When business is slow raise the prices?

[glasswort]

Thai logic, nothing more nothing less.

I know of property in Thailand that has been empty for years and each year the owner increases the rent he wants to charge!!!!

[Oziex1]

This method may actually work when used within the confines of a cartel or monopoly and in near total absence of competition. Does this sound familiar?

Um, are you talking about the Western corporate business model.

[samran]

Economics don't seem to be studied or taught here, which is a pity. Look at the rubber price supports being proposed. Similar to rice scheme that did such wonders. Maybe need some cause and effect classes also. Those of us who propose purpose of education is to teach how to think, process data from real world and implement change when needed are chastised for trying to import those silly farang philosophies, lack of appreciation for "Thainess".

The rubber price scheme, like the rice subsidy, was politics dressed up as economics. And yes, the economic results are disasterous, but perhaps the political ones less so.

On to economics. I'm a trained economist. I also run my own business. You raise prices to what the market can bare. Nothing wrong witht that. If the customers go elsewhere, then that is fine, you adjust or die. It also might be that your product was never any good in the first place. Regardless of price.

My experience in running a business, is customers dont care about price, if they know they are getting value for money. What I've charged someone say $100 for, I've also charged others $1000 for. The latter are more desperate.

I've also raise prices to get rid of customers I don't want. 80/20 rule.

If you have customer loyalty, or are in a business where there are few competitors, then then that is also another way of keeping up the price.

The thing that people tend to forget that if you are in business with inputs, you need for them to be paid for. Small businesses for the most part don't have the cashflow reserves to take a hit and drop their pants. Heck, neither do major businesses. SME's don't have ready access to bank credit to smooth over the cashflow humps. So they raise prices just so they can pay for their outgoings. It is what you do to need to survive to make sure you get through to the next pick up in business. Cut your prices, and you close tomorrow vs raise them a bit, but knowing you will sell that slab of beer eventually for a small profit, though not as fast as you would have liked.

And cause everyone's experience here seems to be beer bars, that is probably what they are trying to do. London to a brick.

So that is my experience in business. It may all seem 'common sense' until you are doing it. And trying to juggle cashflow is one of the toughest challenges that most people don't understnd until they have to do it. I don't doubt it is the same in most developing countries. And in many developed countries.

So I'll leave it there, and go back to getting lectured by former US postal workers who are on their SS telling me how business works.

Edited September 1, 2014 by samran

[Lamphen]

The "logic" is a bit different in Thailand – it seems like they just want to earn the same amount of money as they did last year by distributing the "cost" on fewer punters.

I’ve stopped playing golf on some of the golf courses because of the huge hike in green-fees.

Hopefully they will grasp the concept of supply and demand in the near future.

[FireMedic]

I'm going to use this all the time......

[Just1Voice]

Wife has a friend who owned barber & beauty shop. Employed 3 other women, all old, dumpy, never smile. New place opened up just down the street. Had 3 younger, friendlier girls, always smiling and laughing. Friend started losing business fast. Wife told her that she needed to change girls, spruce the place up. Nope. Said nothing wrong with shop or girls. Yeah, well some soap and water on the walls would have worked wonders. Anyway, raised her prices by 50%. Was completely shut down inside of 3 months due to almost zero business.

[Jingthing]

Yeah, I said I wouldn't give specific examples, but just thought of a classic one that I want to tell.

I used to buy from a chicken stand guy (the large chain) who raised his prices over his direct competition within walking distance of his stand.

So I asked him, why did you do that, I can just go down the street and buy the same chicken for less?

His answer was that he used to work in a furniture shop and in order to make the same money as that old job, he had to charge more for the chickens.

I pretended that made sense.

He lasted a few more months.

But I think it was probably for the best.

The guy clearly didn't have his heart in the chicken business!

Edited September 1, 2014 by Jingthing

[Suradit69]

So I see this all the time here in Thailand when business is slow the prices go up.

When the economy is hurting and the baht is down a lot of the small vendors will raise there [sic]

prices.

Ah yes, more economic lectures from those in the west whose economies have tanked because of bad economic policies.

It doesn't seem slashing prices is such a great solution there either.

Farang Econ101Really bringing in the customers.

Cut the prices and take a loss. Great business model

Edited September 1, 2014 by Suradit69

[Oziex1]

I new a lady who wanted to open a bar, next to a bar that was next to 10 other bars. What makes you think you will make money with so much competition so close I said what are you going to do better than the rest? No comments, no plans just do what everybody else does. Predictably lasted only a few months.

What an outlook start a business next to so many the same, bars, laundry, massage. Iv'e said it before maybe Phuket could do with half the amount of bars and it may result in the remaining bars gaining a little ambiance from more customers.

Hows things looking out there are the tourist areas imploding through these poor practices or just same same. I'm not in Thailand.

[thaimlord]

As so often seems to be the case, I find myself totally disagreeing with the vast majority of posters on ThaiVisa.

The Asians have been trading for thousands of years, much longer than the modern economic theories of a lot of our western countries. And even in our countries there are many schools of thought. Who's right? Maybe both systems are sound. Have we considered that this practice of raising prices might actually work, just as well as lowering them, or maybe even better?

In Farangland:

Customer numbers are down, what do we do? Let's cut each others throats by slashing our prices and margins and progressively fighting with each other until we lose our staff and all but a very few of us go out of business. Businesses that are already struggling can't afford this sort of activity.

In Thailand

Customer numbers are down, what do we do? Let's get together and hike the prices so that we retain our profitability on fewer sales, and are able to continue paying and retaining our staff, so that when the customer levels return we can resume our standard operations and even make a better profit as higher price levels have been established in the marketplace. Some still go out of business, but often a lot get by. We see it again and again here.

Sorry guys, the Thais are NOT stupid, it's your own lack of economic understanding and tolerance of other cultures, and the fact that they might know more than you do. Either system works sometimes, and not others.

The Thai system falls down when one person decides to start playing the western game and slashes prices. My guess is that he is looked up unfavorably by the remainder of the merchants, because when/if others follow, the businesses all suffer.

TL

[samran]

As so often seems to be the case, I find myself totally disagreeing with the vast majority of posters on ThaiVisa.

The Asians have been trading for thousands of years, much longer than the modern economic theories of a lot of our western countries. And even in our countries there are many schools of thought. Who's right? Maybe both systems are sound. Have we considered that this practice of raising prices might actually work, just as well as lowering them, or maybe even better?

In Farangland:

Customer numbers are down, what do we do? Let's cut each others throats by slashing our prices and margins and progressively fighting with each other until we lose our staff and all but a very few of us go out of business. Businesses that are already struggling can't afford this sort of activity.

In Thailand

Customer numbers are down, what do we do? Let's get together and hike the prices so that we retain our profitability on fewer sales, and are able to continue paying and retaining our staff, so that when the customer levels return we can resume our standard operations and even make a better profit as higher price levels have been established in the marketplace. Some still go out of business, but often a lot get by. We see it again and again here.

Sorry guys, the Thais are NOT stupid, it's your own lack of economic understanding and tolerance of other cultures, and the fact that they might know more than you do. Either system works sometimes, and not others.

The Thai system falls down when one person decides to start playing the western game and slashes prices. My guess is that he is looked up unfavorably by the remainder of the merchants, because when/if others follow, the businesses all suffer.

TL

As said, a bunch of former US postal retirees who have spent their careers being jobworths giving us their small business smarts. Even better, basing their case studies on chicken vendors, salons and beer bars which are run by people with 4th grade educations. But at least they are having a go.

No mention of the farang beer bar owners who keep Georges classified businesses up and running with their constant turnover.

[thhMan]

Of course,because Thaï do not have the common sense.MNot only for business,look the way they work....

Cause clearly those here on Thai visa are business owners themselves and are experts on commenting.

It doesnt take a genius to figure out that selling the same crap as your neighbor who is selling cheaper, may lose you business.

And then with the higher prices, comes the tainted food that is not sold the first few days (with regards to restaurants).....

[maderaroja]

When business is slow, there is wastage because the product must be thrown out. Someone has to pay when you do not buy. The result is raised prices.

[samran]

When business is slow, there is wastage because the product must be thrown out. Someone has to pay when you do not buy. The result is raised prices.

The smart thing to do is to build in that into the higher price to account for wastage. But it would require every one to do it so there is actually pricing based on all costs, not just immediate physical ones.

So two things happen. People are not actually running businesses where their marginal revenue is less than their marginal costs (fark me, a Thai who knows economics and actually using the lingo).

Secondly the retired postal worker expats cum business strategy gurus will whinge on how Thai people have raised prices, and how stupid are they.

Edited September 1, 2014 by samran

[JDGRUEN]

With housing rentals in sea side resorts and with the rentals of motorcycles in the same areas - there seems to be a salvation against loss ... Thousands of bungalows, flats, apartments, hotel rooms, guest houses, etc. in low season - prices actually go down - but usually not far enough... so places go empty ... then with only a hint of the so called high season coming up they want to raise prices -- but no real demand... It is the same with motorcycle rentals -- low season -- hundreds - even thousands of bikes sitting not rented...

How does this work -- seemingly the owners of rental housing units and motorcycles in resort communities get obscene prices and profits in the high and peak season --so much so that they really do not care if a housing unit or motorcycle is rented in the low season...

This is all great as long as there is not a hiccup in the high season turnout ... as they may be this coming high season due to a number of factors... maybe yes - maybe no... we will see

Right now in Ao Nang in the ending stages of the low season - changing to high season -- I see thousands of housing units not rented and the same with motorbikes... If the high season is HIGH then it will be fat bank accounts for many --- if not -- there will be virtual blood in the streets...

Personally - I think the practice I observe is quite naive if a business owner assumes the good times will always be there ... And I feel these same business owners do not follow changing events such as has occurred in Thailand in the past six months or so ... we will see - soon ...

Edited September 1, 2014 by JDGRUEN

[Sarana]

I found this phenomenon of people raising prices in low season or no business. My friend told me they need to chargeore because no business. Thus, they fail to recognize market forces but so do we...scarcity of customers, businesses close, scarcity of services...and unofficial cartel of local business owners who collude to raise prices and keep them high...but they are only for the farangs, Thais getarket prices that fluciate according to demand. Life sucks, racism lives even here.

[samran]

With housing rentals in sea side resorts and with the rentals of motorcycles in the same areas - there seems to be a salvation against loss ... Thousands of bungalows, flats, apartments, hotel rooms, guest houses, etc. in low season - prices actually go down - but usually not far enough... so places go empty ... then with only a hint of the so called high season coming up they want to raise prices -- but no real demand... It is the same with motorcycle rentals -- low season -- hundreds - even thousands of bikes sitting not rented...

How does this work -- seemingly the owners of rental housing units and motorcycles in resort communities get obscene prices and profits in the high and peak season --so much so that they really do not care if a housing unit or motorcycle is rented in the low season...

This is all great as long as there is not a hiccup in the high season turnout ... as they may be this coming high season due to a number of factors... maybe yes - maybe no... we will see

Right now in Ao Nang in the ending stages of the low season - changing to high season -- I see thousands of housing units not rented and the same with motorbikes... If the high season is HIGH then it will be fat bank accounts for many --- if not -- there will be virtual blood in the streets...

Personally - I think the practice I observe is quite naive if a business owner assumes the good times will always be there ... And I feel these same business owners do not follow changing events such as has occurred in Thailand in the past six months or so ... we will see - soon ...

With property you'll often find owners are full owners. No mortgages.

I know this goes against the grain here as all Thai people are supposed to be uneducated peasants, but when you have no mortgage, then there is less incentive to get rentals at any cost.

Moreover, they view the land as a long term investment. Happy to let it sit if need be.

[Sarana]

When I came to Thailand, prices doubled due to Shinawatra's high end tour I policy. I became so stressed (eg. 800 baht for taxi from Koh Samui airport to Big Buddha) or 2 hrs minivan round the island to Maenam instead for 300b) that I ended up in local hospital. Got a 60 day medical visa for convalescence and spent 6 weeks in hotel in Nathon.Local comments: what is she doing here for six weeks in same hotel not taking any tours, and why always going to government hospital, should go to Bangkok Samui hospital (another 25km away.) Much more expensive and 500b taxi each way. Finally rented a house and 2x60 TR visas but market prices, laundry,etc always double.

[JDGRUEN]

With housing rentals in sea side resorts and with the rentals of motorcycles in the same areas - there seems to be a salvation against loss ... Thousands of bungalows, flats, apartments, hotel rooms, guest houses, etc. in low season - prices actually go down - but usually not far enough... so places go empty ... then with only a hint of the so called high season coming up they want to raise prices -- but no real demand... It is the same with motorcycle rentals -- low season -- hundreds - even thousands of bikes sitting not rented...

How does this work -- seemingly the owners of rental housing units and motorcycles in resort communities get obscene prices and profits in the high and peak season --so much so that they really do not care if a housing unit or motorcycle is rented in the low season...

This is all great as long as there is not a hiccup in the high season turnout ... as they may be this coming high season due to a number of factors... maybe yes - maybe no... we will see

Right now in Ao Nang in the ending stages of the low season - changing to high season -- I see thousands of housing units not rented and the same with motorbikes... If the high season is HIGH then it will be fat bank accounts for many --- if not -- there will be virtual blood in the streets...

Personally - I think the practice I observe is quite naive if a business owner assumes the good times will always be there ... And I feel these same business owners do not follow changing events such as has occurred in Thailand in the past six months or so ... we will see - soon ...

With property you'll often find owners are full owners. No mortgages.

I know this goes against the grain here as all Thai people are supposed to be uneducated peasants, but when you have no mortgage, then there is less incentive to get rentals at any cost.

Moreover, they view the land as a long term investment. Happy to let it sit if need be.

I didn't say anything about Thai ownership or not ... nor did I make any references about uneducated peasants. The problem I do see however regardless of nationality of ownership is by foregoing cash flow income in the off season -- many of the owners seem to opt for not performing needed maintenance ... And what I often see is neglected properties - which have to have deep maintenance bring ups prior to the high season ... But this has a long term increase in noticeable wear and tear - cheapening the property.. I just moved from a resort property that is owned and managed by people who see that consistent year round income allows the employment of a year round staff to keep landscaping and buildings in top shape --- they offer attractive off season prices for a luxury place - thus they are now ready - set - go for the high season -- no mad dash to bring up the property and the look of the property compared to others is superb .. Good business practices work regardless - but this place I mentioned is quite an exception ...

[Sarana]

I rented several houses on the island and definetlyowners not interested in renting in low season as sitsitting on fat bank balances of last two years cold winters on Europe. Also happy to take your advance and harass you into leaving as well as connecting your elec meter to their house or resort garden lights, no WiFi, artesian water in the house as cheaper than govt water and coveting your stove, elec appliances, even your fitness and leisure. They want all you have, even your health.

[belg]

well, biggest example and scam in thailand, the riceberg, where they tought by hoarding it, the price would go up ... everybody knows it is now rotting or missing ...

rubber farming ... how many more ...

[dao16]

Well, I have definitely seen this...and I think the OP is talking about a very specific type of price increase. This isn't the price increase due to increased prices in commodities or market demand or whatever. This is the "oh, I messed up my business...nobody is coming so I'll raise prices" move. It is a panic move.

Meet its cousins: drastically cutting portions or quality suddenly, or simply not buying important parts of the product itself or relevant accessories. So then, even when your customers do go, it won't be long before they stop going.

As someone said above, it usually is a sign that the place is going under soon.

As for examples, I have a ton.

Here is one of the many I have seen (obviously, the place went under pretty soon): a new place opened and we knew some of the guys who opened it so we went. It was actually good for about a month. Then they changed the chef and it wasn't as good (I think they had some conflict about money between themselves..it was unclear). Then some random guy started cooking and it was edible enough to keep going for food along with some beers. The last time we went, we ordered TomYam, which was generally good before. It came out and no one could recognize it as being TomYam of any sort (90% Thais at the table). It was sort of like salty water with some sick looking shrimp inside. The rest of the food was also severely lacking.

We never went back and, apparently, most other customers made the same choice.

By the way, in reference to the one poster talking about foreigner/tourist areas, I don't live in one by any stretch of the imagination.

[rgs2001uk]

When business is slow, there is wastage because the product must be thrown out. Someone has to pay when you do not buy. The result is raised prices.

The smart thing to do is to build in that into the higher price to account for wastage. But it would require every one to do it so there is actually pricing based on all costs, not just immediate physical ones.

So two things happen. People are not actually running businesses where their marginal revenue is less than their marginal costs (fark me, a Thai who knows economics and actually using the lingo).

Secondly the retired postal worker expats cum business strategy gurus will whinge on how Thai people have raised prices, and how stupid are they.

(^_xxxxxx, a Thai who knows economics and actually using the lingo).

My mrs does not employ family, asked why, easy to get rid of non family.

Farang sets up nothing more than a welfare scheme run by his mrs who has no more than a P2 education.

Chinese came to my house one day, told the skivvers, no time for resting you are paid to work.

Chinese, Muslims and Southerners are the only people my mrs will contact to do work.

threw a spirit level at me one day, much laughter, Big Boss asked me what I was going to do.

My answer, he doesnt work for me, he works for you, what are you going to do?

After the lights finally went on, was told to xxxxxoff, followed by a wai and a kor tawt.

Edited September 1, 2014 by Rooo
profanity

[Sarana]

I rented several houses on the island and definetlyowners not interested in renting in low season as sitsitting on fat bank balances of last two years cold winters on Europe. Also happy to take your advance and harass you into leaving as well as connecting your elec meter to their house or resort garden lights, no WiFi, artesian water in the house as cheaper than govt water and coveting your stove, elec appliances, even your fitness and leisure. They want all you have, even your health.

[orpheus454]

That is the pattern in Thailand ... and it often signals a desperate business on its last legs.

Of course they should look at the fundamental issues ... WORK much harder in delivering satisfaction to the customer at an attractive and competitive price ... that would give real hope of turning things around and create a business that can last and grow for many years.

Not saying businesses shouldn't raise prices when they can get away with it, but the pattern here is they jump the gun (raise prices for their own desperate reasons rather than raises that are justified and customers can agree they are justified) and kill their own business.

I've seen this same short sighted desperate move in businesses in the USA ... but much less common ... here you can see this tactic everywhere.

Really? Where?

I see lots of talk about this it for me but it is something I've never experienced.

That's because you (and I) live in a different Thailand to others on this forum.

Theirs is a parallel universe Thailand where everything is bad. Just let them stew, Samran...

[Jingthing]

Huh? Who said everything is bad? If a business raises their prices and I no longer see the value there and I have other choices, I just don't buy there. DUH!

[farangforever]

Looking for accommodation in Nakhon Pathom some years ago while still fairly new to Thailand I was introduced to this practice. Looking at a place not really suitable, way too much unusable space and way, way too expensive, my Thai friends were told that the price was very high because they had to increase it as the place had been empty for a very long time, and therefore they had lost lots of money.

[Jingthing]

Looking for accommodation in Nakhon Pathom some years ago while still fairly new to Thailand I was introduced to this practice. Looking at a place not really suitable, way too much unusable space and way, way too expensive, my Thai friends were told that the price was very high because they had to increase it as the place had been empty for a very long time, and therefore they had lost lots of money.

If someone has lived in Thailand a long time and claims they've never noticed this practice, you really have to question their sincerity. It's like saying you live in Pattaya and haven't seen sex workers.

[rgs2001uk]

Huh? Who said everything is bad? If a business raises their prices and I no longer see the value there and I have other choices, I just don't buy there. DUH!

Just becoz you can no longer afford the prices doesnt mean the business model is bad.

I drink in bars in Pattaya that charge about double the going rate for a beer.

Why do I drink in these places?

Answer, it keeps out the CC farang scum and Chavs, Digital Nomads and free WiFi huggers.

Some of us are able and more than happy to pay a bit more, as our American friends will tell us, its all about your eating out experience.

[Jingthing]

I don't go to bars. Sorry to burst your bubble. I wasn't even talking about bars. Someone else mentioned bars.

I realize many customers are happy to pay more and know they are paying more and they get "value" from the feeling they get from paying more. Companies like Starbucks take great advantage of that.

But that's not really what I was talking about.

I was talking mainly about small desperate businesses screwing themselves out of business instead of looking at the fundamental reasons their businesses are slow.

Edited September 1, 2014 by Jingthing