Would you be happy to pay more for the same thing?

Yvette – You say “we explored how much convenience supermarkets charge when compared to the nearest equivalent supermarket. We picked a basket of goods and found it was up to 7% more expensive at a convenience supermarket”. It is not clear what you mean by “the nearest equivalent supermarket”. Do you mean another convenience store operated by the same company, another convenience store operated by a different company, or a large supermarket operated by the same company but possibly in an out-of-town or edge-of-town location so not necessarily convenient? Although they sell a wide range of goods, convenience stores are not usually regarded as supermarkets. The picture is further confused by stores like Aldi, Lidl and the Co-op which are bigger than convenience stores but are not full supermarkets. Another complication is that some large supermarkets are categorised as superstores because they are much larger and also sell clothing, homewares, tech products, etc and offer a range of other services.

I presume you are referring to the Big Four supermarket operators [Asda, Morrison, Sainsbury’s and Tesco] which often have a ‘mini’ version within a mile or two of a major store and there is a price differential between the two.

I was thinking about this only the other day when we were passing a Tesco Express and stopped to pick up a few things and I noticed that a packet of Tesco biscuits was 65p whereas in their major store the same product was 60p. There is therefore an 8.5% ‘premium’ for shopping in a ‘local’ or ‘express’ convenience store. My immediate thought was that there had been a price movement between my previous purchase and this one, or that the quantity/weight was bigger for the small shop packet, but I have subsequently checked and it is a true like-for-like comparison. I have not done a price comparison on the other items we bought.

In some villages and suburbs the only grocery retailer is a convenience store operated by a major supermarket operator and much of the fresh produce is supplied from their nearest large supermarket acting as the mother ship. One alternative to shopping there is a journey [possibly several miles] to the large supermarket so in terms of cost there might be little difference or it might actually be cheaper to use the convenience store if it sells all you want. On-line ordering and home delivery is another option which brings the full choice of goods at the large supermarket prices but might not be so convenient as it requires a degree of planning and organisation. The third alternative might be an independent or franchised street-corner mini-market type of shop that might have a more limited choice of products and almost certainly higher prices than a major supermarket’s local version.

Some people use convenience stores to avoid the temptations of a large store and to keep within a tight budget. To some extent they are paying more than they could but they achieve their primary objective. For some shoppers, time has a value and justifies the speed and convenience of local shopping, especially for top-ups.

I should be interested to know how sensitive the local branches of the Big Four are to price competition from discounters like Aldi and Lidl if they are within a mile or so – this is now quite commonplace as the discounters have invaded territory previously regarded as their own by the Big Four’s little brothers.

My overall conclusion is that convenience comes at a price which might or might not be worth while – it is up to each customer to make that assessment based on a range of factors including time, distance, choice, and total price for a basket of groceries and provisions. I happen to think the big boys are milking it and, as Ian says above, it’s a result of supply and demand and what the market will bear.

I think this particular aspect of price discrimination would justify an article on its own taking in the whole spectrum of shopping provision and the different economics, including competition, that apply to it.

A final thought – do the products supplied to the convenience branches of the Big Four have different bar codes to those in their large supermarkets, or is the bar code recognition system in each branch tuned with a set of prices unique to that branch? If the latter, is that done locally at branch level or is it controlled and implemented remotely from head office [including shelf-label management]? I can only imagine there is a considerable hidden infrastructure supporting this operation with checks on prices in other competitive shops in the vicinity and sophisticated yield analysis of on what and by how much price differentials can be applied. This all feeds into the pricing and makes you wonder whether it is worth it.