Earlier quoted context omitted.
When was retail ridiculously profitable? The charts for public retail companies going back 2 or 3 decades show sub 5% profit margins. The weakness of retail is that it has a low barrier to entry and does not provide much more utility compared to competitors. Quality control and branding and the internet make obtaining information about good products and being able to trust them much easier than in decades long ago. S…
Margins are the difference between what it cost, and what you earned. But what I would call "profitability" is your actual return versus capital deployed. For example, I know a retailer that earns a 1% margin...terrible? No. They turn over their inventory every week (roughly), so they earn that 1% 56x times a year...that is a very profitable business. Similarly, I can earn a 90% margin but if I can only turn my asset…
>For example, I know a retailer that earns a 1% margin...terrible? No. They turn over their inventory every week (roughly), so they earn that 1% 56x times a year...that is a very profitable business. Similarly, I can earn a 90% margin but if I can only turn my assets over every ten years (some business are like this) then that business isn't very profitable.
I do not know what most of this is supposed to mean, but that is not what profit margins indicate on a company's 10-K. A 1% profit margin indicates little room for error, and given that most retailers pay bottom tier wages, it means they have intense competition and little pricing power. Very few at the very top might get rich in retail.
>Retail provides massive utility.
I specified that retail does not provide much utility compared to other retailers.
>I am not clear what your point is.
My point was that I disagree with your original comment
>They strip all the difference out of their product, usually compete solely on price, and (ofc) someone eventually comes in and undercuts them. That is a failure of incentives and management.
There is no failure of management or incentives. There is customers willing to shop somewhere else for 5 cents less. A few retailers, that I mentioned, will succeed catering the the top 1 or 2 quintiles who can afford to pay a little extra, but most retailers will be competing on mostly price alone.