Question about Grocery Store Pricing

Factual Questions
21

A few years ago, I briefly (for a few months) worked as a price-changer on the graveyard shift at a large Canadian grocery store.

I was really interesting, as I would go around every night with new labels and change prices on grocery items (i.e. goods in the grocery section on the shelves - deli/bakery/produce did their own price changes). The new price lists were sent to us electronically every night from head office, with some prices going up and some going down, often only with a change in price of a few cents. I don’t know exactly what went into their price-changing algorithm, but I assume it factored in many different things.

I’d estimate that about 70-80% of the grocery items had a change in their price each night - and this isn’t even including major sales and coupons, which were in separate from these regular price changes.

I noticed that overall the trend seemed to be that most items cost a bit more on the weekends (especially Saturday), and that prices were usually a bit lower mid-week (Tuesday and Wednesday). Some items didn’t necessarily follow that pattern, but it seemed to be generally true.

22

[QUOTE=Waenara]
I was really interesting…
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Such an ego! :slight_smile:

23

[QUOTE=Chez Guevara]
Unless, presumably, a supermarket needs to react quickly to the marketplace in a price war.
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Price wars in supermarkets are pretty much irrelevant. Most of your major chains run razor thin profit margins as is compared to most other businesses.

24

[QUOTE=Shagnasty]
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).
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You know you have worked in supply chain too long when you start working on economic order quantities and planning time fences on bar napkins. :smiley:

I was soooo glad I didn’t have to work with perishable product…ugh. Bad enough dealing with product that moves in and out of the facility.

25

[QUOTE=drachillix]
Price wars in supermarkets are pretty much irrelevant. Most of your major chains run razor thin profit margins as is compared to most other businesses.
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Do grocery chains actually ENGAGE in price wars?

26

[QUOTE=Exapno Mapcase]
Such an ego! :slight_smile:
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:o

It was interesting, whereas I am clearly not.

27

[QUOTE=Vetch]
Do I have any basis for my cynicism?
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In retail, there’s always a basis for cynicism.

In the case of the wine, it is probably a matter of either (a) that particular wine not selling very well or (b) the store getting a really good deal on a bulk purchase.

Note that “not selling very well” is emphatically not the same thing as “not very good.” You can see this by looking at the NYT bestseller lists. When appropriately priced and marketed, drek sells very, very well. On the flip side, extremely good wine (or books, or whatever) can sell poorly because of our untrained palates or limited budgets–or even because the label isn’t very pretty.

“With a name like Smucker’s, it has to be good.”

28

[QUOTE=Exapno Mapcase]
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.
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The computer is only as accurate as the data fed to it. If someone forgets to enter the special prices, the computer will blithely continue to charge the wrong ones unless someone complains.

One position I’ve never heard of is “price verifyer”. Did any manager-type person here ever designate someone to read every item on every flyer and check its price by a test scan? I doubt it. It’s caveat emptor.

One thing I haven’t seen mentioned here yet, regarding the OP, is sometimes items are test marketed at different prices to see if they have price flexibility or can be tied to related items. If the price of X is reduced by Y, will it generate enough sales to compensate the bottom line? Or will a reduced price on fudge sauce generate more ice cream sales (which might have a raised price!).

Also, large chains price things differently according to local differences; climate, buying habits, etc. and this can enter into marketing decisions as well.

29

[QUOTE=Mr. Slant]
Do grocery chains actually ENGAGE in price wars?
[/QUOTE]

In Australia, not with each other, but definitely with independent retailers.

The Grocery industry in Australia is effectively a duopoloy, and there is a long tradition of one of the big two, opening a new supermarket, and savagely undercutting prices on either/or/both fresh produce and meat to drive any butchers or fruit & veg stores out of business in the immediate area.

With the obvious result of the supermarket immediately returning their prices to “normal” levels.

30

Interesting.
My wife shops the local indy vegetable market and indy butcher, beating the chain stores every flipping time.
She is exclusively driven by price, and frequents the national chains only for processed foods and drinks.

31

[QUOTE=Mr. Slant]
Do grocery chains actually ENGAGE in price wars?
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The two supermarket chains with market share supremacy in the UK are Tesco with 28% and Asda which has 17%.

Terry Leahy, Tesco Chief Executive, has recently called time on a pricing conflict with Asda over the latter’s decision to sell 1.55kg chickens at £2 apiece. His response to Asda is not without interest. While undertaking to sell his 1.55kg chickens for £3.39 each (an increase of 4%) he remarked as follows:

Maybe he’s right but the point is this:

That’s a price war.

Source.

32

[QUOTE=Martini Enfield]
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. .
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It’s usually that way in the USA too, and I can not remember a time where normally identically priced items weren’t priced like that. But for example, Hormel has Chili with and without beans. The w/o is often almost a buck more than the with. So although Hormel chili mayb be on a “3 for $5 sale” the beanless rarely is. Not never, however- once in a while, all varieties will be on sale at the same price, leading to large lacunae in the beanless variety. I usually shop at Safeway, but also smaller stores, too. (PW, Zanottos, Whole Foods, etc)

I buy a lot of Pepsi products and they often go on sale. I have not yet seen “Pepsi 2 liter bottle” on sale when Diet P, Sierra Mist and others weren’t.

And, other than a product with a damaged barcode, I have almost never been bothered by a “price check” in several years. One exception being Rainchecks, where they have no barcode to scan.

33

Another take on the OP: The situation might be price discrimination. Companies would love to be able to charge an individual’s maximum willingness to pay. In most cases, this is tough to do; as such a setup requires dividing customers into different groups. (Student discounts are an example of this)

In the soup case, suppose you have one group that doesn’t care what kind of soup they eat, and another that prefers the brand the store decided not to put on sale, and will pay extra for it. They have divided the customer base into two groups. I recently read an article claiming “fair trade” coffee is pretty much the same thing.

34

[QUOTE=Musicat]
One position I’ve never heard of is “price verifyer”. Did any manager-type person here ever designate someone to read every item on every flyer and check its price by a test scan? I doubt it. It’s caveat emptor.
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No, that is absolutely not correct. Even when I worked in a very small supermarket chain in high school in the 80’s we did a full test scan of all sale items at 6:00 am on Sunday mornings just before the sale started.

When I worked in management for a much larger supermarket chain in the Boston area in the late 90’s, that issue became hot many times because the state ran audits to check for accuracy. My boss was in charge of those internal audits and I managed them sometimes myself. We hired boatloads of temps do do price checks on the 40,000 or so items that are in a typical store.

This goes back to my point that many people don’t even understand why supermarkets have headquarters or what they do. A track record of pricing irregularities can make the CEO have emergency meetings and pull in top consulting firms in a multi-million dollar contract to fix the problem. There is a lot of legal exposure to the chain not to mention the slow damage done due to public perceptions.

While it is almost impossible to keep the pricing databases 100% correct, there is a lot of corporate talent that is dedicated to making it the best it can be. There isn’t some acne faced teenager typing in prices in the back room. That data gets transmitted to the store Point of Sale systems from headquarters and there are a lot of people that ensured its accuracy and can address problems 24/7.

35

Shagnasty, I don’t doubt what you say, for the stores you were/are involved with. Yet over the last few decades, the number of price errors I have found in grocery and variety stores where a shelf price or advertised price didn’t match what the register charged would fill a book. And (surprise!) the error was always in the store’s favor.

And this is only because I watched the checkout carefully, not because I set out to find errors or get the store in trouble. I just want to be sure I get charged what the consumer has a right to expect.

Just last month I found an error at Wal-Mart of $10 – a $20 item had been clearly marked down to $10 and had a sticker on it – and the manager verified the error and offered me an additional $5 discount for reporting it.

In your defense, I haven’t noticed as many errors recently (in the last few years), so perhaps things are getting better or perhaps I’m shopping at different stores. That doesn’t mean I will trust the register with my wallet without a challenge.

36

[QUOTE=Musicat]
In your defense, I haven’t noticed as many errors recently (in the last few years), so perhaps things are getting better or perhaps I’m shopping at different stores. That doesn’t mean I will trust the register with my wallet without a challenge.
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There are definitely pricing mistakes due to a variety of reasons that likely won’t ever go away. I never saw a major Point of Sale auditing report that scored a clean 100% but 99.x% was the target. It is just inaccurate for you to say that there is no such thing as a price verifier in major chains when, in fact, there is an awful lot that goes on behind the scenes to make it the best that it can be even at an upper management level.

You might be surprised to go into a major supermarket chain headquarters and see the scanning labs, the quality assurance people, the database programmers, the analysts, and the external auditing team all working to make sure that the prices end up the way they were presented to the customer. Wal-Mart has whole teams of people working on this stuff and they really don’t want to be associated with sloppy pricing because near perfect execution on everything has always been their goal. Markdowns are always prone to this problem however so that is probably why it happened to you that time.

37

Another grocery question if I may? Is it true that the shelves are rented to the individual vendors and that shelf position is determined by how much say the Carnation Instant Breakfast guy is willing to pay?

38

[QUOTE=Cluricaun]
Another grocery question if I may? Is it true that the shelves are rented to the individual vendors and that shelf position is determined by how much say the Carnation Instant Breakfast guy is willing to pay?
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Yes, that is fairly accurate for a lot of the choice shelf space. Here on the East Coast, “slotting fees” are often charged to vendors that want to introduce their products into the store. These fees can be anything but often range in the thousands to tens of thousands per individual item. The chain uses the money to actually allocate the space (which takes a lot of coordination across the chain) and to fund the setup process. If the product fails early on, the vendor still loses the slotting fee. The rest of the ways that this is true are pretty complicated. The supermarket headquarters, the manufacturers, and maybe even the distributors always have money flying back and forth for various purposes such as special shelf slotting or targeted promotions. Money can definitely buy better product shelving and the big manufacturers are often pretty liberal with that type of money making it hard for the less well funded to compete.