State Control of Wholesale Prices: One Wholesale Price for All Retailers

Problem:

1. Manufacturers (people who make products or who offer services) and wholesalers (people who represent manufacturers) sell products and services at wholesale prices to retailers who sell the products and services to customers and clients at retail prices.

2. The prices retailers must charge to make a profit depends upon wholesale prices as well as other factors.

3. Manufacturers and wholesalers often have different wholesale prices for the same products and services to accommodate retailers. Most often the larger retailers (those who can "buy in bulk") get substantially lower wholesale prices and therefore can offer much lower retail prices products and services to retail customers and clients than other retailers who do not by in large quantities and therefore must pay higher wholesale prices and therefore charge higher retail prices.

4. Different wholesale prices therefore offer competitive advantages of lower retail prices for the Wal-Marts and other large retailers but these advantages results in disadvantages to smaller retailers--the Mom-and-Pop businesses.

5. The Mom-and-Pop businesses are the basic backbone of American business. They are the small entrepreneurs (self-employed businesspeople, businessowners) who create new businesses and new jobs and thereby improve the overall American economy. They often create the new, innovative products and services that enhance the personal lives as well as improve the financial well-being of Americans, and, in many cases, other people throughout the world.

Mom-and-Pop often have the knowledge retail customers and clients need to make good purchase decisions. They often offer better service than large retailers. And they more often offer their customers and clients the security and peace-of-mind that comes from knowing that Mom-and-Pop are likely to be at the store when help is needed.

Solution: The Moms-and-Pops of American business need the same low wholesale prices offered to the largest retailers. [Flat Wholesale Prices]

Currently, American medical drug manufacturers and wholesalers sell prescription drugs to retailers in other countries at wholesale prices that have to be much lower than wholesale prices offered to American retailers. The result is lower prescription drug retail prices in other countries such as Canada (and perhaps Mexico) than retail prices in America for the same drugs. This creates an obvious hardship for American consumers. This is why many Americans travel to Canada to purchase medical drugs.

The proposed law does not specify what wholesale prices should be. Manufacturers and wholesalers are free to set their wholesale prices. The law only specifies that once manufacturers and wholesalers set their wholesale price for a product and/or a service for big retailers, the bulk buyers, the same price shall be offered to all NH retailers regardless of size.

I once managed a music store in Dover, NH. We once were anxious to sell a Yamaha keyboard that a musician could strap around his neck and play like a guitar, and thus bounce around on stage like guitar players, and thereby attract the attention and the women guitar players attracted. We were told that Yamaha contracted the keyboard with Sears. Sears was to be able to sell the keyboard six months before we could. Sears charged a retail price that was $15 less than our wholesale price. We thus could not compete in retail price with Sears.

We offered other keyboards at prices that would enable us to make profits, but because our wholesale prices were higher than Service Merchandise's wholesale prices, we could not offer retail prices that could compete with Service Merchandise's retail prices. Customers thus bought from Service Merchandise but came to us for help in learning to operate the keyboards. They expected us to be happy helping them learn how to use a product they bought somewhere else. Naturally, we could offer them lessons, but more often all they wanted was instruction concerning how to make the keyboard work. And in some cases they bought more than they needed, less than they needed, and in other cases they bought what they did not understand. Had we been able to compete with Service Merchandise in retail prices, then those customers could have been our customers and we could have helped them make wise retail purchases and offered them service and instruction after the sale including encouragement to take lessons.

It is because of lessons like these that we learn that American consumers benefit from the Moms-and-Pops of small business. It is because of this benefit to all American consumers that flat wholesale prices are needed.

Mom-and-Pop operations typically have more operating costs including building/lease costs, utilities, labor costs, and shipping than biggie operations. Because of these costs, Mom-and-Pop typically must charge more for their retail prices than the retail prices charged by big businesses.

But if there were only one wholesale price for all retailers, then Mom-and-Pop could better compete for retail business, especially when, in general, they offer better personal service than the biggies. Mom-and-Pop most likely, because of their increased costs, most likely will charge higher retail prices, but then consumers will be more likely to purchase their products and services knowing that they offer better personal service.

Because the biggies will most likely still charge lower retail prices than the smallies, and many customers will prefer lower retail prices to personal service, the biggies will continue to make healthy sales and profits, and, thus, they will not be compelled to go out of business.

In all this the customers benefit, because they will have a choice between buying at the biggie price and skipping personal service or paying a little more with Mom-and-Pop and getting the advice and service they need.

Where the biggies may not offer top-quality products Mom-and-Pop often offer top-quality products in addition to lesser-quality products, so the customer has a greater range of options, and where Mom-and-Pop offer better personal service, the customer can see a genuine value in buying from Mom-and-Pop instead of buying from the biggies.

Manufacturers, wholesalers and distributors would not lose money selling to Mom-and-Pop at one wholesale price, the same wholesale price as they sell to the biggies, because of shipping costs. If manufacturers, etc., can make money selling at low wholesale prices per item to the biggies, then they can make money selling at the same low wholesale price per item to the smallies provided that the shipping costs are different for the smallies compared to the biggies.

Essentially, manufacturers, etc., pass the shipping costs on to both smallies and biggies. The biggies pay less shipping per item because they are paying for shipping in bulk; the smallies pay more shipping costs per item because they are not paying for shipping in bulk. Thus, manufacturers, etc., could make money selling at one wholesale price because they would not lose money on shipping.

The biggies could sell to the smallies and make money on the shipping. The smallies would then pay the same shipping costs as the biggies and therefore would have both the wholesale prices and shipping costs as the biggies and would therefore be in a better position to compete on retail prices with the biggies. But the biggies would have made money on the shipping to the smallies, therefore the biggies would still be profitable. Essentially, Mom-and-Pop could go to Wal-Mart to buy from Wal-Mart the product at both Wal-Martís wholesale price and Wal-Martís shipping cost. Where Wal-Mart may lose money because it does not retail the product it makes money because it provides the shipping. But since Wal-Mart will still have other competitive advantages, usually lower retail prices because of lower per item overhead and labor costs, plus the availability of a wide variety of products under one roof, then Wal-Mart will continue to make reasonable profits in its retail sales.

If we find big retailers leaving NH because of the NH flat wholesale price law, this will become an opportunity for NH businesspeople to open retail stores which, because of the NH flat wholesale price law, will nevertheless be able to offer NH consumers the same retail prices as the long-gone retailers. And NH businesspeople would then be in a position to buy the former Wal-Mart/Sears store buildings at reasonable prices and get into business quickly.

Republicans trumpet/champion the primary political values of personal responsibility and individual freedoms which lead to the secondary political values of less government and lower taxes.

The NH flat wholesale price law should enable small businesspeople to get into and to stay in business and thus satisfy Republican values of personal responsibility and individual freedoms.

Democrats trumpet/champion the political values of fairness and equality (of opportunity, it is hoped, and not outcome).

The NH flat wholesale price law will for sure be fair and equal to all retailers and thus satisfy Democrat values of fairness and equality (of opportunity).

We see, then, the possibility that the proposed NH flat wholesale price law should have bipartisan appeal to both Republicans and Democrats in the NH General Court/Legislature.

It for sure for sure will appeal to NH's Moms-and-Pops.

Proposed Law: Manufacturers and wholesalers wanting to do business in New Hampshire shall sell products and services to all NH retailers at the lowest price offered to any one retailer; shipping charges would not be included in the one-wholesale-price-to-all-retailers law.

The One-Wholesale-Price policy would benefit smallies and biggies but most of all it would benefit customers, who can then choose between smallie retailers who offer personal service advantages and biggie retailers who offer retail price advantages.