Supermarket not-so-specials, are the prices really that special?

Garth Bray
Source: Fair Go

Ever get a feeling that some places and some things seem like they’re always on sale, or on special?

Fair Go has learned the Commerce Commission is investigating a case of misleading pricing around the use of what is supposed to be a “usual price” - that’s a price that a store claims it has then marked down or discounted.

It’s an active investigation so the Commission declines to give any details, but it came up as Fair Go was asking it questions about supermarket pricing.

Since February, Fair Go has been mystery shopping at each of the major supermarkets. The prices back up recent research by Consumer NZ, which suggested that most of us think the specials are not that special. 

Fair Go has found multiple supermarket items advertised as discounted or on special that are never or seldom at their supposed usual selling price, raising questions about whether they can continue to be described fairly as discounted or special price items.

For instance, 1.5l bottles of Pepsi were at New World on special every week of the 10 weeks Fair Go visited, at a variety of prices, while rival Countdown put the same product on various discounts for six out of 10 weeks. Pak‘n Save marked the same product Extra Low even in weeks when the price was the same at the nearby Countdown store.

Rival brand Coca Cola was on special more than half the time at New World and Countdown stores. Multibuys were also common for both, including 2 for $5, 3 for $5 even 4 for $5. If this was a story about the lure of sugary products, we’d linger on that.

But this is all about the price – the claims of discount and how those claims hinge on what you think you’d usually pay.

“That might be the regular price that they're comparing to; that might be the usual sale price; that might be the last price that they paid; or it could be a price that is set for them as a sort of an anchor for them. That's also called psychological pricing, “ said Dr Jessica Vredenburg, senior lecturer in marketing at AUT.

Dr Vredenburg gives an example from clothing retail - a shirt priced at $14 might seem like a budget item, but the same shirt priced at $50 then marked down to $14 we often view as having greater inherent value - and studies show the store will sell more of them as a result.

“Words like 'special', 'deal', 'promotion' actually trigger the reward centre in our brains. There is that feeling of 'I’ve won something,' 'something's a deal', there’s been an oversight (and) the brain releases chemicals like dopamine, oxytocin,” Dr Vredenburg said.

Which is fine if the deal is real, anchored to a psychological “usual price” that is also the price you’d usually pay.

But based on the Fair Go mystery shopping survey, you’d wonder. And you’d never want to pay full price for yoghurt either - assuming you can work out what the usual price is, of course.

Fair Go tracked Fresh ‘n Fruity pottles in half-dozen and dozen packs. Countdown had the 12 packs on special for eight weeks out of 10, the 6 packs for five weeks out of 10; and New World had them on special four weeks and six weeks out of 10 respectively.

New World advertised a special on Waitoa free-range fresh whole chicken every time we visited. And at the same time, it was on sale at Pak’n Save marked as an Everyday Low price - even though it was for several dollars more expensive.

In all, Fair Go tracked 16 products, including Weetbix, cheese, various free-range eggs per dozen, streaky bacon, washing powder, Whittaker’s and Cadbury family blocks of chocolate and the staples - bread, butter and milk. We had 10 visits each to stores in Auckland and tracked prices in Christchurch.

Half the time, about two-thirds of the products at New World and Countdown were not at their supposed “usual price”.

The trouble is, there is no legal definition of the “usual selling price”.

The Commerce Commission says it will depend on the nature of the goods and the markets in which the goods are being sold.

“The ‘usual’, ‘normal’ or ‘everyday price’ is the price goods or services are commonly sold for. Retailers may mislead consumers if they refer to a claimed usual price which they have never charged the goods or services at, or which is out of date because it is no longer the price that the goods or services are commonly charged at,” a Commission spokesperson tells Fair Go.

The big two supermarket companies say they respect that:

“As per the Commerce Commission’s guidance, we are very conscious that if a product is discounted for too long, there is a risk that the discounted price can become the “usual price”. Each of our supermarkets has around 20,000 to 30,000 products, depending on the size, but we have systems in place to ensure that we manage this,” said Countdown’s Kiri Hannifin.

“We take our obligations under the Fair Trading Act very seriously and we understand that any discount must be off genuinely used prices,” says Foodstuffs NZ’s Antoinette Laird, which represents the New World and Pak’n Save brands.

But how to square that with the results of Fair Go’s mystery shopping? That too remains a mystery.

“I can’t give you any specifics about how our prices or promotions are decided and in what timeframes - we work in a very competitive industry and that information is commercially sensitive,” said Countdown’s Kiri Hannafin.

Countdown owns and operates its stores while Foodstuffs works with individual owners of New World and Pak’n Save stores

“Pricing, discounts and promotions vary considerably across all of Foodstuffs’ stores and although some prices/promotions are rolled out regionally or nationally, the majority are determined at the store level,” said Foodstuffs Antoinette Laird.

One can only imagine the big two have been more forthcoming with details for the Commerce Commission, which is partway through a market study of the industry to check we are getting a fair deal, with results due in November.

Meanwhile, you now know your brain is a hardwired bargain hunter and the word “special” lights it up – so stop and think “is it?” before you put that special in the shopping trolley.