and does occur. The injustices may still occur but they become far fewer in number.
Thanks D&D,I tried to follow your link. It lead me to the New York Times but not to a specific article. Without title and date I think the article you are referring to would be too hard to find.
I've been aware of these free trade exploitation issues since the early eighties.
For others, I found this one in 30 seconds: http://www.globalissues.org/article/57/corporations-and-workers-rights
It barely touches the surface of the magnitude and ubiquity of substandard, unsafe, and inhumane working conditions. Third world nations in Africa, South America and South-East Asia are defined by their dependency on First world technological nations for their economies, and by their poverty, malnourishment, disease, and low life expectancy. Many are run by military or oligarchic elites, or by tyrants.
A sample from Burma's National Newspaper in English, "The Irrawaddy" - "After Bangladesh Tragedy, Questions for Burma’s Garment Sector," Tuesday, June 11, 2013:
"[Bangaladesh] That country’s labor woes were highlighted on April 24 when a building collapse outside the capital of Dhaka killed 1,129 workers of garment factories housed in the structure."
It has not been the only incident. Deaths from fires in the factories have been common, along with wages too low to actually live on.
If we wear clothes sold in places like Big-W or Target, we are supporting the exploitation and death of such people, because these companies have full awareness of the working conditions at the source of their products.
Houses are priced based on neighborhood comparables excon. Now you are bringing in something additional. You are bringing in the sale of a house. Same thing could apply to the sale of a car. I am talking about a business operation where the owners and the public have different goals. Getting back to the question YOU are asking if my house is "valued" at $250,000 and no one puts in an offer I would drop the price If, however, there are many people interested in buying it and some are willing to pay MORE than the asking price to get it I would then have to do some thinking. I might LIKE a couple who offers the asking price and I might DISLIKE a couple who is willing to pay more to get the house. So it isn't an easy question to answer. I would far rather deal with people I like and money is not my carrot so it is less relevant to me than it would be to someone who can never get enough money . Same thing with a car. If blue book says my car is worth $10,000 and a bidding war ensues and I'm offered a lot more I would evaluate the offers and HOW MUCH I LIKE THE PEOPLE doing the offering and go from there. I am not out to get every penny I can get for something . I have sold things at far less than I could have gotten for them. He** I have GIVEN AWAY many things I could have gotten money for but didn't. People have said I should have opened a restaurant because I love to cook but my Jim says I'd lose tons of money because I would never charge what it was worth. Well that is very true. Okay I answered your questions right? I am not your average avaricious person who prays at the altar of money so you won't get the answer you expect to get. Money is very low on my totem pole of priorities. Always has been. Always will be . I am not now nor have I ever been money hungry. Thank you for your reply excon.
