Hacker News Reader

Comment by SllX | Hacker News Reader

Because most businesses are low margin, and they’re low margin because of basic supply and demand in a competitive business environment. Some places might get away with charging novelty prices for stupid crap, but the coffee shop that charges $10 for a cappuccino and passes the extra margins to their employees is going to receive fewer customers than the place that charges $3 and produces a roughly equivalent cappuccino. Maybe it’s not as good, but is the other one really $7 better?

You can demand higher employee compensation all you like, but customers will be the ones paying for it, as they pay for all costs that the business incurs (if the owners want to stay in business anyway).

View on HN

Again, customers do not need to pay for all cost increases. Businesses are not non-profits. They take costs, and then some. The amount of "and then some" is variable. Cost increases that do not exceed "and then some" do not necessarily need to be paid by customers.

Low margin is not no margin. As long as there is a margin, this remains true for some level of cost increases.

And your example is excessively reductive. Say the $3 company can't actually retain any workers because their pay is so bad. They will not be serving any $3 coffees, so it's not a threat to the $10 coffees. Also, your example prices sure are, uh, interesting and hard not to read in to.

Customers will pay for all the costs though, in order for the business to stay profitable. The “and then some” you’re referring to is the profit margin, which businesses can reduce, but if revenue (money paid by customers) goes below costs, then the business is now losing money.

> Say the $3 company can't actually retain any workers because their pay is so bad. They will not be serving any $3 coffees, so it's not a threat to the $10 coffees.

The $3/coffee company will likely still find workers who are willing to work for what the company is willing to pay. Thus there is a market-established price for the labor and the floor is a legislatively-established price-control called the minimum wage. It’s not high skill work and you can train someone in a day to operate a drip brewer and an espresso machine.

> Also, your example prices sure are, uh, interesting and hard not to read in to.

There’s nothing much to read into there. I rounded up the $3 option to be generous to the opposition and overstated with the $10 option as a point of comparison that you cannot simply arbitrarily charge more without additional value-add and expect to retain your customers. Seniors on fixed incomes will complain all day about coffee costing even $2, or a single cappuccino going from $2.25 to $3.5 over the course of a few years.

Reply on news.ycombinator.com