Are ammo seller gouging or are the high prices just supply and demand

Some of y'all have a really simplistic view of supply and demand.

AlexanderA said:

The classic definition of "fair market value" is "the price at which the property would change hands between a willing buyer and a willing seller, both having complete knowledge of the relevant facts and neither being under any compulsion to buy or sell." In a sudden pandemic, everybody lacks knowledge of the extent and course of the disease. And the resultant panic is a form of psychological compulsion. Under these conditions, it's impossible to establish a "fair" price point, and the normal laws of supply and demand don't apply. Anybody selling at a price substantially higher than the prevailing price ante could reasonably be presumed to be price gouging.

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I will disagree because ammo has nothing to do with a respiratory illness; people who do not do their due diligence are their own worst enemy and if they willingly exchange their money for goods, there is no gouging

AlexanderA said:

Anybody selling at a price substantially higher than the prevailing price ante could reasonably be presumed to be price gouging.

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Are we talking ammo, toilet paper, wedding dresses, college tuition or all of the above?

The prices of 7X64mm Brenneke ammunition at Target Sports I purchased months ago look like they've remained the same through today.

PPU 140 grain PSPBT $11.99 / 20 rounds

https://www.targetsportsusa.com/prv...neke-ammo-140-grain-pspbt-pp764-p-110103.aspx

Norma 160 grain Tipstrike $37.99 / 20 rounds

https://www.targetsportsusa.com/nor...-polymer-tip-flat-base-20171152-p-109886.aspx

It probably occupies the same point on the price / demand curve, and the in-stock availability looks to have changed very little since then, which indicates to me Target Sports probably hasn't needed to order more of this material since I made my purchase.

Having grown up and lived on the South Texas Gulf Coast for 21 years, and having lived in rural Southeast Louisiana for 6 years (we took posession of that house and moved in 6 weeks before Hurricane Katrina made landfall), I've seen true instances of price gouging, as well as absolutely irrational human activity including shots being fired about who was in line before who in line to purchase ice, and gasoline. This was before any anti-gouging laws were put in place as far as I can remember.

Now, what I don't like seeing but the market allows for some important everyday items is pricing current inventory based on the projected cost of the next order for that item instead of the price paid for the current inventory of that item, and sometimes it only works when prices move one way - increase.

Retail motor fuels purchased at the pump is the best common example I can point to. Some merchants raise prices at their pump based on projected price of the next delivery. Those merchants may lose business to other merchants in that area to those who only change the price at the pump when a new order is purchased and delivered. Similarly some merchants may not decrease the price of their current inventory until the next order is purchased and delivered. Again they may lose customers to other merchants that lower the price of current inventory when market pricing indicates the next purchase will be at a lower price.

Neither example there fits the definition of price gouging IME, but I'm not an attorney nor judge.

Egregious examples are pretty easy to spot. Consider a convenience store with low inventory turnover in non-emergency times for items such as disinfectant wipes and toilet paper has a higher price than such items in a supermarket or Walmart for example will typically have a higher shelf price for such items as that store doesn't have the volume purchasing power leverage as the large chains. But if in an emergency that convenience store increases the prices on those items well beyond the same margin of a replacement order cost, that's price gouging.

And in the current situation material goods shortages have been highly driven by panic buying as well as small time operators looking to profiteer (and the dividing line between prudent business acumen "buy low, sell high" and egregious profiteering is somewhat difficult to set). That's why specific laws have been put in place with plenty of time by now for merchants and purchasers to become familiar with for their area.

It's somewhat difficult for me as someone who's weathered numerous true disasters to really categorize the current situation with respect to items.such as canned foods, toilet paper, disinfectants, and most especially bottled water. I haven't heard of any areas losing basic utility services so far, and in my county at least, the municipal water system announced weeks ago it was suspending shutting off supply to customers for non-payment of bills.

If a merchant passes on increased item costs they have based on cost of resupply that's a fundamental plank of a business. When they choose to change their prices on the basis of replacement cost is more a function of business philosophy and customers can be gained or lost to competitors that execute a different business philosophy in a competitive marketplace. Also, benchmarking by evaluating prices offered by competitors is another fundamental plank of a competitive marketplace, with different businesses philosophies providing options for purchasers.

The fact that we even need to have a discussion like this is the reason why the developed world has consistently moved from a market economy to a mixed one. I expect that broad trend to continue.

Retail motor fuels purchased at the pump is the best common example I can point to. Some merchants raise prices at their pump based on projected price of the next delivery. Those merchants may lose business to other merchants in that area to those who only change the price at the pump when a new order is purchased and delivered. Similarly some merchants may not decrease the price of their current inventory until the next order is purchased and delivered. Again they may lose customers to other merchants that lower the price of current inventory when market pricing indicates the next purchase will be at a lower price.

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They have to raise them for the next order if they want to stay in business.

Egregious examples are pretty easy to spot. Consider a convenience store with low inventory turnover in non-emergency times for items such as disinfectant wipes and toilet paper has a higher price than such items in a supermarket or Walmart for example will typically have a higher shelf price for such items as that store doesn't have the volume purchasing power leverage as the large chains. But if in an emergency that convenience store increases the prices on those items well beyond the same margin of a replacement order cost, that's price gouging.

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No, it isn't; he is reacting to market supply and demand and by raising his prices to current market demand levels, he will ensure that only those who truly NEED the product will buy it ensuring there will be a supply.

My wife's utility is running into that now buying PPE things like sanitizer for the linemen. 8oz bottles you can buy in the supermarket for $2 normally are being bought in bulk at a discount price of $6/each. Gouging? Not when you feel you have to have it.

I can tell not too many folks have watched that video I posted.........................

Kleanbore said:

Very common, and usually necessary to maintain a positive cash flow.

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Agreed. Different organizations have different capacity for surge in those dimensions.

Currently I reckon competition for cargo space and routing availability in the freight movement sector has to be especially high on a grander scale than any prior event in this country since WWII. So even with decreased fuel cost, getting various goods from one point to another has an emphasis on "What's it worth to ya?" on an extremely different perspective than before these purchasing surges depleted inventory available to dampen the effects of those surges. And it's no secret loaded ammunition and even component bullets are pretty dense materials (high weight to volume ratio).

Plus overhead costs are a significant factor on inventory of anything, items on a shelf whether at point of sale or a warehouse do not provide cash flow until they're purchased. So much business has been focused on just-in-time availability in order to successfully compete.

George P said:

They have to raise them for the next order if they want to stay in business.

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Not necessarily immediately. Large organizations may have significantly greater ability to dampen out variability in cost of supply over time than a smaller organization. Those differences are acutely displayed in economically volatile times and / or commodities with higher than average price volatility which is the reason I chose motor fuels as that example. Personally I haven't seen that same volatility in the price of engine lubricants, motor oils, mirroring the swings in pricing of motor fuels although petroleum whether crude oil or natural gas is used as feedstock. There are numerous fundamental reasons why that point of sale volatility is different.

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George P said:

No, it isn't; he is reacting to market supply and demand and by raising his prices to current market demand levels, he will ensure that only those who truly NEED the product will buy it ensuring there will be a supply.

My wife's utility is running into that now buying PPE things like sanitizer for the linemen. 8oz bottles you can buy in the supermarket for $2 normally are being bought in bulk at a discount price of $6/each. Gouging? Not when you feel you have to have it.

I can tell not too many folks have watched that video I posted.........................

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Does that video demonstrate the example I just illustrated on difference in point of sale pricing volatility of motor fuels vs motor oils? I'm guessing that answer is "No".

I understand supply and demand, but I think that the prices during this last buying frenzy reflected a bit of price gouging. All prices on ammunition increased by 50% or so. When a vendor sets a price on an item, the price is usually set at "what the market will bear" .... at a point where the target market will be willing to buy and there will be enough sales to be sufficiently profitable.

Yes, demand went up, and by the laws of supply and demand, the price should have gone up accordingly, but in the case of this buying frenzy, it wasn't just the laws of supply and demand dictating price. Did the manufacturers raise their prices? I don't know; but, if they did , how is it that places like Academy Sports was able to cater to the public in a way that was much better for the public. They didn't raise prices and actually did a pretty good job of stocking their shelves and taking care of everyone the best they could by limiting the amount of ammunition a person could buy.

I think that most of the ammunition vendors raised their prices to take advantage of the panic of the public knowing that those buying would be willing to pay the increase just to have the product. Yes, there is a supply and demand element to this; but when we have a nationwide crisis, they are not only a vendor, but are also a provider of a public service. I mean, we're all (as shooters) supposed to be a part of some sort of community, right? Or is it just all about business? I believe that if the vendors were just trying to limit how much any individual would buy, they could have just placed limits on how much you could buy.

I may be all wrong about this, but feeling are feelings and are neither right or wrong. I do know that I won't be buying from any online vendors unless I need to. I'm not going to do it just to save a couple of bucks anyway. I'll take my business to those who were there for me, whether they knew it or not.

Mr. Zorg said:

Not necessarily immediately. Large organizations may have significantly greater ability to dampen out variability in cost of supply over time than a smaller organization. Those differences are acutely displayed in economically volatile times and / or commodities with higher than average price volatility which is the reason I chose motor fuels as that example. Personally I haven't seen that same volatility in the price of engine lubricants, motor oils, mirroring the swings in pricing of motor fuels although petroleum whether crude oil or natural gas is used as feedstock. There are numerous fundamental reasons why that point of sale volatility is different.

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Does that video demonstrate the example I just illustrated on difference in point of sale pricing volatility of motor fuels vs motor oils? I'm guessing that answer is "No".

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I am talking about what I thought was about gas stations; small owners MUST immediately raise their price when they are told a price increase is coming with the next delivery; otherwise, they will not be able to pay for it and make the necessary profit to stay in business.

George P said:

I am talking about what I thought was about gas stations; small owners MUST immediately raise their price when they are told a price increase is coming with the next delivery; otherwise, they will not be able to pay for it and make the necessary profit to stay in business.

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They also have to lower the price according to the market, like they are doing right now.

Fine Figure of a Man said:

They also have to lower the price according to the market, like they are doing right now.

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True, but they lower prices slower than than they raise them because they paid a higher price for the batch in the ground

George P said:

True, but they lower prices slower than than they raise them because they paid a higher price for the batch in the ground

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I wouldn't be in a hurry to drop prices at my gas station or ammo store but when the guy across the street does....... A free market works every time it is tried.

What people will pay sets the prices the sellers sell at. When people stop paying a certain price sellers have to lower to a price they will pay. That’s capitalist supply and demand at its very essence. We do it to ourselves by buying at higher prices. If literally nobody bought at those prices, suppliers would be forced to lower, potentially to near cost, just to move product.

‘The market’ controls the prices and there are ebbs and flows. In the system we’ve set up you either wait for prices to come to where you want them as demand and supply change or you regulate what the market is allowed to do with pricing during times of high demand. We’ve largely chosen, as a culture, to do the former and avoid (and vilify) the latter.

Until we do the latter this will ALWAYS be the situation and frankly I’m surprised anyone is surprised by it, it’s not new, it’s being going on for a long long time.

Fine Figure of a Man said:

I wouldn't be in a hurry to drop prices at my gas station or ammo store but when the guy across the street does....... A free market works every time it is tried.

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They also have to consider that they paid a higher price for that load in the ground and they need to recoup that to boot.

George P said:

I am talking about what I thought was about gas stations; small owners MUST immediately raise their price when they are told a price increase is coming with the next delivery; otherwise, they will not be able to pay for it and make the necessary profit to stay in business.

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While large volume sellers such as Costco, Sam's Club, and Walmart don't necessarily have to do so and can even use motor fuel pricing as a loss leader as it's not their core business.
Why have you repeatedly chosen to ignore that segment and instead focus solely about gas stations with small owners? What purpose does ignoring that reality that serve, video or no video?

George P said:

They also have to consider that they paid a higher price for that load in the ground and they need to recoup that to boot.

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Hopefully gun and ammo sellers are recouping some of the losses they suffered not long ago.

Mr. Zorg said:

While large volume sellers such as Costco, Sam's Club, and Walmart don't necessarily have to do so and can even use motor fuel pricing as a loss leader as it's not their core business.
Why have you repeatedly chosen to ignore that segment and instead focus solely about gas stations with small owners? What purpose does ignoring that reality that serve, video or no video?

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But they do; however, their bulk buying allows them to weather to minor changes on a more even basis. Where I live, Sam's is currently $1.749, while a local place is $1.699; Sam's has been fairly stable........the local market more reactive...............

mcb said:

Assuming it is a free market than nothing the buyer does though ignorance, panic, or irrational behavior can makes the seller a gouger. .

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Well...of course!

Nothing the buyer does makes the seller a "gouger"--it's the price the seller demands for the goods, that
makes the seller a gouger.

AFA the "is it gouging or supply and demand?"--it's both.

The degree that demand exceeds supply, allows the seller to arbitrarily raise the price--if he's of that
mind.

When the seller arbitrarily raises the price higher than most people see as reasonable, the seller
is "gouging".

One site had a K of 9mm for $279, but now has the same ammo for almost $360. Did anything
change, in the ammo itself? Nope. Is the retailer gouging? Hard to say--did the wholesaler raise
the price to retailer, by $80, or by $40, and retailer raised his price by $40? Who knows...

George P said:

But they do; however, their bulk buying allows them to weather to minor changes on a more even basis. Where I live, Sam's is currently $1.749, while a local place is $1.699; Sam's has been fairly stable........the local market more reactive...............

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Where I live both Sam's Club and Costco pump prices are $1.459 / gal RUL. Quik Trip, a recent entrant to my market that had been undercutting even those sellers, is $1.519 / gal RUL. The pricing only goes up from there here in Military City USA, I wonder if we'll still be ranked 7th largest US city by population when the 2020 census results are tallied? A pretty competitive market, but also the only one of its size not yet requiring boutique blended gasoline and the nearest gasoline and diesel focused refinery is 60ish miles away. You can see these prices via Gasbuddy if you plug in 78233 as a starting ZIP code, then go to map view and scroll around the area.

I don't see volume as the sole determinant though, unlike you. They don't have to price current inventory at current replacement prices because they operate their business with enough cash reserves to pass along changes in prices after ordering the next inventory. Exactly like my example with the 7X64mm Brenneke ammunition at Target Sports I posted earlier. They've maintained the same price on current inventory as I paid months ago.

What you posted in opposition is not absolutely true that all merchants *must* price current inventory at prompt replacement prices. Remember? It's clearly optional for businesses that operate with sufficient cash reserves to pass on prompt replacement inventory costs after they order additional inventory and are able to offer it for sale. This can fit into the category of competitive advantage.

I still don't understand why your discussion has remained solely focused on businesses with small owners, ignoring even those businesses have the option of operating with sufficient cash reserves to not have to price current inventory at prompt replacement prices. Is it less likely, certainly so. But it's absolutely not required for any business operating with sufficient reserves to not have to price current inventory at prompt replacement prices.

Thus I see a low probability Target Sports is engaging in gouging as not all inventory has experienced price increases in the last 6 months. And even if all inventory prices had increased that doesn't mean they're gouging if they choose (but are demonstrably not required) to price all current inventory based on prompt replacement prices l.

Economic theories can be interesting to debate.

Those who followed seasoned advice during normal times and Prepared (if/when cash was available) don't usually bother.

An aviation and military expression: Prior Planning Prevents Piss-Poor Performance.

In the engineering world I spent my career in, turning crude petroleum into useful products and / or intermediate materials others further converted to useful products and getting those materials to market, that was known as The 6 P's.

If circumstances suggested a less drect and flamboyant presentation and discussion it was reduced to The 5 P's.

Fun to see this discussion. The main question is whether ethics and economics overlap. Normally, the answer among pure free-market folks is 'no'. To people who live in the real world, the answer is a messy and qualified 'yes.' It is like the question of whether there is such a thing as a crime of omission - are you obligated to throw a life ring to a drowning man? And after all, you might throw out your shoulder!