When woolies or coles (or even other retailers) are selling at half price or better than half price, who is footing the difference in the cost ?
Do retailers work out a bargain with the manufacturers/suppliers ? Or is it a loss for the retailer ?
Just trying to understand this.
cheers,
In theory it's the stores. In practice the supermarkets demand monies for various things, including rebates, etc. such that the supplier foots the bill.
That's why you see the same goods going on the same scale of sales again and again; the suppliers have agreed to pay for it in exchange for 'considerations' from the supermarkets.
If you have set up supplier relationships with one of these monsters, the very threat of not being carried is enough to make most suppliers cave in - because if they lose the supplier relationship, they fold. TimTams was the last one that got away with saying no, but only just, and only because they were a well enough known name to win. For how long they will win, that's another matter.
http://www.news.com.au/finance/business/retail/tim-tams-make…
Sometimes suppliers are asked to pay a contribution margin to cover the sale, advertising and shelf space.
Sometimes the retailer just wants the stock out to allow the way for new items that will sell. In that case it might be described as a loss leader when it is actually just dumping stock on unsuspecting consumers, or suckering people into buying stuff the retailer can't sell normally.
This.. im looking at you weird timtam flavours.
Also, suppliers sometimes have logistics issues because of fixed or predicted production volumes being wrong. So if products aren't selling as quickly as predicted, discounts move the excess stock from the warehouse to your pantry.
Then there are products with BB or expiry dates. No supplier or retailer wants to get caught out with near worthless stock.
Regarding best before or expiring stock, it's cheaper for a supplier to sell the expiring stock at a loss than to pay for destruction/disposal.
At Woolies and Coles a vast majority of items are marked up well over 50 % so they just reduce their margins. It just shows how much they are gouging out of us.
I was reading about grocery shopping in Atlanta in the USA last week and their supermarkets still have young boys who pack your groceries into bags as they come off the register and then they push your trolley to your car and load the bags into your car. Sure you can tip them a dollar but that's what I call service and that's lacking here in Oz.
They don't just push up the margin to 50% so they can reduce them. It's been long accepted that retailers margin should be 50% to pay for the operation of the business. Those that undercut the 50% margin by a lot don't seem to last.
I do agree that they do mark down all too often though.
Yes but the idea of a supermarket is to offer a large range of groceries under the one roof and have lower prices. We have the situation now where my local corner store sells things for the same price as Coles and Woolies. No wonder Aldi was rubbing their hands with glee when they saw what is happening in the Australian market. They knew the shopper was being taken for a ride. I am all for foreign competiton here in Australia as Aldi seem to have just as much Australian made stock as Coles and Woolies. They employ Australians and their distribution model is excellent. Every night they send refrigerated trucks from their distribution centre in Western Sydney to deliver produce fresh the next morning in Brisbane and Melbourne so it's all centralised on the East Coast. That's what I call efficiency. Maybe Coles and Woolies need to learn and stop ripping the consumer off.
Thanks for replying everyone.
I used to be a buyer…
-All the half price deals are job buys with rebates. Buyers negoitate qtys and prices including advertising, locations…If they fail to sell a certain amount rebates can be put "at risk". You have suppliers hanging from your feet, a half price offer on an endcap in 1000 Woolworths is a million dollar sales op. The big feature ends you see in a supermarket are all vendor funded, it's pretty much a real estate game, everyone fighting over space…highest bidder usually wins.
Supermarket endcap displays in Christmas are worth six figures to rent.
Some stock is on Consignment which means any out of date or stolen is a loss to the supplier. DVDs are majority on consignment, so the entertainment companies pay for the shelf space and give the supermarket a cut of what they sell.
If you've got any questions happy to answer!
Two things can happen when things are sold half price. Your profit margin covers it. Eg. You bought something at say $10. You have been selling it for $25. You are now selling it for $12.50 which is half price. Your just decreasing the profit there.
The second scenario is what is called a loss leader. You lose money on a deal hoping to get foot traffic and sales for other items which cover your loss for particular item. Colesworth does this all the time.