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Confusing discount and regular pricing

By now everyone in the industry is aware that at least 40% of all groceries are purchased at a discount price, through promotions or from discount supermarkets.

I would venture to guess that the percentage is even higher than 40% if one takes into consideration the considerable sales through the growing Asian supermarket block, which has blossomed over the past three years and in which all stores sell at reduced prices.

The continuing interest by consumers in getting a deal is clearly a holdover from the recession of five years ago, when just about everybody was cost-conscious. The problem with deals as they continue today is that shoppers begin the question the actual cost of the items they are buying.

Take soda pop for example. Suppliers tend to rotate their promotional prices among the retail distributors. That’s why you’ll find a two litre pop in some stores at $3.29 while at others the same pop may only be $1.29. Wait a few weeks and the price at the first store will drop to maybe $1.79 while at the second store it may rise to $2.29. The actual cost remains a complete mystery to shoppers, who increasingly are curious about such things. What is the actual cost to manufacture the pop and what markup is the retailer taking?

Their curiosity is heightened by the price of private label pop, which for two litres can range from 99 cents to $1.29. Shoppers figure, rightly or wrongly, that the retailer is making some profit no matter what price it is selling the pop for. Loss leaders don’t matter to shoppers, only the price they have to pay.

Shoppers can be fairly certain that if there are a series of shelf talkers advertising a lower price then the price reduction is a promotion from the manufacturer, but once again that doesn’t matter to them because they don’t care which is making the concession–the supplier or the retailer.

Savvy consumers are also aware that big retailers put a lot lo pressure on their manufacturer suppliers to discount their products or force those suppliers to pay handsomely for listings and a myriad of other activities. What consumers don’t know is what effect those funds rushing into the hands of retailers has on reducing the price of products, if at all. Transparency is not a strength of big Canadian retailers.

Personally I can understand the curiosity, and confusion, over private label pricing.

Here is an actual example of what I would call bizarre pricing: Earlier this year, over a three-month period, Loblaw ran some special prices on its private label coffee. The special prices rotated among Loblaw stores like Superstore, and franchises like Valu-Mart and No Frills.

Purchasers of President’s Choice West Coast Dark Roast Gourmet Coffee in 875 g cans (and some other similar-sized President’s Choice coffees) became used to paying $11.97. Then suddenly at Valu-Mart it was $8.97. Two weeks later it dropped to $7.97 at Superstore. It was still $11.97 at No Frills, causing some to wonder what frills were missing! Three weeks later it was $14.97 at Valu-Mart!

For the next month the prices bounced back and forth among various Loblaw outlets, but the strangest thing was that two weeks after the $7.97 price at Superstore there was a very large sign in that store that read: NOW $11.97. Was that bragging about the price increase or was it to establish a more regular price? Confusing to say the least.

Some customers wondered: if the price could fall to $7.97, but also could be sold at $14.97, does that mean the retailer was making a $7 profit?

That’s not likely, but it shows just how confusing some retail pricing can be. It would certainly help shoppers if there were more logic and explanation to discount shopping versus “regular” prices.

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