Price-Cutting Detrimental to Community

Sun (Auckland), Volume II, Issue 412, 21 July 1928, Page 20

Price-Cutting Detrimental to Community

Housewife Must Ultimately Be Loser

LONG controversies have been held in respect to pricecutting. The benevolent shopkeeper puts a glaring sigu in his window and a sensational advertisement in the newspapers advising the.credulous housewife that he is selling Johnson’s Jam for Is., while other stores still sell at the standard price of Is 2d.

us examine the situation a little more closely. At first glance it would seem that the retailer selling Johnson’s Jam for Is is really a benevolent individual, whose sole reason for being in business is to dispose of his stocks for what they cost him. The very thought is absurd. Even if the “cutter” were so generous that his main object in life was to give the public goods at cost price, his capital which would vanish fast, would soon put an end to his activities. But on the other hand the “cutter” does not go out of business because of his generosity—as a rule he builds up a flourishing business and retires early in life.

How is this done? It is really quite simple. The methods employed, however, do not bear close scrutiny—they savour of the confidence man whom we all abhor. This is the “cutter’s” mdthod. There are, of course, varia-. tions in this formula. His first aim is to convince the credulous housewife that his goods are cheaper than those of his competitors. With this laudable object in view he sets out to deliberately hoodwink his customers, and incidentally to ruin some manufacturer’s business. There is, we will suppose for explanatory purposes, a well-known standard line named Johnson’s Jam. Johnson’s have for many years spent thousands of pounds on advertising their wares, so that the public would come to know and ask for them. Everyone consequently knows that Johnson’s Jam costs Is 2d over the grocer’s counter; the grocer pays Is for the line, thus making a profit of 2d a tin. The “cutter” now enters the story. He is not satisfied with 2d—he want& more. llow does he get it? He will advertise Johnson’s jam at Is —the price he has paid for it from the manufacturer. His aim is of course to convince the credulous housewife that all his other goods are correspondingly low-priced. Now it stands to reason that if ho makes no profit on Johnson’s, he must make it on something else. This is how it is done. He takes an inferior line of jam to Johnson’s, which he buys for the sake of example, at Bd. This jam through being un-advertised and consequently unknown is not a familiar line to the housewife, so when she asks for Johnson’s, the benevolent “cutter” persuades her to take the unknown line at lid.. He points out that it is just as good as Johnson’s and is Id cheaper, but he does not inform • her that he loses money by

selling Johnson’s, and that he makes 3d on the unknown line.

Now we come to the really serious part of the position. The housewife has paid an exorbitant price for the unknown jam, and in addition has got

an inferior brand. The manufacturer of the well-known jam. is having his line killed by an unscrupulous trader, who does not believe in playing fair to either his customer, the manufacturer, or his fellow trader.

Here is a positive and proved fact. If the housewife persisted in buying only cut lines—the shop selling them would go out of business inside of 12 months. This is surely sufficient proof that when a retailer cuts one line and sells it at cost, he has got to get an exorbitant profit on a number of other lines to make up his losses on lines he has cut. This brings us to the health point. We have seen how the unscrupulous retailer substitutes an inferior jam for a good jam and actually charges the housewife more for it than it is worth. Apart from this aspect there is the question of inferiority—its effect on the health of the children.

There is an old saying that the “best is not good enough”—yet here we are getting the worst and actually paying through the nose for the privilege of using it.

One more case and then we are done. A “cutter” once sold a line for what it cost him. He soon found that people would come into his shop and only buy the cut line. They did not buy his carefully loaded lines, that showed anything from 25 per cent, to 50 per cent, profit. This, of course, worried him, but not having a conscience he only felt the financial embarrassment of the situation. He then advertised that people could only get the cut line if they purchased other lines as well. This was the beginning of the end, for the public bought neither the “other” goods nor the cut line. Shortly after this he became bankrupt, and people who did not know him intimately sympathised with him. It is said that evil finds its own punishment and while it is admitted by all fair-minded people that pricecutting is a very real and growing evil, this is mighty poor consolation for the manufacturer.

Then again, the fact that occasionally a “cutter” gets caught in his own trap does not minimise the housewife’s risk of getting inferior foodstuffs that the “cutter” is constantly substituting for standard well-known lines that have now become unprofitable through his own folly and short-sightedness. .1