Arrivederci,?Ciao Bella.? For several years, our local grocery story carried a brand of coconut sorbet,?Ciao Bella, which we had for dessert several times a week.? It was $5 per pint-pretty expensive-but worth much more than every penny. In the last month, it hasn’t been on the store’s shelves.? The manager informs me that they will not be stocking it; although it sells well in his store, the chain purchases centrally, and it just won’t sell in their other stores.
My?preferences and income are not so different from my near neighbors’, but all of ours apparently differ from preferences and incomes in the chain’s selling area (all of Texas). (Austin is weird!) And that makes the chain unwilling to bear the cost of using its central purchasing facilities to buy this specialty item.? I, and I’d bet other purchasers, derive substantial?consumer surplus from this sorbet and would be happy to pay $7 for it.? What prevents the chain from ordering it on a small scale, just for this one outlet, and charging a price sufficient to offset the higher cost?
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Just goes to show that it’s the nature of central planning, not government per se, which leads to suboptimal economic outcomes.
Or, what stops and enterprising person from starting a sorbet store, paying the premium for ordering it on a small scale, and passing that premium on to their customers?
Or would the inconvenience of an additional shopping stop erase the consumer surplus?
In the words of a current UK TV comedy series, “Computer says no.” If their logistical operation (which may be outsourced) cannot currently handle stuff which is delivered to only one shop, then modifying it so that it can would probably be quite expensive.
On the other hand though, what prevents you and your neighbours clubbing together, forming a company, and buying it wholesale?
It looks to be carried in more stores than just your local grocery store:
http://www.ciaobellagelato.com/#/store-locator
Makes me want to try it.
Daniel,
There’s plenty of it in Austin.
Go to
http://www.ciaobellagelato.com/#/store-locator
it has to be a mathematical break-even formula allocating head office overhead, logistics, rent, etc over units sold. Even then, why would I bother allocating all these for a contribution of a dollar per unit? Asked differently, if you were the owner of a very profitable store, would you go the extra mile for an extra Benjamin a week, especially if there are more than adequate substitutes that potentially sell better on a larger (i.e. chain) scale?
Walmart changed retailing by inventing and perfecting a centrally controlled inventory system. It is indeed a marvel, has saved consumers a lot of money, and has put the fear of God into every other retailer. Those other retailers have learned that they must learn and perfect their own version of the Walmart system or die. Single stores and small chains have no hope competing on mass market items.
Of course, you can avoid competing with the Walmarts of the world by being an upscale boutique. The problem is, your local store probably sells mostly mass market items, and relatively few boutique items. It takes a lot of focus and mangement to compete in the lean and mean mass market. To loosen that focus by adding a selection of boutique items is tricky. Will the boutique items, profitable in a narrow sense, prove costly as a distraction from mass market efficiency? What are the real total costs of adding an alternative supplier route? How do you advertise and market boutique items in a mass market outlet? So I sympathize with the loss of your sorbet (I love a good sorbet), but I can understand the perspective of the store manager.
I am fond of pure maple syrup, and no local store carries it in efficient large containers (it’s very expensive at 4 oz per bottle). So I buy a gallon at a time on the internet from Vermont. Increasingly the internet is the boutique alternative to big box mass market stores. Check the internet to see if you can get your sorbet delivered by express mail in a box capable of keeping it cold.
I don’t think it’s anything systemic. I think this is one of the many instances where the problem is based in the individual utility some purchasing manager gets from doing par or sub-par work–he or she simply doesn’t or cannot manage purchases at that level of detail–regardless of the profit the company might derive from more tailored offerings at a higher cost and price. Never underestimate executives’ ability to appreciate and cultivate mediocrity.