Hi there. I hope that you’re having a great weekend.
I normally do my grocery shopping on Sunday, but there was a meal that required an overnight marinade that I was looking to make, so I found myself in the local grocery store today by the deli section, list in hand, when I came across this sign:
That’s a whole, store-prepared rotisserie chicken for just $5.98.
A whole, cooked chicken could be the starting point for four or more meals, so you can see why I might be excited by this price. Then the gears in my head started grinding away; “If they’re selling cooked chickens at a price this low,” I thought. “Then they must be selling raw chickens for almost noth….”
I didn’t even wait to finish the thought as I dropped everything and sprinted to the meat section. The poultry came into view and I thanked my lucky stars that there were still some whole chickens left. As happy as I was that I’d be eating inexpensively for weeks — or even months! — I was almost happier that I was going to get to blog about it.
Imagine my disappointment, then, when, after looking at four different brands of whole chicken, this was the single cheapest one I found among the bunch:
$8.14! That didn’t even make sense! Would the same be true of the rotisserie chicken at Costco, Vons, or Whole Foods as well?
My heart sank and I had to sit down for a minute. Yes, I’d have to get up, collect my shopping basket and umbrella from the other section, but I needed a little time.
A meat department employee approached me and asked if I needed help finding anything. I told her I didn’t need help finding anything, but had an important question about the chickens. I asked her why a cooked chicken would cost less than a raw chicken. To that, her only reply was that the cooked section was a whole other department and maybe they got their meat from somewhere else or maybe the chicken was…
“Sorry,” I cut her off. “I’m going to need to ask a manager.”
Luckily, Ramon (Not his real name), whose face I recognized from the picture above the meat section, was walking the floor just at that time. I stepped over to him and asked him the same question. He looked at me distrustfully and asked what I meant.
“Because it doesn’t make sense!” I told him. “You can get the cooked chickens in four or five flavors, there’s the spices, you gotta pay someone to prepare and clean the bird. Are these just smaller chickens? Are they chickens that were about to expire?”
My questions clearly touched a nerve with Ramon.
“Listen, friend,” he said, taking a step toward me. “We just sell our cooked chickens at that price to be good to our customers….”
I squinted at him.
“And if that chicken gets people in the store and a little hungry,” he continued, measurably more quiet now. “Then maybe they buy a little macaroni salad to go with it, maybe a bottle of Coke or a bag of chips.”
A ha! We exchanged a knowing nod. I went to shake his hand, but he pulled away, closed his work gloved-hand and offered a fist bump, which I gladly accepted.
Not for nothing, here’s how Investopedia defines Loss Leader Strategy:
A business strategy in which a business offers a product or service at a price that is not profitable for the sake of offering another product/service at a greater profit or to attract new customers….
A classic example is that of razor blades. Companies like Gillette essentially give their razor units away for free, knowing that customers will have to buy their replacement blades, which is where the company makes all of its profit.
Another example is Microsoft’s Xbox video game system, which was sold at a loss of more than $100 per unit to create more potential to profit from the sale of higher-margin video games.
And for what it’s worth, I did not leave that grocery store with chicken today.
Have a great weekend!
A late edit 4/26/14: Mr. Fund says:
I work in the grocery store…cooking those chickens, and you can bet they’re not losing money on them, even when they’re on sale. Our store (QFC) actually uses the same chickens that we sell raw