Big W Thought Provoker, page-14

Negative. Clearly Big W needs to get with modern economic thinking. What they want to do is be the nice guy but let's leave that to the Good Guys, that's their game. There is a shortage of the product in Australia because there is a shortage of the product in China. Nobody wants to buy Chinese products because they have reason to believe they use plastic fillers. I am not saying this is with or without precedent but beliefs are strong behavioural drivers. Hence the Chinese community buy Ozzie and export to China. We know this.

By restricting the product sales per person Big W are saying, albeit implicitly, there is a genuine shortage of milk formula and the price we are charging is below the market value. This is nothing but a blatant invitation to cheat the system- get four of your mates to do a Big W raid at product limits. Then go back the next day. Wash, rinse repeat. Clearly because of export - to- China demand, demand exceeds supply at the current price and the price needs to rise. Basic Ecos 101, folks. If socialism has taught us nothing: it is we discovered the laws of economics and one cannot rewrite then capriciously- especially if you are Big W.

Actually such an approach does Australians no favours. By restricting supply the usual market signals are not available to producers and resources are misdirected with ongoing shortages- which are bad for Aussie mums. What should happen is Big W should keep on ordering more and selling as much as they can. This is a signal to the producers that they need to raise prices and/or make more. Higher prices (ceteris paribus) will direct resources towards formula production as above average profits can be made. This is turn invites competition and drives prices down towards cost plus margin to stay in business.

Big W management need to get with the programme. This is not a threat but an opportunity.