Retailers showing their greed again

[Louwai]

I needed to buy a Label maker today.
Walked across the rd from my office to DSE. The one I thought would suit was $48.65, which I thought was a bit much.

Walked 100m down the road to Office Works.
The EXACT same item, in the same packaging from the same supplier as DSE, was $16 CHEAPER than DSE.

So how do they justify this????
If the item was $200, I could understand it.

They are losing their customers, so they have to exhorbitant prices to keep their margins up????

[Coops]

Possible explanation could be that Officeworks have tighter margins or they can source from the supplier at a better cost per item.

[Louwai]

True Sean, but they must be one of the very few that can't buy this item any cheaper.

I also looked on-line for the same item. 90% of the on-line retailers were cheaper. Granted not $16 cheaper. Mostly about $2 to $5 cheaper. BUT the on-line prices included postage Australia wide.
Of course the on-liner's don't have the overheads that a store front has....

There were also a couple that were more expensive.....

[Rodstar]

Bryan, your post demonstrates that:

1. In this day and age the consumer has the ability to pay less if they shop around (that is what you have done); and
2. Some businesses operate on lower turnover but higher margins, other businesses operate on higher turnover but lower margins (DSE vis-a-vis Officeworks).
3. The free market seems to have a place for both business models (both DSE and Officeworks currently trade).

For some people, price is not the sole criteria on which shop they might give patronage to. They may have loyalty to a particular store, and enjoy shopping there with all that goes with that.

To put it in another context, in the legal services industry that I operate, Firm A will charge, say, $500 per will, and make 200 of them each year, collecting $100,000 in fees per annum. Firm B will charge, say, $1000 per will, and make 100 of them each year, also collecting $100,000 in fees per annum. How much is a will worth? If you have confidence in the guy that charges you $1000 for it, and are happy to pay that amount, then everyone wins. Certainly the solicitor wins, because he only has to do half the amount of work that the other solicitor does.

Your attention appears to be drawn to the perceived injustice that you, as consumer, suffer when you pay more for the same item in different stores. On the other side of this picture is that small shopkeepers are being elbowed out by large scale companies, with a signicantly greater buying and bargaining power. Those small businesses would close if they tried to compete with the prices of the largers stores.

Unless we want to see the demise of the small local store in favour of the mega stores, I would encourage people to shop at the local store when they can, even if it means paying a bit more occasionally.

As to what assessment we should base the value of a good on, my view is that things can easily be underpriced just as they can be overpriced. A large chain can afford to sell particlar items below cost price due the profits made elsewhere across a larger product range. This is not always possible for a smaller seller.

[Roobi]

sorry to dissagree with you rodstar but i think that greed is a huge part of why alot of shops charge more. I don't understand this at all mind you, as i think its common knowledge that if a shop charges even slightly less, word of mouth will soon get them more customers. Our locally supermarket of course sells fresh fruit and veg as well as meat, we also though, in the same strip of shops, have a seperate butcher and two shops up, a grocer. Even though it is easier for us to get everything in one transaction at the larger supermarket, there is no way we will because theyre prices are marginally higher for both the meat and the fruit and veg. So we of course go to the lower priced butcher and grocer. Not only are they cheaper, they are much friendlier, and often put in an extra sausage, or give our little one a banana to chomp on while we shop.... Why would i ever go to the supermarket when i get such good service and great prices from the smaller businesses. Everyone we've told about this now shops seperatly as we do and are much happier also.
People should realise, charge slightly less and treat customers and staff well, and not only do you get more customers, but you get better working staff also. bigger places only charge more because they can, and because they don't care. It infuriates me because most workforces seem to think this way too, rather than treating their staff wll and having better productivity they treat them like crap and the workers start to loose their work ethic..... It's all getting too much like America for my liking.

OK i've had my rant now lol

[TrevorW]

DES- Woolworths
Office Works- Coles

why also are prices for the same items different in different suburbs at the same time ????

[lacad01]

Certainly for consumables, I'll go lowest price but if it's a larger item where after sales service comes to play then slightly different story. I'll never buy any computer equipment from the big "O" as I had an extremely bad experience with a faulty bit of gear I purchased. Luckily I had the unit replaced for new but that was after 3 months of inconvenience and almost daily phone calls. :(

[Lismore Bloke]

I think that major chain store retailers often charge more for goods in more affluent suburbs than they do in poorer ones. Particularly the case with fuel prices. Recent publicity in regard to supermarkets might change things.

[TrevorW]

Paul that would be fine if that was the case but I'm talking about 2 close working class suburbs and the stores are about 3 klms apart

[Lismore Bloke]

Yes I take your point Trevor, doesn't sound like a lot of competition there. Shopping around with the phone is even more important in that instance. I've noticed that the presence of a third competitor (eg Aldi with Woolies and Coles) starts to make the other 2 greedy buggers a bit more honest.

[Outbackmanyep]

Two words sum it up..."Murphy's Law"

[taxman]

To me, pricing is one of the most intellectually interesting aspects of microeconomics.

To start, we have the supply and demand curve, which often gets simplified to: More demand = higher prices and vice versa. This is true to a point, but more true for goods with a high price elasticity of demand.

Price elasticity of demand can be simplified to the principle that the less you need something, the more your demand will change according to price. For example, when there is a big sale on Apple Macs, a lot more volume is sold.

PED is also relative, so a label maker, while pretty elastic to a general consumer is less elastic to a business, particularly an office with physical files. So less price demand elasticity results in less effect on demand from the office of prices.

Along with this background, we can see that as the office goods supplier is over the road from your office, we may assume there are other offices that it is central to. A smaller store may even generate more business than a larger, cheaper operator by being more flexible, say offering 60 instead of 30 day terms.

As offices tend to be less elastic in their demand for office goods, as a retailer, it would make sense to cater to the offices by selling a smaller volume of goods with a higher margin to achieve the same overall level of profit as the larger operator. This would enable the store to be smaller with fewer staff, less storage space, lower insurance etc.

For example:
1000 $15 gadgets sold at $35 each with $10 overheads per unit = $10,000 profit
250 $15 gadgets sold at $60 each with $5 overheads per unit = $10,000 profit

Another important factor that is not taken into account is unquantifiable risk. Basically the bigger an operation is, the more complicated and so the more failure points there are. For example as a smaller operator with accounts with only a few large clients, you are better able to manage inventory so your risk exposure to storage, transport and saleability is also much lower.

However, an entrepreneurial person may see a business happily eking out a comfortable living by applying the above business model when they see that the overall budget being spent by general consumers on office goods in a particular locality may outweigh that spent by business. In that case, they may then make the decision to take on the exponentially larger risk of a high volume, low margin business model for the potential reward of higher profits.

Now having said the above, I am not making any value judgements. There is a place for both models and it is fairly rare that a business is being "greedy", instead they are often taking a rational approach based on the owner's perception of the marketplace in which they operate.

There is no sin in different store owners making a profit (farming to a surplus is what got us started on the path to civilisation after all) of a size and in a manner of their choosing - at the end of the day it really is up to the potential consumer to determine which store is the one for them.

[TrevorW]

and don't forget the Tax man

[Roobi]

lol

[Kevnool]

Shop around everyone dont just walk in to the first shop and buy.

Would of been a different story if you walked into officeworks first.

Cheers Kev.

[Gallifreyboy]

Matt,
very impressive, could you let us know what is going to happen to interest rates and AUD and if in your powers PM me the lotto numbers;)

[TheDecepticon]

:lol::lol::lol::lol::P;)

[Louwai]

I suppose one thing here, as Trevor pointed out. DSE & Officeworks are not David & Goliath, but 2 very similar sized entities.


I still say there are pleny of greedy retailers.

I know of a retailer who imports an item for AU$245ea & retails them at $1600ea.
Many would say Good on them.
I have an import business & I used to supply this retailer. The guy researched & found the overseas manufacturer I was using, by-passed me & went direct.
All to save $15 / unit which is what I was charging him. Obviously $1355 per unit wasn't enough for him.
Same retailer bought filters from me for $3 & sold them for $48. He complained that I was too dear & offered $2 per filter.

Scumbag......

This retailer is still operating in Brisbane