Hi in some supermarket chains (in Australia at least) they have a lot of half price specials mainly involving chips, chocolates and soft drinks but also other brand-name products.
I was wondering about the cost price of the products… I assume the supermarket is always making a profit… say the normal price of the product is $10 does the supermarket normally pay say $7 and when it is on sale is the cost price like $4.50? (and sold for $5)
“Loss leaders”: they may be factoring in the cost of storage space for a product that isn’t shifting at its otherwise profitable or cost price, or the additional purchases customers might be tempted to make if they think the place offers bargains.
At supermarkets like Coles and Woolworths the 1/2 price specials feature prominently in their catalogues. Leading brand chips and chocolates are often 1/2 price in the catalogues. The generic brands are rarely discounted. The brands that are 1/2 price on the front cover are usually brands that are advertised on TV. Items that are 1/2 price later in the catalogue often aren’t very famous - maybe they dropped their price temporarily to get noticed. It seems like a lot of products alternate between normal price and half price to get noticed but then to get a better profit by going back to full price.
I was just checking out the IGA (Independent Grocers Association) website. The opening slide just shows 1/2 price for Doritos and Pepsi range softdrinks. Maybe the sellers do a deal with the supermarket to promote it…
As I understand it, the discounts come from the manufacturers; usually as part of a general promotion to raise interest in their products. Supermarkets operate with very small margins (1% to 3%) so have little room for discounts on their own. Loss leaders are already banned in France and Germany and the practice is frowned on here.
Reported as spam.
Where is “here”? In the U.S. it’s not frowned on; it’s a standard ploy. But what is frowned on (or downright illegal) is for a large chain to offer deep discounts in one market, taking a short-term loss with the aim of putting small competitors in that market out of business. Quite a different thing than the loss leader strategy.
“Here” is the UK, where the environment is a bit more business-friendly and hopefully governments are sensible enough not to implement such counter-productive laws. Me, as a shopper, I don’t “frown on” loss leaders at all. I love 'em. As long as there’s nothing monopolistic or cartel-ish going on, what’s the problem?
That’s the attitude in the US, but supermarket can get in trouble if it’s done to put someone else out of business in that area. All supermarkets have loss leaders, with the goal of getting you into the store and buying a full shopping cart. But it’s a problem if a store in a chain deliberately sells most of their items at a loss, using the revenues from the chain to stay afloat until the competition in the area can’t keep up.
It is frowned on in some places in the US. There are states that have minimum price laws for such items as milk, cigarettes, and gasoline.
And liquor.
You’ll hear them advertising ‘The lowest legal price in (state)’.
Only in states that have floor price limits. Like this one. Meaning there’s very little reason to go to grungy discount places, and little incentive to make a liquor store (pardon me, “package store”) any more clean and pleasant than a gas station.
Around here ( southeastern PA) “Coke” will be on sale one week and “Pepsi” the next week.
The sales are to get you into the store. Most people buy other products too. The store always makes money in the long run.
In some cases (less so with the better-known brands), the supermarket buyers wear the trousers and tell the supplier that they are running a promotion and will require a suitable credit note or other adjustment against the volume sold on promotion - the supplier may be offered the choice of complying, or losing the contract to supply.
That’s certainly been documented for the big supermarket chains in Australia, who I suspect regularly thaw out frozen Nazis from the secret base in the Antarctic to act as contract managers. The product maker wears all the cost and carries any discount for such promos, and often get hit with additional fees for mid-shelf / premium locations, or risk being consigned to the bottom shelf behind the cat food.
It’s called “predatory pricing”, deliberately undercutting a competitor to push them out of the market, because the first merchant has deeper pockets. I would be surprised if it’s not illegal everywhere. Of course, the fun part is proving that the price cuts had that motive, so most merchants avoid blatantly obvious price cuts. A loss leader on an smaller assortment of items for a limited time is most likely not predatory. Longer, deeper cuts on most popular items could be.
Yes, AFAIK most extreme sale prices are done with the cooperation of the wholesaler or manufacturer.
How’s that joke go? “I’m losing money on ever transaction, but I’m making up for it with volume.”
In New Zealand, stores have to be able to prove that the advertised level of discount (i.e. 50%) is realistic relative to normal store pricing over a moderate time period.
The big stores with heavy discounting policies have compliance teams to ensure that they do not incur heavy fines from the Advertising Standards Authority.
Sent from my SM-G900I using Tapatalk