Everyday high prices:
A comparison of standard supermarket prices
Since the introduction of supermarket "frequent shopper" or "loyalty" card programs in the early 1990's, several studies have attempted to determine the cards' impact on participating stores' sale prices. Both anecdotal evidence and at least one study (see our pre-card/post-card Kroger study ) found that sale prices go up at stores after cards are introduced. Until now, however, consumers have known little about the impact of card programs on participating stores' non-sale or "everyday" prices.
A store's everyday price levels have a greater impact on most shoppers' bottom line than the sale prices, since few consumers purchase only discounted items. When card stores prominently display the "savings" their card programs offer, the stated savings are based on the "everyday" price, playing a large role in customers' perception of the program. We decided to investigate to see if we could develop a clearer picture of just what those regular prices are like, in order to determine if the "savings" are real, or illusory.
On a recent hot, humid July morning, I headed to Greenwood, Indiana, a residential community just south of Indianapolis, to investigate prices at card stores and non-card stores. There, located along a 3/4-mile stretch of road, are a Super Target, a Meijer Supermarket, and a Kroger Supermarket. A little over a mile and a half further down the same road (in an area with roughly the same demographics) there is also a Marsh Supermarket. Both Kroger and Marsh have card programs; Super Target and Meijer do not. My mission: select ten common items a typical family might purchase on any given day that were not on sale and compare the prices.
It should be noted that I made no attempt to pre-select items with high price differentials; items were selected because I had purchased them before and thus would be likely to use them once the study was concluded.
I had previously observed that Kroger's every day price on Ritz crackers was $3.49, with "card" prices running from $2.50 to $3.19, while Meijer's everyday price was $2.04 with sale prices as low as $1.50. I wanted to determine whether that large discrepancy in cracker pricing was an anomaly or an everyday occurrence.
The items I selected for my price comparison were identical in size and all other ways with the exception that a few had minor flavor substitutions that did not affect the price. Two of the items were on sale at Meijer, so I used Meijer's non-sale price for the analysis. While some of the items may have been on sale at Marsh or Kroger, I did not use a card, so the receipts reflect the everyday price.
Based on prior knowledge of how these programs operate I suspected that the "everyday" prices at the store with cards would be higher, but I was astounded by the extent of those differences. On every item I compared, the "everyday price" of items at the card stores exceeded that of the two card-free stores.
Table 1 lists each item and its respective price. Table 2 lists the average price of each item for both card and non-card stores, the amount of the difference, and the percentage difference in those prices.
Table 1: Item Prices
Table 2: Average of prices and amount of difference
Supermarkets with card programs criticize efforts to compare prices between chains by claiming that prices vary on individual items from store to store. They say that while some of their prices may be higher, lower prices elsewhere in the store balance those prices out overall. But based on this investigation, where I selected essentially random items, I found that while prices do vary from store to store, price variation did not seem to be the major factor in the price discrepancies we encountered. Rather, a systematic trend of higher everyday prices overall seemed to prevail at the card stores.
While this investigation covers only a small number of the items available at the supermarket, my observation of other items while in the stores lead me to conclude that these are not isolated incidents. A substantial number of items seemed to follow a similar pricing pattern.
It is important to recognize that standard prices have just as much impact, if not more, on shoppers than sale prices. Not only do regularly priced items raise a consumer's overall grocery bill, they enable to store to claim far greater percentage savings on items when they do go on sale. If Kroger sells a box of Ritz at the "2 for $5.00" price, the receipt would read "You saved $.99 with your Plus Card!" although the customer would have paid $.49 cents more than the everyday price at Meijer, and a full $.81 cents more than Meijer's sale price.
The next time you shop at a store that has a card program and receive a statement telling you how much you "saved," take it with a grain of salt: you could have done far better going to a store that values your privacy and patronage by supplying everyday low prices, without the marketing gimmicks. And if you ever purchase items that are NOT on sale, you might want to investigate the prices in your area, before spending more money than you have to.
July 23, 2002