The economics of bulk buying - Sally's Journal
The economics of bulk buying|
Tesco's have an interesting price scheme going with their orange juice at the moment. One carton is, I believe*, 68p. However, for the budget conscious** you can buy a 6 pack***, in which one carton is 61p.
Tesco's also do a 4 pack of orange juice. One carton in the 4 pack is 54p.
Is it just me, or is this completely insane? I have internalised "if you buy lots it gets cheaper" as a Fundamental Rule of Life, and suddenly these cartons of orange juice are sitting there, mocking my lack of understanding of the world!
I was sufficiently confused I went to speak to the customer services man. He gave me a neat "we don't have anything to do with the pricing, guv" speal, and was generally disinterested in my anguish, but also made the curious comment that it "probably that the 6 packs are more expensive because they're more popular"
How odd. It's not a supply and demand thing, because Tesco's could package its orange juice in whatever n-packs it liked. There's no shortage of orange juice, at least at this level. All I can think of is that the rest of the world has also internalised "it's better to buy the biggest packs because that's cheaper" and now only check the size of the pack and not the actual price.
*OK, it's 1am, and I'm going to misremember all the numbers. But I'm not going to misremember the point, and I promise you it's true.
**That is, the people with cars to transport heavy stuff in, and really large houses to store stuff in. So, err, the people who are rich already. Vimes' boots, innit?
*** Just to clear this up, all the n-packs are n cartons, all completely and utterly identical to one carton.
|Date:||March 19th, 2006 01:41 am (UTC)|| |
I had this revelation one Easter. I wanted to buy a lot of creme eggs and I sat on the floor in the supermarket trying to work out the best way of doing it. I came to the conclusion that the medium size packet was the cheapest per egg. The same was incidently also true when buying pasta a while ago. Isn't the world a weird place.
Did you get my email BTW and also did you pick up the dress yesterday?
I once bought a crate of creme eggs post-easter when they were selling them off for pennies. I took in a fiver and worked out how many I could get for just under that. It was a *lot*.
|Date:||March 19th, 2006 01:54 am (UTC)|| |
Alternatively, there may be a temporary surplus of 4-packs that they want to get rid of relative to the number of 6-packs. Like the way that you sometimes have special offers on single items that mean they're cheaper than the multipacks.
|Date:||March 19th, 2006 02:46 am (UTC)|| |
It isn't new. My parents internalised "the biggest packs are cheaper, except for when they're trying to pull a fast one on you, so check" in me sufficiently long ago that all I can reliably tell you about my age was that it was single figures.
|Date:||March 19th, 2006 07:43 am (UTC)|| |
What he said. It's well known that people think bulk packs are cheaper, so that doesn't need to be true all the time for people to buy the bulk packs. Soit isn't true all the time.
One of the cheap shops at the grotty end of town did something even more extreme. They advertised bars of soap at 30p each or three for £1. You'd be amazed how many people bought three.
A friend of my ex-husband's, who was short of money but not brains, actually wanted three bars of soap, asked to be charged for them individually, and was told that this wasn't allowed. He would have to be charged for three. So he bought one bar of soap, then queued at the checkout again for the other two.
|Date:||March 19th, 2006 11:15 am (UTC)|| |
Supermarkets usually put unit prices on the price label on the shelf too, so it's not hard to determine which variant is actually best value even if you can't/won't do arithmetic. (They could lie, in principle, but the cost to them of being caught would not be good...)
I do the cash-and-carry thing at Booker once a month. That way, things get really
Jaffa Cakes, for example, can be bought as cartons containing fifteen tubes of twelve, or cartons containing twelve boxes of fifteen. Or sometimes as cartons containing six double-packs of thirty. Occasionally, they also sell discounted cartons where the individual packs have an RRP printed on them. Then there are also the catering boxes of three-Jaffa-Cake portion packs. And even then, Tesco might charge less per pack when they're bought singly — though in making the comparison you have to remember Jaffa Cakes are VAT-exempt because they're legally biscuits despite being called cakes, and biscuits are VAT-exempt even though water isn't. Oh, and the catering and domestic supplies of Jaffa Cakes are in different parts of the huge cash-and-carry warehouse.
Still, it breaks the ice at parties
Part of it is down to using pyschology against people, in order to get them to buy stuff and carry on making the shop a
large humungous profit. After all if some people will buy single packs because they're carrying them themselves and others are buying 6-packs becuase they carry them in a trolley and then a car it makes sense to put the most "over the margin" prices on them. The middling size which may not sell and so get you may stiffed on (when they're still on the shelves 18 months later) you keep the price closer to what you paid for it from the makers.
|Date:||March 19th, 2006 11:08 pm (UTC)|| |
Sounds plausible. Could check if they have nearer sell-by dates... Then if the 4-packs disappear from the shelves after a while, that would support that hypothesis as a size that didn't work, so they had to sell them off cheap.
Problem is, they'd be cannibalising their sales of 6-packs. I mean, at those prices it's cheaper to buy a 4-pack and two singles than a 6-pack. Maybe there's enough people that are so used to just chucking a 6-pack in the trolley that it's worthwhile, and it's only the real cheapskates who actually check the prices and get the 4-packs, and thus buy more orange juice than their cheapskate natures would usually allow. That's typically how price discrimination works - offer lower prices to people who are willing to go to the trouble of claiming them, and who are therefore likely to be the most price-sensitive. But it seems so little trouble to go to in this case.
I don't normally pedantically comment like this, but: "spiel", "uninterested".
Yeah, the Customer Services bloke was definitely not disinterested - they pay his wages, after all.
It's always confused me that loose fruit, when I can pick out the tasty looking apples and buy exactly the number I need, costs significantly less per pound than bagged fruit.
|Date:||March 20th, 2006 11:21 am (UTC)|| |
But that is often very sensible, for the packaging is less. Also, they probably waste less, because if a packaged pack gets broken nobody buys any of the contents.
This is also the case with mushrooms. Why do people buy those stupid plastic packs of mushrooms with millimetres of rigid plastic packaging, when you can get a paper bag of mushrooms? It is cheaper, which is right and correct, and considerably less wasteful.
This has no bearing on the orange juice debate, which is merely a bit strange.
I saved some pennies at Tesco's the other day, by trying to self-scan 12 cartons of soya milk. The machine got terribly confused and kept saying "remove the item", "replace the item", "item double weighed" etc. I followed its instructions dutifully, but when I got home I found I'd only been charged for 9 cartons. Hey ho.
Ah I like the way your language has become slightly geekified, things like:
I have internalised
at least at this level
Advice about starting new businesses, which I've been reading recently, almost invariably contains a line like "find out how much everyone else is charging for $product so that you know what people will pay". As opposed to "work out your prices based on costs". Value is a funny thing at the best of times, and in a consumer society it's even funnier.
Maybe everyone who buys bulk orange juice wants 6-packs but most of their machines can only wrap 4 cartons; hence 4-packs are much cheaper than 6-packs.
I often buy 2 singles, but a bargain like that might make me buy a 4-pack. Because I am more frugal when I don't have much left, I'll probably drink the first two packs more quickly than the last two or the only two, so they have sold more than they would if I buy two now and two next week.
Maybe they make more profit on a cheap 4-pack than 2 expensive singles but the people who buy
6-packs wouldn't want 4 or 8 cartoons, so it doesn't affect sales of 6-packs.
Of course, if the extra orange juice that I drink is instead of tap water they win, but if it is instead of (more expensive) cranberry juice they might have lost...
And because of my Club Card (though I use Sainsbury's and my Nectar card much more) they have the data to go figure all this out.
[I don't drink much orange juice - it can bring me out in a rash; I've actually described my apple juice habits.]