2. Intercity distribution is markedly less efficient than in suburban areas. I got into this for a time. Suffice to say that UPS officials actually do lobby on the issue of urban congestion and favor anything that will make their trucks move faster. Yes, a big part of the cost is labor. But you also have to consider that the capital cost of the truck is being amortized over fewer deliveries per hour and that in the case of delivery to small volume outlets you have fewer deliveries per hour divided compounded by lower volume per delivery. Volume takes a double hit.
3. Most people do not understand the importance of sales volume in pricing. If I have a can of beans which costs 35 cents to put on the shelf (my inventory cost) and sell that can every day, replacing it the next, if I make 1 cent per can I make a huge (1042%) return of 365 cents on that cost on an annualized basis. Thus is a 2.9% markup on the INDIVIDUAL PRODUCT turned into a 1042% return on the capital cost (inventory being the principal capital cost here; we could do a more detailed analysis but the results would be the same). Thus a mere 1 cent return per can on a high volume product turns into a fabulous return which looks monopolistic, it is so huge. Yet, paradoxically, the pricing system itself has no means to cut below that level of return (at that level of demand) because if we were to drive to a less "exploitive" rate of return we would have to actually cut the price below the minimal unit level in our currency system (the penny).
4. Coming back to our small ghetto store. If you've looked around in them, as I have, you will find that a lot of the cans have a lot of dust. The "fresh" products that "move" (like potato chips) do not. But the can of beans will be priced at 50 cents. If it costs 35 cents to put it on the shelf, and it sells twice a month, the annual return on the capital cost will actually be a shade less than the big high volume grocery store (360 cents per year instead of 365). But it won't cost 35 cents to put on the shelf. Due to small volume deliveries (1 case instead of twenty) and other considerations, it may cost 40 cents or more to put on the shelf. So your ghetto store will look pretty exploitive. So does that store up at Mineral King. Food volumes sold are small because people bring their own by and large. The restaurant however does a good business and is reasonably priced (volume permits it in spite of that long winding road).
4a. Note that volume issues also affect boutique pricing (essentially high pricing to people that can afford it in return for extra quality). Boutique pricing is also high, but is combined with better throughput (sales volume) because the people know they can afford it. In Cape Cod, near a friend's house, the local fish market sells fish at $15-$20 a pound and they sell almost all of it. And any leftover inventory gets tossed--NOT selling fresh fish at those prices would lose them business (volume). But I would say that the difference between ghetto pricing and boutique pricing lies in volume, and the difference in volume lies in the income level of the proximate buyers.
4B. Note that we have not discussed ancillary issues which may also affect pricing, such as the comparative risk of robbery to a boutique owner on Cape Cod vs a ghetto store owner.
5. This should help us understand why these huge suburban shopping centers with huge parking lots are part of an integrally related process whereby large market areas and a wide consumer base produce a high volume that improves quality and lowers per-unit prices, at the same time yielding superior profits (allowing them to have the shiny new-infrastructure look, instead of the depressed shit look of inner city places).
Thus in my view the truly insidious nature of wealth maldistribution, as a function of class and geography, is that it can perpetuate itself without any immediately apparent villains. All that is required is that everyone do what is rational: the poor do not buy cars, gaining access thereby to pricing and distribution systems that lock them into a poor diet (among other things); those with cars gain access to a better pricing system and a better lifestyle generally.
I also believe that the pricing/volume issue is key to the question of power in capitalist society generally, and will post separately on that.
-- Gregory P. Nowell Associate Professor Department of Political Science, Milne 100 State University of New York 135 Western Ave. Albany, New York 12222
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