Fancy words for pushing down prices
Carole Sloan -- Furniture Today, February 8, 2004
Welcome to the world of monopsony!
Don't know what that is? Neither did I till I read The Wall Street Journal a week or so ago and found out that many of the things we've been talking about in recent years apparently has a name that sounds like a major dread disease.
It seems we've been calling it the Wal-Mart disease, aka retailer abuses, chargebacks as profit centers, the deflationary impact of imports and so on.
Monopsony, according to the WSJ, is the business disease that occurs when one company gains enough power to push suppliers' prices down. Sound like anyone we know?
But hear this: There's a related disease called oligopsony. This is when there is more than one company that has the muscle to push down suppliers' prices. There's a bunch that could join the fellows from you-know-where in this scenario.
Basically, this "disease" happens when the ranks of market players shrink for any number of reasons, and a few players can control prices for specific products.
In the WSJ analysis, the folks from Bentonville are acknowledged to have enormous price influence, but apparently the company is not properly admitted to the monopsony club because it doesn't control the retail marketplace.
Apparently there's a barely distinguishable difference between controlling prices and helping consumers with lower prices.
Monopsony also appears to be related to the mergers and acquisitions arena, where the FTC gets involved in determining the impact of mergers on pricing in a specific marketplace.
Heck. Here we thought the furniture world was special in this regard. And after all our angst, we find we're just another cog in the price-pushdown machine.
All together now, let's practice the words ... monopsony ... oligopsony.
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