Unit pricing for groceries

Peter Martin thinks that the one thing we might see from the ACCC’s grocery inquiry is unit pricing for groceries. He points to the fact that often larger volumes of food products actually sell for more per unit than smaller ones. Buying a larger one would be a bad idea as you could just buy a requisite number of smaller ones and be better off.

OK, so consumers might prefer that information. Even if you can calculate per unit volumes not having to do so would be a time saver. (Interestingly, Woolworth’s online offering does give you unit pricing). So why don’t the supermarkets offer them? I mean, no one even tries as a point of differentiation.

When you try to think of reasonable explanations — integer constraints, packing costs or what have you — it only increases the rationale for some transparency so that consumers feel the firm’s cost pain and accommodate it.

Thus, we are left with the strategic: put simply, it looks like an innumeracy tax. Those who can’t or can’t be bothered calculating may end up paying more than those who can. But even that doesn’t get us the whole way there as an explanation: those very same people who can’t also have to be the people who are relatively price insensitive. Now, the notion that the rich can’t be bothered is attractive but given how widespread this practice is, I suspect those who can’t, can’t also easily check between supermarkets as to whether they are paying more for their whole basket of groceries.

So what happens if we mandate unit pricing? Let’s assume that eliminates the innumeracy tax. The problem is that supermarkets will no long have a means of targetting price sensitive customers and sorting them from the insensitive ones. In a relatively competitive market, prices on some products might rise. And sorting out the average seems tricky (although not impossible with a formal model — something I don’t have time to do here).

In any case, it is not entirely clear whether a policy to mandate unit pricing would improve matters; although ideologically, I am in favour of more transparency if it can be cheaply done; i.e., assuming supermarkets themselves can calculate unit prices! Of course, after FuelWatch, no such policy could surely be introduced without a clear policy trial or experiment and some careful econometric analysis. After a week of Parliamentary debate on statistical significance, our political standards on these things appear to have shifted.

7 thoughts on “Unit pricing for groceries”

  1. Most states in the US do require unit-pricing shelf-tags in supermarkets. I have yet to see a study of whether it affects consumer behavior. Also, it’s not clear that unit pric shelf tags are used for “sale” prices.

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  2. Most supermarkets in Canada have unit pricing too. In very very small font, so I have to squint to read it, but it is very helpful. I think sale price stickers usually have the unit price too.

    This is one of the few areas where labelling is better in Canada than Australia. For instance, most fruit/vege/meat prices are still labelled predominantly in pounds rather than kg (with smaller font kg), which is particularly slack for a country that is supposedly all metric. Also labelling of nutritional content seems weaker in Canada, though that’s not technically the fault of the supermarkets.

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  3. I recently saw an Aldi brochure that they will offer consistent unit pricing across Australia.

    I think this is consistent with them trying to sell themselves as cheaper and more consistent, but it also leads me to the conclusion that people in major centres will end up paying more to subsidise the freight costs etc of the harder to reach Aldi stores.

    I don’t necessarily mind this as I still think I pay less going to Aldi. (and no, I’m not an Aldi publicist!)

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  4. Here’ the response we had from Coles Customer Relations:
    “Thank you for your email regarding the introduction of Unit Pricing at all our Coles outlets.

    We have not had feedback from our customers that unit pricing is a significant issue for them. However, if customer attitudes changed in the future then obviously we would take that on board.

    In broad terms though, we believe these sort of labeling issues are best addressed at a broad industry and government level, so that we get outcomes that are consistent for all retailers across the country, and gives customers consistency regardless of where they may shop.

    Your feedback regarding this issue has been noted and forwarded to relevant management for their information.

    Coles is committed to providing a high level of service to our customers and feedback such as yours helps us to continually improve.

    We greatly appreciate the time you have taken to contact us and we will continue to work hard to ensure you enjoy shopping with us.

    Kind Regards,

    Manette, Coles Customer Relations

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  5. I just want to find out how soon Unit Pricing will arrive. We have been in the dark for far too long and it’s about time we had the shopping advantages of other countries. We need it, so why don’t we have it? I just can’t wait. We already have Unit Pricing when buying meat at the supermarket. Why not everything else?

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