Is the State of Washington Trying to Get Costco to Leave?

[Ed O]

So liquor prices will go up, we'll wait in longer lines, and we'll have a more confusing search in a grocery store.

I don't agree with any of this. I bet prices will go down rather significantly and it'll be great not to have to make another stop just to get hard alcohol.

Ed O.

 

[BrianFromWA]

jlprk, have you ever been to a BevMo (or a Safeway in California)? I think your fears are unfounded.

Now, I don't know what the State's going to do with its already insane liquor tax, but basic economics and business state that a) more competition drives down prices (if you don't like Safeway's price for your Jim Beam, go to Costco); b) economies of scale drive down prices (if Costco puts the same profit margin as the state, then the volume they buy gets them a bigger discount on their orders); c) being able to now bypass a distributor drives down prices; d) more streamlined overhead and internal distribution drives down prices.

 

[jlprk]

a) The overhead of hundreds of retailers vs. one, the state, will drive up prices.
b) The economy of scale is probably the biggest argument in favor of the state.
c) Why will hundreds of retailers need fewer distributors than a monopoly one?
d) That's 4 for 4. All of your arguments are in favor of the state.

I don't agree with any of this. I bet prices will go down rather significantly and it'll be great not to have to make another stop just to get hard alcohol.

Most people like to buy it separately, usually a quickie trip Saturday evening, anticipating fun. They will now have to stand in a long grocery line, possibly embarrassed, holding their only purchase, a bottle of booze.

 

[BrianFromWA]

A) I guess we'll agree to disagree, b/c I'm not sure how you think that works
B) you think the state of washington buys more than Costco worldwide?
C) hundreds of retailers no longer have to go through distributors. No middlemen. That's a large change in this bill.
D) That was 3 for 3, obviously they're not in favor of the state, and I don't know why you're so against something that has been shown to work pretty well in 23 other states.

Additionally, here's what the state said their challenges were:

Challenges to Growth
• Supply chain staffing and infrastructure is not keeping pace with the demands of growth.
Increased staffing is needed in our stores to adequately serve our customers. Improved
business technology is needed to provide more analytical capacity.
• State law forbids the agency to advertise or engage in product promotion through discounting.
• The state’s two-year appropriation cycle slows the ability to respond quickly to a wide range of
business challenges – to open new stores and relocate existing stores, for example. The
uncertainty of the appropriations process significantly diminishes the agency’s ability to plan
and perform strategically.
• The Distribution, Purchasing, and Retail Divisions must realign themselves to work more
effectively as a seamless supply chain organization that is focused on serving the public
responsibly and efficiently.

So, they say themselves that their problems are staffing and infrastructure, inability to discount prices, inability to do either strategic long-term planning or be agile in the short-term, and that they need to work more effectively on their supply chain. Um, I'm not sure how you argue with that.

 

[jlprk]

An internal analysis. I'm sure any big business does the same. The link says that the state profited by $263M in 2005. So taxes will go up, or services will go down, by that amount, now that the revenue will be lost. When you use the park or the zoo or your car you'll pay something more, because drinkers are no longer subsidizing you. You might say there will also be liquor tax on sales, but that was already there and won't change.

C) hundreds of retailers no longer have to go through distributors. No middlemen. That's a large change in this bill.

Distributors and warehouses are a buffer zone, storing a product between the time the manufacturer makes it and the time the retailer needs it. More retailers means more distributors. One monopoly, like the state, can spread the product out to its hundreds of stores as they need it, so will need few distributors storing it waiting for when stores need it, and the monopoly may even warehouse it by itself without needing distributors.

Costco is big, but there will be hundreds of other retailers in Washington selling liquor too. So your argument that now there will be fewer distributors is the opposite of the truth.

 

[jlprk]

I told you so. Privatization means prices will go up.

http://seattletimes.nwsource.com/html/businesstechnology/2017408836_distributors03.html