"Tell Kenny to go get the van."
A competitor was having a sale on Coca-Cola. The price was something crazy, like $1.99 for a 12-pack, limit 10 per customer. (Please don’t hold me to that price. It’s been a decade.) The point is, the box store was selling soft drinks to their customers at a price that was way lower than we could buy it direct. We loaded up our catering van and stocked our shelves with as many cases of Coke as we could get during that sale. Desperate? Yes. Moral? Well...
Prices deviate between stores for a myriad of reasons, and a higher price on the same item doesn’t mean that store is trying to get rich off of you. (I've never seen a grocery store owner in Burberry.) Here are a few reasons you may find price differences as you shop around. It’s not all apples to apples. (Or milk to milk.)
1. Different Distributor Pricing
Supermarkets pay different prices for the same product through distributors. Some stores pay what’s listed in the distributor’s catalog, while others get a blanket discount off of all products, based on volume.
The more product (collectively) that a retailer purchases, the larger their discount. That organic soup your small co-op sells for thirty cents more than the large chain store down the street cost them considerably more. Cut them some slack, and save 'em a dime by bringing your own bag.
2. Difference in Quality
Assessing quality isn’t scientific, but in some cases looking at labels will reveal that not all is equal. Taste, ingredients and process may be vastly different.
Some produce is more expensive because someone's in the back room, sorting through the vegetables before putting them on the floor (rather than cutting open a box, slapping a sale sign on it, and hoping for the best). Buy one super-cheap yet half rotted onion, and you'll know what I mean.
And take meat, for example. Does the price of chicken or sliced ham seem too good to be true? Take a look at the percentage of saline on the label. Fifteen percent of the weight of conventional poultry is a solution of water and salt.
Specialty producers (often with a higher per-pound price point) are selling 100% meat, which may just balance the pricing out.
So—as with most grocery purchases—read labels and ask questions.
3. Different Supplier Deals
Some retailers lose the middleman (the distributor) and secure lower pricing directly from the makers.
Trader Joe’s skips distributors, doesn’t take on debt, and pays its producers on delivery (instead of 30 to 90 days later, after that toothpaste has sold). This promise of quick payments helps secure lower pricing from the companies that stock the Trader Joe's shelf.
Costco is similar. The retailer works with brands that lower their own margins to sell products en masse directly to the warehouse club. Often, producers make Costco-specific items that can't be found anywhere else and therefore aren't available for comparable pricing. That KitchenAid stand mixer? It has a different motor than what you'll find elsewhere. And the three-pack of Omeprazole (my personal Costco favorite) is unique to the retailer as well.
The Takeaway: Shop Around and Consider All the Factors
If you're lucky enough to have wiggle room in your wallet, consider the non-tangibles you value from your shopping experience when making purchases. Convenience, customer service, values (saving the planet!) and selection are all ways retailers can compete beyond price. And if you're on a strict budget, don't forget to consider your own time (or gas money) when driving around time for the next best deal.
Do you have any insights into your own local grocery stores and how or why they differ in price? It also never hurts to ask if they can match prices from one store to another, so it pays to know the spread.