Buy for more and sell for less

There was a famous merchant known for his ethics and riches. He had a son helping him in his business and a grand son. Suddenly the son meets his end and the old man is in a dilemma – whether to burden his young grandson with business or carry on with the business himself for some more time allowing the young boy to enjoy his child hood till he has grown out of it. He decides on the later course , but as fate would have it ,suddenly took ill and is in the last stage of his life.

He calls his grand son and tells him,

“ I don’t have the time to train you. Let me give our success formula in short for you……….buy for more ……and sell for less………”

So saying , he breathes his last.

The boy truly takes the advice to heart and implements it to find him-self running into losses very soon. He can’t believe it or understand . So he decides to consult an old friend of his grandpa .

The old man smiled on hearing the story and told the boy “ you combined the 2 split sentences and ran into losses. Split them….buy good quality goods paying a little more than your competitors…thereby , you will have committed suppliers ,quality and availability……same way…..sell good quality goods at a price little less than your competitors …..there by you will have an assured market and profit too due to higher TURNOVER….that is the key.

The boy understood and prospered earning as good a reputation as his ancestors.

The above is a story that I read sometime back.

Come to think of it. Is it not what the big retail chains are doing. This also explains the importance of economies of scale. Stories are a great way of conveying a theory.