Every year, when I go shopping for Passover foods and am horrified by the exorbitant prices, my mother always says the same thing: “Passover doesn’t come cheap.”
This past Friday, my mother sent me to run a few errands before Passover. On the way, a friend’s father told me that there was a major sale at Pathmark on all Passover items. He said to relay this message to my mother, but we both knew that he was talking to the right person; after all, I am The Bargain Hunter in my family! While Pathmark was not on my list, I took a small detour to accommodate the potential for massive savings. What I thought would be a short stop turned into a major shopping excursion that highlighted a terrible business strategy.
I see this scene all the time when I go clothing shopping. It was refreshing to see them up and going, breaking a sweat as they took charge of the shopping!
Unsurprisingly, there was pure chaos at the store. On a day that is characteristically frantic, with increased foot traffic from customers making last minute Passover purchases, there was now an even larger crowd. The Passover aisle was packed, mostly with young men on the phone with their wives telling them exactly what to buy. Their perplexed faces were priceless! As I predicted, people were buying in bulk. To the unsuspecting onlooker, they appeared to be preparing for Armageddon. On a Passover shopping trip myself, I knew better.
Before major storms, you often see empty shelves where bottled water used to be. This occurs because demand soars. In this situation, demand remained the same, but prices dropped. As a result, people were willing to buy more.
Seeing that there was no shame in filling up one’s cart to the brim, I cleared the shelves of chips, nuts, and various other foods. I am not exaggerating. When I was done, there were vast swaths of empty shelf space. While I promised never to clear the shelves like shoppers do in the show Extreme Couponers, I felt that there was an important distinction between not leaving for others any life- saving Aleve versus barely edible potato starch based cookies. Let’s be honest: I was doing society a favor by taking these products out the store! In total, I spent less than $30 for a trunk full of groceries whose retail price was triple that amount.
I was disgusted when I found out that nearly two years ago, Walmart had a food drive for their own employees. Their wages were so low that they could not even afford to buy food from the store! What was meant to be a gesture of kindness was interpreted by everyone as callous and ended up being bad publicity.
I was so laser focused on getting the best bargains that I was only finally able to ponder this markdown phenomena after my third trip from the store. (“Leora, buy 3 packages of almonds.” “So I’ll buy 6?” “Yes.” Five minutes later: “Buy 2 more, I need for a new recipe.”) Why had the Pathmark suddenly slashed prices? Some thought it was a glitch in the system, and thus acted quickly to snatch up the savings, lest prices return to normal once Pathmark fixed the problem. The store manager told my friend’s father that this markdown was intentional. In prior years, Pathmark ended up throwing out or donating leftover Passover food. The demand that peaks before and throughout the holiday instantly plummets once it ends. To avoid major losses, everything was now discounted-when demand existed and people would still buy. By quickly clearing the shelves of food that would soon lose value, Pathmark could restock with items that customers wanted and, more importantly, that were worth more.
There is no difference between Easter eggs r and Kinder eggs, which are sold year round. It is all about the marketing.
It is important to note that at this time of the year, stores also face this exact issue with Easter related inventory. Demand for peeps and chocolate eggs spike close to Easter Sunday; after that, leporine goods are heavily discounted. And to think, economics highlights the similarities and thus unite Christianity and Judaism!
Pathmark is one of the most expensive grocery stores in my area. Although they will make a loss from their Passover goods, they still make a major profit because of their sky high prices.
The business model in Pathmark was severely flawed. By slashing prices during peak demand, Pathmark forwent the potential for major profits. Customers at the time were willing to pay top dollar; even later on in the holiday, when they needed to replenish the contents of their cabinets at home, they would still pay regular price. As a result of the markdown, consumer surplus increased, while producer surplus decreased. It would have behooved Pathmark to keep prices high, when demand was high, for as long as possible. Only toward the end of the 8-day holiday should prices have been reduced incrementally.
In prior years, the 75% sale occurred once Passover was over. Now, Pathmark curtailed the possibilities for significant profits by testing out this new strategy, a holiday promotion that was far too premature. I predict that their overall profit from Passover foods will be less than last years’.
