Monday, February 25, 2013

So is it a buyers' or a sellers' market?

Good morning economists. It is no secret that the global recession has affected both firms and consumers to varying degrees. I would like to share a story which made me wonder whether the market is slowly but steadily becoming a buyers' market.

A buyers' market is a situation where supply exceeds demand thus giving the buyers or consumers bargaining advantage over the sellers. A sellers' market is the exact opposite. In that scenario, there is excess demand and suppliers can take advantage of consumers either by raising prices or by having some sort of advantage over negotiations.

A month ago, my vintage motorcycle was in need of service. I do have my regular mechanic that I always entrust to do a good job on the bike, however due to the recession his business has slowed down in the last six months. It came as a shock to me that it took my mechanic almost two weeks to service the bike. That is, change the oil and refill the fluid in the front springs. For anyone who is into motorcycles will understand that this is a three hour job!!!

The problem was that I could not cancel the deal since he started working on the bike on day one, by dismantling the front springs. So it was impossible for me to move to bike to another mechanic. I had to endure the delay despite my daily phone calls to expedite the work.

In a global market where there is arguably excess supply, I found myself falling victim of a sellers' market. In other words I was at a disadvantage over the negotiations for the completion of the work. I wondered at the time whether my mechanic really understood the concept of a buyers' market and the whole idea of excess supply. I guess the supplier still has some negotiating power in the case of services than in the simple sale of goods.

Have you fallen victims of a sellers' market recently?

Have a nice day!

Thursday, February 14, 2013

How not to destroy your valentine's day!

Good morning economists! It was Valentine's day yesterday and like all couples me and my significant other decided to celebrate by doing something special. I had made reservations to what is arguably one of the best restaurants in Cyprus as it received numerous awards throughout the years. We had visited the specific restaurant in the past and we were nothing but satisfied with their service and quality of dishes. I especially liked the fact that ordering a bottle of wine was always followed by a ritual where the bottle was opened and prepared next to the table with special attendance to detail (checking the wine color and right temperature).

Yesterday we were very excited as we could not wait to witness the same kind of service and food quality. Unfortunately it was a huge let down. The food was nothing special and it was not even anywhere near the usual culinary treat that we were used to at that specific restaurant. Further, the food was served cold as it was left standing for a significant amount of time. You see the restaurant was offering a pre-set menu.

When we ordered the bottle of wine, there was no opening the bottle ritual whatsoever. The waiter brought us an already opened bottle of wine that I was not even sure whether it was freshly opened. To add to this, the waiter emitted a rather unpleasant bodily odor and at one time his shirt was hanging outside his pants! Hardly the valentine's day I envisioned.

Lesson learnt. Never visit a restaurant with a pre-set menu. They cook in bulk and as a result plates are left standing, usual rituals are not followed and overall the quality of service declines. Next time, either pick a restaurant that has its usual menu or arrange to cook something special at home. Where has the personalized service gone?

Have a nice day!  

Monday, February 4, 2013

Baby diaper wars!

Good morning economists. Globalization is something that we have witnessed in one form or another during the last two decades. The development of the internet makes it easy to purchase goods from other countries and have them delivered right to your door. In fact, globalization has opened the door for many successful businesses that aim at buying goods at a low price and selling them for a profit.

The latest example of such behavior comes from Norway, where a large number of supermarkets in the south have entered into a "diaper price war". Supermarkets are lowering baby diaper prices in order to attract customers. And they are pretty successful in this endeavor.

Customers from Poland and Lithuania are literally driving their trucks to Norway, fill them up with baby diapers (each shipment costs around $9600) and sell them for twice the price in their respective countries. So a trip over to Norway can produce profits around $10000. And everything is completely legal! As a point of reference diapers in Norway cost $5,50 for a box of 50 diapers.

What do you say? Fancy a trip to Norway?

Have a nice day!