Heavy Lifting - thoughts and web finds by an economist
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Monday, July 20, 2009

New (and different) business models

The downturn has severely hit our local mega-mall Concord Mills. The company that owns the mall (name redacted), also owns malls of similar names in Grapevine, Texas, and other cities around the country.

While some long-time retailers have disappeared from the mall, especially a big anchor store Circuit City, some new retailers have popped up and are promising to come to the mall, including a Lego store, which sounds neat.

Two of the most interesting new businesses:

Free Market Warrior - which I haven't yet taken pictures of but I will next time I am at the mall (assuming the FMW has survived): the FMW is a kiosk located outside the Bass Pro Shop which sells anti-Obama t-shirts and bumper stickers as well as posters of Ronald Reagan, Barry Goldwater, and other libertarian/republican names. I wonder if we should try to sell some DoL gear there?

The Train: This is a small electric train with about five cars which drives around about 1/4 of the "circular" mall (actually it goes through the area of the movie theaters, which is of least pedestrian traffic during regular hours). It is a pretty neat thing for three bucks and the kids love it.

The head scratchers:

1. The Beef Jerky Outlet. We haven't been to the BJO yet, I just saw the sign yesterday (see picture below). The only thing I see on the surface the BJO has in its favor is that it is located next to the Harley Davidson store. Much like the Free Market Warrior and the train, perhaps location can make this business work, but I wonder. I put the over-under of the BJO at less than two months (perhaps lower if they only have one inventory delivery), but others have suggested a bit longer.

2. The Not-Everything's-A-Dollar Dollar store: This is a dollar store where not everything is a dollar. Some items are $1.25 and others are $0.75. Perhaps the average price is $1 - so why not just go with $1 for everything? The oddest price I saw was $1.16, for window cleaner or some such chemical. I don't understand what the owners hope to accomplish with such a pricing scheme. I thought the supply-side argument for the dollar store pricing was (at least) two-fold: reduced "menu costs" in that the store didn't have to change prices on all sorts of different products and reduced fraud on the part of the staff - inventory can easily be counted against receipts and any differential is easily determined.

On the demand side, a $1 price makes it easy for consumers to keep up with their total expenditure on the trip and and comparison between different products is ostensibly easier because all items are the same nominal price.

Not for these guys. These guys are paying someone (perhaps a family member) to label every item in the joint. For every product they price over a dollar they dramatically reduce the odds that I (personally) would buy a product and for every item they price under a dollar they do not increase the odds that I will purchase the product. Thus, in the dollar store I have an oddly shaped "kinked" demand curve. Maybe I am unique, but I wonder.

My over-under for this experiment is three months.

Cross posted at Division of Labour

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Some checking shows that what was once the "other" economics department at ND, the Department of Economics and Finance, is now simply the Department of Finance. Looking over its faculty shows quite a few who are still mostly, actually economists, but it is clear that the administration made a decision to move that department to being just finance, with some of its former faculty moving into the new Department of Economics and Econometrics.
I think most people shop at dollar stores to find things that are cheap and generic. I don't think they will have your unique aversion to prices slightly above $1.
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