Tuesday, October 01, 2013

Don't know the price of a loaf? Don't ask the Prime Minister, or for that matter anyone

Three weeks ago, in "Not satisfactorily under control" I said,  

I'm always struck by the way prices are displayed in supermarkets, for instance. They are on little tickets stuck either above or below the item on sale, and are changed often. Although there are many labeling laws (state and federal), such as a requirement to put the price-per-ounce on the little ticket, so you're not fooled by larger packages with smaller contents, there doesn't seem to be any law as to what 'on sale' or 'special' means. Goods go 'on sale' every three weeks, and the little ticket is changed to say so, and quotes a 'regular' price that the sale price beats out. But since the little ticket doesn't actually have a list of historical prices, there's no way to check if it was actually offered at that price before. And there most certainly is no requirement for the good itself to have a price affixed, so there's no historical data at home. Was a can of beans $1.25 last week? Or $1.50 or $0.85? Who knows? 
Today, in the Guardian, there is an article on the subject of supermarket pricing. The Graun is British, of course, where the laws are slightly different, but the pricing strategies are similar. The article by Felicity Lawrence, called Don't Worry David Cameron There's No Such Thing As The Price Of Bread, looks at the recent revelation that the Prime Minister does not know the price of bread in a supermarket. The article goes on to say,

I hate to say this, because it is always fun to enjoy the discomfiture of politicians, but it is not just the prime minster who does not know the price of bread. [...] 
Most of us don't know, because there is no such thing as the price of bread any more. Rapidly changing prices on hundreds of products do not help consumers but instead confuse them. And what they give with one hand, supermarkets can take back, or have already taken back, with the other. In the lead-up to Christmas 2010, Asda cut nearly 800 prices but also increased 850 prices; Tesco cut 930 prices but increased just under 1,000. With so much volatility it is impossible for the average shopper to work out where best value really is.[...]  
We appear to have been bamboozled by this clever piece of retail psychology, however. Prof Paul Dobson of Norwich Business School, who has studied supermarket pricing for more than 10 years, reckons that more than 40% of what we buy in supermarkets is on special offer. He also calculates that the most common price cut among the big four supermarkets over a period of five years has been 1p. Cutting thousands of prices by tiny amounts, or making prices yo-yo, has been used to mask serious price increases on a smaller number of lines – with a big net effect on bills.

Worth a read, if only to help inoculate yourself against it.

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