As a senior executive of the food retail trade reports to “ET” on Sunday, for many years the pricing architecture was based on high introductory prices and great deals. “Many industries artificially inflated the prices of their products and then put them on sale. Essentially, the cost of the offer was financed by the price increases”, the same source points out and adds that now this model is changing, emphasizing the low initial prices.
Data
For example, according to data available to “E.T.” on Sunday, baby diapers of a large company that, until before the implementation of the new measures, had an initial price of 19.99 euros and were sold throughout the year at a discount of 35% to 50%, i.e. from 12.99 to 9, 99 euros, from March 1 available at 10.98 euros, without any promotion. “This is the real price of the product and includes both the cost of production and the company’s profit. It is not possible for a product to cost 20 euros and be permanently sold on offer at 10-13 euros, without the supplier making any profit”, he emphasizes to “ET”. of Sunday representative of the market.
» Bubble bath of a well-known multinational (650 ml) with an initial price of 5.98 euros, which until February 29 was permanently sold either with a 50% discount or in the form of a “1+1 gift” reaching the final consumer at 2.99 euros, with the application of of the new measure, its initial price on the shelf dropped to 2.92 euros, i.e. lower than what households were buying under the promotional energy regime.
» Detergent in powder (50 scoops) of a large company in the sector, which had an initial price of 19.22 euros and was constantly offered on the shelf up to 50%, from March 1st it is sold at 11.68 euros, i.e. 39.2% cheaper, as approximately consumers were buying it on sale.
Transparency
The measure, which has reduced initial prices on 4,000 consumer goods by 15% to as much as 40%, may put a brake on misleading offers and ensure price transparency, but the real benefit to the pocket of the consumer, if he will buy the products cheaper than before. “It will take some time to see how consumers will evaluate it and companies will adjust their commercial policy accordingly. Now, the prices are essentially the same as before, except that the low prices are not the result of any promotion. In order for the prices to fall further, we will have to see if the companies will continue the offers and with what intensity”, he points out to “ET”. of Sunday high-ranking supermarket executive.
However, the same sources believe that it is certain that the industries will continue to make offers, even on a smaller scale, in order to maintain their market shares, as consumers are “addicted” to promotions.
According to the Consumer Goods Retail Research Institute, more than half of the products in Greece are sold under some promotional action, while on average the discount they receive from the offers amounts to approximately 12%-13% of their expenditure.
THE DIFFERENCE IN THE POCKET BASICALLY PRODUCTS
BABY DIAPERS
Price until 29/2
19,99€
Price from 1/3
10,98€
€9.01 cheaper
BUBBLE BATH
Price until 29/2
5,98€
2,92€
€3.06 cheaper
DETERGENT IN DUST
Price until 29/2
19,22€
Price from 1/3
11,68€
€7.54 cheaper
1st INFANT’S MILK AGE (0-6 MONTHS)
Price until 29/2
26,34€
Price from 1/3
22,40€
€3.94 cheaper
2ND INFANT’S MILK AGE (6-12 MONTHS)
Price until 29/2
20,57€
Price from 1/3
17,50€
€3.07 cheaper
Cheaper vs 15%-20% the baby milk following the ceiling
A significant drop of 15% to 20% is also recorded in the prices of baby milk, following the ceiling on the gross profit margin of the companies that import, produce and distribute baby milk in Greece. This equals the operating costs of the business plus 7% of net sales. Given that offers are prohibited in this particular product category, reductions on the shelf have already been seen.
For example, infant milk (0-6 months), while until February 29 it was sold at 26.34 euros (pack of 800 grams), from March 1 it is available at 22.40 euros, i.e. 17.6% cheaper. The first of the prices for second infant milk (6-12 months) of a well-known company is the same, as it fell from 20.57 euros to 17.50 euros with the application of the ceiling.
According to development ministry circles, until now baby milk was being marketed at up to three times the profit margin of the government’s 7% ceiling, which is why its price was so high. “With the new limit on the profit margin, the gap will be closed and its price will be closer to the European average.” It is noted that a recent investigation carried out by the Competition Commission showed that in Greece baby milk is sold up to 213% more expensive than in other EU countries.
Bother
However, for their part, the representatives of the dairy industries, although they admit that baby milk is expensive in our country, attribute the high prices to its special composition, to the increased transport costs, given that it is produced exclusively in foreign countries, as well as to the strict systems security required.
They appear, however, annoyed by the implementation of the measure, noting to “ET” of Sunday that “any ceiling on the profit of any product is arbitrary in a free market. Consumers may now see reduced prices, but in the long run the benefit won’t be as great. In order to protect the market and have low prices, competition should operate freely, without restrictions.”
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