Why are stores owned by the same companies charging different prices?
βPrices are often important signals of how **competition **is working.β
Um, what competition if we're talking about stores owned by the same company? Competing against itself?
this post was submitted on 05 Aug 2023
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A profit driven company will always sell a product for as much as they can. Costs doesn't factor into price at all.
Not true. They will price their inventory in a way that maximizes profit for all of it. Sometimes that means individual products being sold for cheaper.
Or not being sold directly to customers, but to discount retailers.
You can find the same product for different prices in the same fucking Zehrs. There is a section of the store clearly intended for immigrants, and the items are cheaper there. Save a few bucks on a tub of cashews.
I needed a few cinnamon sticks. Went to Save On Foods.
Spice aisle: small spice jar with maybe 8 sticks in it. $6.99.
Ethnic food aisle: 4lb bag with like 100 sticks: $4.00.
It's exhausting.
A lot of that is for to the distributor.
What people don't realize is that grocery stores don't really order/stock everything themselves. A lot of product is brought in by vendors who bought shelf space. The big guys, like Nabisco, coke, Pepsi, Frito lay, Bimbo, etc., all order and stock their own stuff.
They might be getting standard spices from over distributor and the Mexican spices from another, etc.
Never heard of that where I am, sounds pretty cool.
Do they have any restrictions preventing "well-off" looking individuals from shopping for the cheaper items, or possibly are these cheaper items a different brand with the same thing lower priced?
They have a store brand for immigrants. So you'll look in the international aisle and there will be a big tub of T&T branded cashews, which are cheaper, fresher and better than the ones sold in the baking section or beside the bulk section under Club Pack or whatever brand.
Because of third-degree price discrimination (not discrimination with the negative connotation).
This is literally economics 101 for how to maximize profit when you have a monopoly. You find a way to sell the same thing for different prices depending on the customer's ability to pay
There are some arguments and scenarios which support price discrimination, OP's article is a prime example. Price discrimination encourages firms to sell more output (at all levels), which enables more customers to purchase goods at each of their willingnesses-to-pay. The natural consequence is, yes, the producer captures more profit. This seems ideal if we are to accept the theory of a capitalist economy.
Monopolies do exert a great deal of control over price and therefore price discrimination to the detriment of the market, but reasonably competitive firms also have some influence over price in ways that are supplemental to the market.
I agree that sometimes there are arguments for monopolies and price discrimination, but I have to respectfully disagree that Canada's grocery industry is an example of this. There is no natural reason for there to be so much monopoly in Canada, except that our consumer protection and competition enforcement is weak as hell.
Reviewing the article, it describes Loblaw, Sobeys, and Metro as the "three largest" firms accounting for grocery conglomerates, which implies there are other firms in the grocery industry up there. Since there is more than one parent firm, this describesβat worst, an oligopoly. Oligopolies do exert control over prices by virtue of the few suppliers in the market, but their price-setting isn't monopolistic.
To the first point you've mentioned, my argument is towards support of price-discrimination, and not monopolies. The article does indeed demonstrate third-degree price discrimination (same product, different store/market segment, different price), but I did not try to connect these two.
To the second point, the reason for there to be an oligopolistic market is the natural result of an industry that has the kinds of barriers-to-entry that a grocery store seems like it might have: the substantial investment required to purchase the initial inventory, the real estate, and the labor costs.
With respect to Canadian consumer protections, I have no input.
I think you're overstating the barrier to entry of grocery stores in general. There are small, independent competitors that are able to provide a comparable level of service. Where the big ones win out is their ability to afford extremely large retail spaces for big-box supermarkets which cater to a car-dependant, suburban lifestyle. The flaws of our low-density and inefficient city planning haunt us in numerous ways, one of which is in giving an advantage to businesses which pass the cost of convenient access on to the customer (in the form of requiring them to drive to a sprawling commercial area with a massive parking lot which has been segregated from residential zones).
I say this as someone who never shops at the big supermarket chains, as I live less than 2 minutes' walk from a neighborhood corner store which sells 90% of the groceries I need. But the sort of walkable, mixed-use neighborhood I live in is basically illegal to build nowadays due to market distortions caused by zoning laws. Zoning laws which are the result of lobbying by suburban housing developers, as well as the fossil fuel and automotive industry.
Nice series of comments!
Thatβs so kind, thank you! I am studying economics and the discussion helped reinforce a lot of fundamental learning.
As with all pricing: because they can.
Couldn't this just be used as an avoidance tactic? Like saying, "see we are trying to keep the prices low, by offering competitive prices in different stores". All the while raising the base price of the item in all stores to trick people into thinking they are getting a good deal.
Do you want to go to multiple stores or just pay for convenience? That's how they over charge. Best buy sells 40 dollar HDMI cables.
Shopping around can save a lot of money on groceries. It wasn't so bad when all the stores price matched, since this could simply involve opening an app to show you all the flyers and highlighting the ones you want to price match at a single store.
Now, hardly any do price matching, so that's one more way they've found to screw us over.
I mean I work in retail. Prices are different based on region. If a local competitor has a better price, then they'll try to match it out beat it. That's basically it.