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Thread: Loss leaders

  1. #1
    TC
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    Loss leaders

    Gene Cafe Coffee Roaster $850 - Free Beans Free Freight
    So you can now have it delivered to your home for around wholesale cost- even less than wholesale if youre remote. Sellers mantra: To undercut all competitors.

    This generally happens in the majors. They have done with milk and attempted with beer. Theyre doing it with fuel as well in an attempt to drive competition out of the market. What about on bigger ticket items? Heres*what the ACCC thinks about predatory pricing...

    I am interested in obtaining CSer thoughts. Do you choose businesses that indulge in these practices?

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    Re: Loss leaders

    well if re-sellars are getting supplied a product that undercuts another reseller why would they not go for a bigger market share?

    if your suggesting that all re-sellers should sell at RRP are you not suggesting price fixing ?


    the ACCC dont like that either.... eg Visy board 2007
    The ACCC today ordered the Visy board to pay $36 million for engaging in a four-year price-fixing and cartel scheme with packaging rival Amcor


    but i understand you argument about selling in a "loss leader situation", but if it is right or wrong is a good question.

    i would not have thought many coffee equip retailers have the flexibility to sell at a loss. if they can afford to then they must be doing ok (maybe) or maybe quitting a line / stock ?

  3. #3
    TC
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    Re: Loss leaders

    Hi Maheel,

    Yes, I agree that market share is all fine and it is a competitive market. Cartels suck and sadly, its rare that the ACCC ever show their teeth.

    In this case, the item is in fact a loss leader in many shipping scenarios.

    The catch-22 is does one engage in a price war that nobody can win or lay down for a trampling?

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    Re: Loss leaders

    Maheel - not sure that the loss leader thing applies, as that is more commonly used by such as supermarkets where they offload a relatively low cost item at a loss, knowing that the majority of customers will also buy several high margin products in the one transaction.

    Interesting question though. Will give it some thought and post later if I can add anything to the discussion

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    Re: Predatory pricing behaviour in coffee equipment sales....

    I agree who me "loss leader" is not really happening here as you really need a volume capability in sales to start using that pricing model . i dont think the sales volumes would impact anyone in the coffee equipment market? (maybe the big retailers like DJ, Myre, kmart, HN etc might have some clout )

    @ TC. personally myself if i was in the market for a product I might choose the cheaper price option but i need to weigh up the pros an cons of each purchase.

    if its an international brand that sells on volume and i know i can get product support just based on the date on my receipt anywhere in AUD then i would look at the cheaper "wins" deal.

    If its a little know product only sold by one or two importers then I think i might choose the retailer where i know i can get support if need (hopefully get support). and know i need to pay some $$$ for that service.

    Trying to control a free market in general is going to be a challenge and may not be constitutional etc for all. Is it just the nature of the beast? Not that i am saying your trying to control it. I am kind of saying even the ACCC may not be able to "control" selling at a loss to any real extent as a business maybe should be allowed to push the market in some direction if they want to, maybe ????

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    Re: Predatory pricing behaviour in coffee equipment sales....

    Quote Originally Posted by 6F5A4940494563280 link=1308534734/3#3 date=1308538293
    Im not sure if its just me thats naive, but when I originally joined CS about 18months or so ago there appeared to be less politics.
    Its not just you - I think its starting to affect the whole community feeling that was here a while ago.

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    Re: Loss leaders

    Quote Originally Posted by 2F232A27272E420 link=1308534735/5#5 date=1308539776
    I agree who me "loss leader" is not really happening here as you really need a volume capability in sales to start using that pricing mod
    Im not so sure Maheel....

    I reckon I could do it with 20 whatevers if I wanted to drum up some website traffic?

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    Re: Loss leaders

    My question stands....Whaddaya do?

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    Re: Loss leaders

    Quote Originally Posted by 7A767F72727B170 link=1308534735/9#9 date=1308554785
    Dennis out of interest and for sake of "loss leader" arguments what was your reason for selling the aero at bellow the RRP?

    as an-ex business manager i can see the $49 price point being a draw point but was interested in your decision if different.
    It was as you say, I thought the $49 price point would be more attractive.
    Quote Originally Posted by 7A767F72727B170 link=1308534735/9#9 date=1308554785
    i think most successful new products (not just new products) see a niche they can exploit and become successful because of its ability to sell to its niche market
    Hmm. A2 milk might be an example, yes? I think its great milk though also think it survives on the shelves for as long as it suits the supermarkets, not for as long as it fills a niche market.

    Do you agree?


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    Re: Loss leaders

    Predatory pricing only applies where its a (generally much) larger company trying to drive out a smaller company (not just on a particular product), and usually is a response to a new business. The companies have to really be in direct competition, and online predatory pricing would be a grey area at best.

    (I watched this happen locally to me - a new bus company started up offering $10 tickets each way, when the other (larger) company was previously charging $18. The larger company then started at $8, sent the other company bust, then jacked the prices up to $20).

    So what do you do? You do what other brick and mortar retailers are finding they are having to do to compete against cost-competitive online resellers - you differentiate. You offer something other than "best price".

    If I were any coffee equipment supplier, Id be more concerned about Myer, DJs etc selling Breville appliances for cheaper than you can (which is already happening semi-infrequently with 15% off discounts etc), and will happen more and more. This is why Ive been confused about certain specialty coffee resellers selling Breville gear, no matter how good it is, as their competition just got WAY bigger. You can tell the customer how good it is, show them how it works, they can go away to "think about it", then buy it on their Myer Credit card on a % off sale just because they want the points. They cant do that with any of the Italians.

    (And lets assume Ive written all of the above oblivious of the background of this thread, despite me knowing where it has come from just to avoid the "taking sides" arguments. I will not comment in public OR in PM about the backstory of this thread).

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    Re: Loss leaders

    @ TC taking the bat and ball and going home is not going to work and you might be right fighting in the trenches over prices is useless.

    do you weather the storm and ride it out ?

    the challenge i see with some products is that you cannot control who buys them to re-sell (buying the re-seller rights) and you kind of have to accept someone may undercut you (trying not to sound like i am saying here "you got to suck eggs") and the major manufacturer may not really give two seconds thought for a smaller re-seller ?

    the manufacturer may not even be controlling a particular sellers price point as they may be buying from another re-seller who has gotten a great deal to take a lot of stock ?

    @ Den yes i agree about A2 the supermarkets will dump it if it does not meet a particular volume or demand and then it will be possibly the end for the product. But sometimes thats a plus for the likes of IGA etc who might encourage people to come to them to buy A2 (exploiting a particular market segment) its going to take a larger re-seller to keep it on the shelf but i have no idea on its demand as I dont need to buy it for intolerances etc (its main sales point i think?) I do know it is a good product but.

    i think i am starting to argue for the arguments sake.... as i can see your frustrations in your time and investment in any product

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    Re: Loss leaders

    Look, I think that there is something that everyone has pretty much forgotten...

    Women love to Go Shopping... ;D ;D

    No, seriously, hear me out!

    I am sure that the online shops will get a market share but ultimately, women love to go out and shop, so all those huge malls will not lose out completely. Women are relational and they love to get out of their homes and meet up with girl friends and Go. Shop!

    If you take a trip down to your local Westfields (or equivalent) have a good look at all the women wandering the halls...there are Heaps of them! (some even dragging their ever long suffering menfolk along! ;D)




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    Re: Loss leaders

    Quote Originally Posted by 7464686873665860666B070 link=1308534735/13#13 date=1308558571
    Women love to Go Shopping...
    Newsflash

    Talk Coffee will now only sell stuff to women ;D

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    Re: Loss leaders

    Quote Originally Posted by 0D383532061A363F3F3C3C590 link=1308534735/14#14 date=1308558948
    Newsflash

    Talk Coffee will now only sell stuff to women*
    Thatll be a loss leader in itself, unless you charge for the time theyll talk your ear off.

  15. #15
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    Re: Loss leaders

    Quote Originally Posted by 1E2B26211509252C2C2F2F4A0 link=1308534735/14#14 date=1308558948
    Quote Originally Posted by 7464686873665860666B070 link=1308534735/13#13 date=1308558571
    Women love to Go Shopping...*
    Newsflash

    Talk Coffee will now only sell stuff to women* ;D

    There...

    I fixed it... :D :D ;D ;D

  16. #16
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    Re: Loss leaders

    Quote Originally Posted by 607F7D677E6B7C7D6A120 link=1308534735/14#14 date=1308559079
    Quote Originally Posted by 0D383532061A363F3F3C3C590 link=1308534735/14#14 date=1308558948
    Newsflash

    Talk Coffee will now only sell stuff to women*
    Thatll be a loss leader in itself, unless you charge for the time theyll talk your ear off.

    Oi!* :P I bring to your attention...TALK Coffee!* ;D ;D

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    Re: Loss leaders

    For the first time I recently purchased a set of printer cartridges based personal convenience and the price was also attractive

    To explain
    They were the genuine manufacturer type as opposed to a third party product at another 2 thirds lower in price again

    My thinking was
    It cost me $20 less delivered than if I was to drive to officeworks and get it myself
    For the last several years I always got my ink and printers from officeworks

    However the most important factor for my purchasing decision was, because I have some health issues and if one looks at it as combination of events my decision ticked all the boxes

    I think what I am trying to say is
    Dont dismiss an individuals current circumstances

    KK

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    Re: Loss leaders

    Quote Originally Posted by 627D7F657C697E7F68100 link=1308534735/10#10 date=1308557993
    If I were any coffee equipment supplier, Id be more concerned about Myer, DJs etc selling Breville appliances for cheaper than you can
    Well said!

    Quote Originally Posted by 627D7F657C697E7F68100 link=1308534735/10#10 date=1308557993
    You can tell the customer how good it is, show them how it works, they can go away to "think about it", then buy it on their Myer Credit card on a % off sale just because they want the points. They cant do that with any of the Italians.
    More food for thought. HN, GG and others are investing big dollars and shelf space for coffee machines. The BDB will be a test of the market for them. If sales are high enough, a number of these stores will start to stock the Italian machines. To them who dismiss this prophecy, just remember back 10 yrs. The range of ovens, fridges, hot plates etc from Europe that were sold by these stores was very small. The specialty retailers had the market. Look at their range now. They even have cooking demonstrations and classes. If they have competent people demonstrating and teaching people how to make espresso, then they will naturally expand their range of machines.
    Rather than worry about internet retailers (everyone has to start somewhere), the main point of difference will always be service and product knowledge.
    Retailing will just become tougher and more competitive.

  19. #19
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    Re: Loss leaders

    Quote Originally Posted by 2837352F36233435225A0 link=1308534735/13#13 date=1308559079
    Quote Originally Posted by 0D383532061A363F3F3C3C590 link=1308534735/14#14 date=1308558948
    Newsflash

    Talk Coffee will now only sell stuff to women*
    Thatll be a loss leader in itself, unless you charge for the time theyll talk your ear off.
    And...just having a quick look at your profile Richard...you talk more than I do! ;D Youre posting 1.7 per day...me...1.62... ;D

    Though, this post might just change that statistic...

    Right...shutting up now. ;D :D [smiley=engel017.gif]

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    Re: Loss leaders

    Quote Originally Posted by 37272B2B30251B232528440 link=1308534735/18#18 date=1308559895
    you talk more than I do!
    ;D Dont look at either of mine then :-[

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    Re: Loss leaders

    Quote Originally Posted by 3A3D28272A490 link=1308534735/17#17 date=1308559825
    Quote Originally Posted by 627D7F657C697E7F68100 link=1308534735/10#10 date=1308557993
    If I were any coffee equipment supplier, Id be more concerned about Myer, DJs etc selling Breville appliances for cheaper than you can
    Well said!

    Quote Originally Posted by 627D7F657C697E7F68100 link=1308534735/10#10 date=1308557993
    You can tell the customer how good it is, show them how it works, they can go away to "think about it", then buy it on their Myer Credit card on a % off sale just because they want the points. They cant do that with any of the Italians.
    More food for thought. HN, GG and others are investing big dollars and shelf space for coffee machines. The BDB will be a test of the market for them. If sales are high enough, a number of these stores will start to stock the Italian machines. To them who dismiss this prophecy, just remember back 10 yrs. The range of ovens, fridges, hot plates etc from Europe that were sold by these stores was very small. The specialty retailers had the market. Look at their range now. They even have cooking demonstrations and classes. If they have competent people demonstrating and teaching people how to make espresso, then they will naturally expand their range of machines.
    Rather than worry about internet retailers (everyone has to start somewhere), the main point of difference will always be service and product knowledge.
    Retailing will just become tougher and more competitive.

    this is an interesting observation. well said !!

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    Re: Loss leaders

    Quote Originally Posted by 04313C3B0F133F36363535500 link=1308534735/7#7 date=1308556818
    My question stands...Whaddaya do?
    I think you keep on keeping on .....* some CSrs (I dont know what %) will have a loyalty based on their perception of service/ (includes help/fair advice etc) and will support a business based on that.* This works for me and saving a few dollars is not important [smiley=dankk2.gif]

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    Senior Member Lovey's Avatar
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    Re: Loss leaders

    Quote Originally Posted by 20394C0 link=1308534735/21#21 date=1308561377
    some CSrs (I dont know what %) will have a loyalty based on their perception of service/ (includes help/fair advice etc)
    As well as actual experiences of these attributes.

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    Re: Loss leaders

    Before I decided to range Breville (particularly the smart grinder), of course I was concerned that I wouldnt be able to compete against the big retailers for price. Yet, we may not be the cheapest, but are pretty competitive.

    I know there have been people who have come in for a demo, then gone to one of these large retailers to buy the grinder. I know because some of them have told me.

    I guess I like to be able to offer good products, and hope that those few who purchased the grinder elsewhere will come back for their purchase of beans or some other product.

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    Re: Loss leaders

    Well, I have to say that I quite probably do choose businesses that indulge in these practices.

    I think the original post and question have changed somewhat during the day, but thats OK as the question as it stands is certainly a valid one.

    The ACC states pretty clearly that "underselling competitors, is not necessarily predatory pricing".
    They also state: "The initial signs of predatory pricing are pro-competitive"

    Herein lies part of the problem. We as consumers dont know when someone is beign competitive and when they are being anti competitive. What one retailler believes, or claims may not be true - they may be falsely claiming predatory pricing when it doesnt exist, or believe they are responding to healthy competition without realising some predatory practice is going on.
    Even in retrospect, it is hard to know as it is intent as much as result that determines if somethign is predatory.


    I am sure that there are predatory practices in the specialist coffee industry like in most others, and potentially from businesses that you would not expect and maybe even trust as valued partners/suppliers/customers.


    All we can do as consumers is remain informed and try to give our business to those we most trust - well still get it wrong sometimes, but I for one am not going to screw people over just to save a buck - what goes around comes around as they say.

    Ill still try to get the best price I can, but always give the option of price matching (or getting close) to those I hope are behaving ethically and enhancing competition.




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    Re: Loss leaders

    Consumer type goods or stuff I know about I get from whoever sells them cheaply. Specialist stuff thats going to need support I go to a specialist store.

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    Re: Loss leaders

    perhaps of loss leaders are bad does this make price gouging good for consumers?

    how much mark up is reasonably?

    certainly 5% will send you broke and 5000% is wonderful if you can get people to pay it.

    but if people think you have ripped them of they will never do business with you again.

    women may like to shop but is it really the social experience they are buying?

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    Senior Member Stan's Avatar
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    Re: Loss leaders

    It I am buying an expensive item I will deal with a specialist as I know they will be able to give me the aftersales service and advice regarding the right product for the use I envisage. Also so I know who to go to if there is a problem. For small cheaper consumer Items I will go to the lowest bidder.

    EG When I first started into my coffee journey I bought a Sunbeam from Hardly Normals and used it until I was sure I was going to continue to develop my snobbery. I then purchased my grinder from one Sponsor as they were offering the Mazzer at what I thought was a fair price. I then (after much saving) purchased my machine from another sponsor because I was able to go in and speak to them and look at my options. So to me if I want quality I go to a specialist if I want volume I go to the cheapest (but never for coffee)



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