Peter Minuit purchased the island of Manhattan for $24.00 in beads and trinkets from the natives on the island in the early 1600s. Did they get good value??? The current value of the island of Manhattan is around $850 billion.
The price of an item is not the same as the cost of the item! The cost of an item is not the same as the value of the item!
Price and Cost
Price is the amount charged by a vendor or supplier for a given product and service. The vendor uses their costs to determine what this price needs to be. The vendor must take all costs into account when determining the price to charge for their product or service, including profit. Missing any of the costs can be the difference between the success and failure of the business.
Price and cost can be measured monetarily. Value can be much harder to measure in terms of money. A simplified example might be that you have 10 oz of gold with a market price of $1200 per oz. I have 10 gallons of drinking water with a market price of $2.00 per gallon. Which asset has the most value? Most of the time the person with 10 oz of gold would be considered to have the most ‘valuable’ asset compared to 10 gallons of water. However, if we were stranded in the desert for 10 days and I had drinking water and you have gold…value might be perceived differently. In the end, we are all looking for the best value. While different circumstances can change the value, they typically remain fairly steady. 99.9999% of the time gold, a fairly rare item, will be worth much more than a common item like drinking water. However, I would still keep some water next to my gold!
Many people use online prices to try to determine the value of a product/service. The price may be lower but does that make the value higher? Most everyone has had problems with online purchases. Products are misrepresented. The product gets lost in shipping. Products arrive damaged. Warranty issues. Customer service representatives that are difficult to understand and communicate with. The list of potential problems is never-ending. Online companies often cut overhead to keep prices down. The easiest place to cut costs is customer service. When you have 100’s of millions of potential customers’ you can afford to irritate a few. What can they do? Write me a bad review? There is an industry to deal with just that. They will bury or eliminate bad reviews and sometimes exaggerate positive reviews. If you would like some entertainment search “online purchases gone wrong.” The results are a mix of hilarious and maddening. It is easy to laugh at others’ problems until you come across one similar to what you experienced!
Evaluate Cost and Value
I would challenge you to evaluate costs and value in your buying decisions. When you are looking at the price be sure to consider all “costs” as well. Did you have to drive someplace to get it? Did you spend hours searching online to find it? Did you consider shipping charges? Did you buy a membership? What will it cost if you have problems? Will delays cost you time and or money? Did you have expert guidance and support in making a buying decision? All of these and more bring or take away the value of your purchase.
At Warehouse Supply, our focus is to bring you the best value. We build this value with a highly skilled staff that can help you choose the right products. We maintain an extensive inventory so we have what you need when you need it. We can deliver your products to your door. No membership is required! We have hundreds of vendors and can often find those hard-to-locate items so you don’t have to spend hours online, hours on the phone, or running from place to place. We stand behind our products and, should there be a problem, we are there to help resolve it. We not only want you to buy from us again, but we also need you to buy from us again!
Value is not always easy to recognize or measure. Remember the $24 Peter Minuit paid to buy the island of Manhattan for the Dutch? Current estimates put a value on the island at around $850 Billion in today’s dollars. That seems like a great value. However, had the option existed to invest that same $24 in the stock market and received an average return of 8% (since inception, the stock market has shown an average return of around 10%), the value of that investment a little over 400 years later would be over $963 trillion! Over 1000 times more than the current market value of the entire island! That doesn’t mean it was a bad price, it just shows that value is not always simple to recognize.
Next time you need to make a purchase, what is the correct question? What is the best price, or what is the best value? Toba Beta once said, “Value is more expensive than price.”