Does printed RRPs make it difficult for small shops?

Hi all,

Probably putting this in the wrong place, but I was just wondering this to myself this morning and thought I'd ask.


Was looking at a packet of Haribo that was in the kitchen whilst waiting for the kettle to boil. Most haribo have the RRP printed on the packet, like so:




(except not as British over here, obviously)


So I was thinking to myself, I often see this on certain products. Crisps being another one that tend to do it a lot.


I was wondering, does this kind of thing have any negative affect on small businesses/local 'corner' shops or the likes?

I think it's great that the customer is getting a set price regardless of where they go, but at the same time, I'd have assumed that, while it's fine for Tesco to charge a standard price, the local corner shop would generally need to be a little more expensive (as they'd be dealing with smaller quantities and less shoppers, etc.)?


Or am I just making up a problem that doesn't exist (only shop-based retail knowledge I have is a year spent in Dunnes folding clothes).

DubTony

:mad::mad::mad::mad::mad:

How's that for an answer?

Many larger companies want to pitch their product at a specific price, and many have tried to dictate the retail price. This generally leads to a reduction in margin for the retailer, so while he probably makes between 25 and 30 percent on the Starmix you mention when it's sold at regular price, there's a strong possibility that he's "sharing" in the cost of the promotion and has a reduced margin.
The problem here is that the only gain is to the manufacturer. The customer would likely have bought something, but Haribo wouldn't have gained from the sale of Natural Confectionery Company jellies. In this case the retailer also loses.
Even if the margin is the same, his cash profit is less. It costs the same to take in the product, unpack the box, hang it on the rack and serve the customer irrespective of the price.

Some companies work with retailers to help counteract this. They may offer a slightly reduced margin, but create the offer so that the retailer moves more stock for a higher cash return. (3 for the price of 2 offers and the like).

One company here in Ireland that is notorious for trying to control the retail price is Coca-Cola. In my experience they attempt to do this by dictating retailer margin. They recently introduced a 330ml bottle with a €1 flash. I'm not in the business anymore, so dont know cost details, but my gut tells me it costs more than the similarly sized can.

In the main, these things are a pain. I've used them in the past for short periods of time, but only with specific products on which customers would recognise a great deal. I think though, that most retailers just don't like them. Jacobs dropped them from biscuits in the 90s as retailers just refused to buy the reduced margin flashed stock.

That's an interesting post, DubTony. Cheers for the insight.

I'd have always thought that companies like that would be trying to work with the retailer as best they could. Regarding the latter part of your post, does that mean that retailers get to choose (when ordering) between products that are on sale/marked RRP or not?

DubTony

Generally a manufacturer will introduce a flashed product to temporarily replace the existing unflashed line. However, with cash & carries and wholesalers buying form various sources, it's almost impossible for manufacturers to control the supply. So in a word, yes, retailers do have choice, but may have to look to other supply lines to ensure margin.
Jacobs made the mistake of introducing flashed, super flashed, and something I believe they called the Super Duper Flashed product (the price stickers simply got bigger) to run alongside unmarked products. The problem for them was that the difference in wholesale prices (at least in cash & carries) was just pennies per case which lead to retailers, including me, actually dropping the line temporarily when the non flashed product wasn't available. Margins typically ran at 8- 12% for flashed and ... well ... obviously whatever you liked on unflashed.

When ordering from a manufacturer, the rep generally doesn't shout about the product being flashed, and it wouldn't be unusual to know nothing about it until the goods came off the truck. It's amazing how big those printed prices seem when you're not expecting them. :mad:

maggy_thatcher

From a consumer POV, it does result in some weird things - Our local Centra for example currently charge €1.65 for 500ml Coca Cola bottles, or €1.50 for flashed 1l bottles.

I would imagine the 500ml sales are dropping a lot as a result!

galwayjohn89

maggy_thatcher wrote: »

I would imagine the 500ml sales are dropping a lot as a result!

I'd be interested to see the figures and if the 500ml does in fact fall. I was guess it wall fall but not by as much as one might expect. People are creatures of habits and if they go in to buy a 500ml with lunch, thats what they are going to do. Also, carrying around 1litre isn't really feasible if you eating on the go.