From the course: Accounting Foundations: Cost-Based Pricing Strategies
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Do stores really sell things at a loss?
From the course: Accounting Foundations: Cost-Based Pricing Strategies
Do stores really sell things at a loss?
- So you have some personal experience in the supermarket industry. - Yes, yes I do. When my wife and I were first married I was an assistant manager at a family-owned grocery store. - And what were your duties? - Well I was in charge of frozen food. - Okay so we have now established your credentials as an expert in the supermarket industry. So here's my question. Do supermarkets really sell some items at below cost, and if so, why? - Well absolutely some items are sold at a loss, at a price lower than the store's purchase cost. - What items? - Well these items are called loss leaders. Common loss leaders are milk and eggs. - [Interviewer] Why milk and eggs? - [Supermarket Expert] Well many people view milk and eggs as necessities, so if a supermarket offers these necessities at a very low price during a special sale, customer traffic to the store will increase. - Okay yes, but to sell these items below cost, how…
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