Sorting out the real ‘specials’

Press, 31 March 1981, Page 12

Sorting out the real ‘specials’

Every week the shopper is confronted with pages of grocery specials — in the newspapers and in the numerous circulars pushed into the letterbox.

Competition amongst the large food chains is brisk, and there are plenty of smaller grocery groups pushing for a slice of the action too.

One supermarket chain advertises three or four products at below cost. Another tells us we can save more on the things we buy most. A further chain offers discount prices, and still another maintains that its prices are wholesale.

Confused? You’re not the only one. How can supermarkets sell products below cost? What is the difference between wholesale and discount prices? Why do shelf prices of a particular ,product not on special vary so widely from supermarket to supermarket? And why are those wretched coupons so necessary to ensure that you get the full “special” price? Below cost. This is the cheapest price you will pay for an item. If advertised as “below cost,” the.item must genuinely be below cost. Such advertisements are reg-

ularly checked by the Department of Trade and Industry. A below cost item is called in the trade a "loss leader” and is used as a drawcard to attract customers who will usually buy other articles as well.

On special. This is not necessarily an item which has been heavily reduced but is a product the store wants to push in a particular week. Each grocery chain works out a list of specials each month. These specials may be near or even below cost price, and can be offered to the consumer because the chain will buy that item in bulk and therefore more cheaply, or because a manufacturer may offer the chain his product at a reduced cost.

Coupons. These are fre-' quently necessary to obtain the full special price. Why? In most cases the retailer will return this coupon to the wholesaler or manufacturer who will reimburse him with the difference in the price of an article bought with a coupon. Coupons are also used to measure the success of a grocery chain’s advertising.

Wholesale price. This is the price you would pay if

you were able to buy your groceries from a warehouse. Normally only 7 the trade is supplied, but small groups, for example 20 to 30 housewives, can form themselves into bulk buying cooperatives. To be able to buy from grocery wholesalers, certain criteria must be met, for instance there is a minimum order quantity specified. The larger the quantity bought, the greater the discount. But often an item bought as a “special” or “below cost” in a supermarket will be cheaper than the wholesale price. Discount price. This is the supermarket or grocer’s discount off the manufacturer’s suggested retail price of an item.

List price. This is the manufacturer’s suggested retail price. The retailer can sell above or below this price. As an .example, the manufacturers’ suggested price for frozen goods is usually the cost price plus 25 per cent. However, many retailers feel that with the high refrigeration costs, a 25 per cent mark-up is not sufficient and may charge the 'customer the cost price plus 33 per cent. . Many corner dairies also sell goods at above the list price to compensate for being open seven days a week. Here you are paying a little more for convenience. But these increased prices are rarely excessive as the consumer is protected against profiteering by the Commerce Act. Smaller grocery shops too, may sell some of their items at prices slightly higher than the suggested price. Theircontinued existence is proof that their customers are prepared to pay a little more for groceries in return for service like free delivery, having an account and perhaps receiving a touch more personal service. And these smaller shops do have speci'als too. It is clear then that there is no such thing as a normal or correct retail price for an item, hence the wide variation in the price of a particular commodity. This variation is further increased by price rises. You may buy “old stock” at one supermarket and pay substantially

less than if you bought “new stock” at another supermarket. 2 What is the housewife to do? Where can she get the best buy? The old advice used to be “shop around,” but with so many supermarkets and small grocery groups, you could spend five days a week doing the rounds checking the shelf prices, comparing specials in the newspaper .and cutting coupons to say nothing of the petrol you would use. Many housewives also hold down a job and do not have the time to go from store to store, unless perhaps there are two or three supermarkets in the one shopping centre. Shelf prices are competitive. The manager of one of the largest supermarkets in Christchurch told me that his chain frequently sends sommeone around the other supermarket chains to compare prices. Supermarkets have to be. competitive to survive. Where the shopper can be taken in, is over the specials. These products are not only well advertised, but so prominently displayed in the store that you almost fall over them as you make your way around. In this way we are often influenced into buying the product whereas we would not have given it a second look had it been tucked away on a shelf. Even if the savings are genuine, do we always want the product?' Buying something we don’tneed is no way to save money. To finish, a cautionary tale One grocer told me of the following practice employed in the trade. Specialled items, say -a named brand of tea, are placed, in a small stack on a low shelf. Beside this is a large display of another brand of tea which is selling for the normal shelf price, that is whatever the store usually charges. If you hadn’t read your specials thoroughly, or are in a hurry, guess which one you would probably take?