First, I hope I put this in the right place - it SHOULD have a factual answer I would think.
As I was sitting here scooping my meatballs out of my SpaghettiOs® Meatballs
Pasta with Meatballs in Tomato Sauce since they are icky, two things occurred to me.
These were purchased because they were on sale for $1.00 a can. That is why I am eating this glop. They also had SpaghettiOs® Sliced Franks Pasta with Sliced Franks in Tomato Sauce for a $1 a can. Those were my choices. Oh - and the one that has added calcium but I don’t roll that way.
The store carried SpaghettiOs® Original Pasta in Tomato and Cheese Sauce on the shelf right next to the meatball or hot dog varieties but they were NOT on sale.
This led me to some questions.
Why would a supermarket put two or three out of four items on sale? Why not put all the versions of the product on sale.
What drives grocery store sale pricing? How does it work? Does a manager arbitrarily say (for example), “This week let’s put Bounce on sale”?
Any insight into the dark world of supermarket pricing would be appreciated.
to boost sales of one particular product, or to move an excess of inventory. this could be initiated by either the store or the manufacturer.
the more successful chains use pretty complex data modeling to track what products are selling and which ones aren’t. Maybe a mom and pop store makes arbitrary decisions about what to put on sale, but that’s why they have trouble competing with the chains. That’s true of the whole retail industry, by and large.
I am a former major supermarket corporate type and anson2995 has most of it. The possible answer to your question is much more complicated than most people would ever believe. Unless you are dealing with a small store, the store managers don’t have anything to do with it. Corporate has statisticians and MBA’s to figure out what goes on sale and when and it is a big process involving many people that gets settled months in advance. Deals get negotiated back and forth between the manufacturer, the distributors, and the corporate merchandisers. It is a complex game involving money changing hands possibly in several different directions. There is no way to know exactly in your question but it is likely that the manufacturer wanted to promote certain items to boost visibility or to reduce overstocks on their end.
I thank you very much! I had always kind of in the back of my head figured it was just a store guy and it was on a whim almost - obviously I’ve never put much though into it. :eek: This is all very interesting.
No problem with that. I have gotten the same types of questions many times. Often when I told people that I worked at a major supermarket headquarters, they would say that the didn’t know that supermarkets had headquarters or just get confused about what someone at a supermarket headquarters would possibly do (I worked on supply chain systems and often just pure statistical theory).
For some reason, people put supermarkets in the decidedly low-tech category when they actually have been on the cutting edge of technology for decades. The major chains hire boatloads of MBA’s and even PH.D.'s to try to gain an over their competitors because it is an extremely competitive business and even small advantages can influence an outcome greatly.
Wal-Mart was actually the driving force for this type of thinking although weren’t into the grocery business in the beginning. When most people think of Wall-Mart, they think of slack jawed yokels. In reality, they have been deep into technology and cutting edge retail theory armed from loads of data almost from the beginning. Other chains started to emulate that and it started a revolution in retailing efficiency that killed those that couldn’t keep up with the academic and technological aspects of it all.
This is partly a matter of differing definitions, but in the grocery business a loss leader is normally not a sale item but a staple good (milk or eggs, e.g.) that people buy regularly. By taking a loss on an item sure to draw people into the store, the store drives sales of other items. However, the store itself loses the money on a loss leader, while for sale items a store may be compensated by the company so that it doesn’t lose any money for marking down the retail price.
Other reasons things go on sale (I own a retail store, but it’s books, not groceries):
Wholesalers offer special deals. These are intended to be passed on to consumers, although it’s often possible to leave the product at full price and pocket the extra profit.
Sometimes you need to get rid of overstock or discontinued items. If SpaghettiOs is coming out with “New & Improved Meatballs” next month, then all of the old meatballs will be on sale this month.
Stores change what brands they carry. If they decide to replace SpaghettiOs brand with something else, they’ll put the SpaghettiOs on sale to clear them out.
Often, sale strategies seem counter-intuitive. If Barfos brand doggie biscuits are the most popular item in the store, it would seem silly to put them on sale, right? People are already buying them up at full price. But putting Barfos on sale will draw in all of your regulars, who will (hopefully) buy a bunch of other stuff while they’re there. It might also draw in people who don’t normally shop at your store (“Wow! Barfos for only a buck!”), where they will hopefully become regulars.
As much as I dislike some of the business practices of Wal-Mart, they were from almost the beginning, a driving force of change. Their logistics solutions were far ahead of almost anyone else, and they changed several indusry practices.
Also, as a former grocery store manager of a large chain, I can say that we had zero input on what was on sale. However, if you follow the ads close, you can see a definite cycle. For example, the toilet paper on sale alternated almost every month between say, Charmin and MD. You could set your watch by it.
I was once yelled at (well, not YELLED at, but chastised) for calling an item a loss leader. My District Manager made sure I knew that a loss never leads you anywhere…
Usually, the sales items are dictated by the manufacturer.
Campbell’s Soup, for example often will issue coupons for just tomato and chicken noodle or for any condensed variety except those two.
In particular, there is a market dominance law in the monopoly practices code that prohibits Campbell’s and other dominant brands from subsicizing an expensive soup by having a high price margin on another soup that is cheap to make.
Not mentioned is when deciding they want to advertise in one space of the ad at a $1, they will often exclude a variety that isn’t in the same cost category. They want to advertise a single price, not that they all are just on sale. This happens a lot on items with beef verses other content. The other content can sell for $1 but the beef content ones cost the store $1.25, so you don’t have that one included. It’s easier to not include one item that is at a different price, and keep the large sale display stocked only with what is a single price.
Um, a loss leader may involve selling a product below wholesale cost, but it probably means selling for less than you otherwise could. Just because you make a small profit doesn’t mean it’s not a loss leader.
It’s interesting to see how pricing in the US works- here in Australia, when an item goes on sale at the supermarket, they generally put all other closely related lines from the same company on sale at the same price as well.
So, for example, if they’re advertising 2l bottles of Coke for $1.50, then all the 2l soft drinks from Coca-Cola will generally be on sale for $1.50- Diet Coke, Coke Zero, Vanilla Coke, Fanta, Sprite, and Sprite Zero. (This will be advertised as “Coca-Cola 2l Varieties $1.50ea”)
The same goes for things like potato crisps- you’ll never see Smiths Salt & Vinegar Crisps on sale but not Smiths Cheese & Onion Crisps- it’s always “Smiths Crisps 350g Varieties $X.XX”
It certainly reduces frustration and confusion on the part of customers- and it means that if you’re after some chips for a party, you’re going to grab the brand that is on sale for all the flavours you want, rather than trying to work out whether the Chicken flavoured chips are on sale as well as the Ready Salted variety. This also speeds things up at the register- a typical Australian supermarket has considerably fewer “Price Checks” resulting from consumer confusion than a comparable US one, IME.
These days “price checks” are only gags on sitcoms. They seldom happen in real life, in my experience. Computer systems have advanced so much that the price scanned in from the bar code is almost always accurate. The only time I’ve seen price checks needed are from a few odd non-bar-coded items. YMMV.
My results do indeed vary- I used to work in a supermarket (Nightfill and on the checkouts), and we’d often get people wanting to query the prices on things. Changing all the price tickets was a time consuming process and it wasn’t unusual for people to not see the promotion expiration date and leave the tickets up.
When I was last in the US, I heard quite a few PA calls for price checks on various items in a supermarket/Big Box store I was in (Can’t remember if it was Wal-Mart or Target, though).
Wine is always on special offer, different wines at different times of course but there’s always a deal on offer, and I assume it’s the same in other countries. I’m not talking about buying 6 bottles and get 10% off but where each bottle is discounted, some by as much as 50%.
The cynic in me says that the wines on offer were probably not quite up to scratch, and the producer just wants to offload it. Is that likely? Or is it just as mundane as the reasons given above?
Unless I want wine for a special occasion I tend to buy from mid range wines but I have bought wine from a more expensive range that was on offer- and often been unimpressed. Now that may be me not being able to appreciate a good wine but as I’ve said I tend to the cynical view.
No, producers and distributors like to market their products the same way that every other type of supplier does. The could be in an overstock situation but there is no reason to assume so.
I took it to be the ranting of an idiot DM who doesn’t really know what the term “loss leader” means; he thinks if it has the word “loss” in it, it MUST be bad.
