There is a high profile move in Michigan to repeal that state’s item pricing law — the law that requires most products sold at retail to have a price sticker affixed to them. The deceptive tactics being used to turn public sentiment again the law is the subject of this Mouse Print* story.
[Note: MrConsumer is the author of the Massachusetts food store item pricing law, and therefore has a personal interest in efforts to water down similar statutes elsewhere.]
It was bad enough from a consumer protection standpoint that the Governor in Michigan came out swinging against the law. A few days later, the retailers’ association there released a headline grabbing “study” claiming that item pricing was costing Michigan shoppers $2.2 billion a year.
In tight economic times, who wouldn’t be against something that costs consumers $2.2 billion, or an average of $562 a year per household?
The trouble is, that $2.2 billion price tag for item pricing is just plain wrong.
*MOUSE PRINT
The missteps in the study are numerous:
The Michigan report used data from a 2001 price survey — a full decade old — that purported to show that prices in New York (an item pricing state) were 8-10% higher than prices in New Jersey (a non-item pricing state). They said the average item was 25 cents more expensive in New York because of item pricing.
How can anyone conclude anything legitimate about Michigan prices based on what prices were in New York 10 years ago? Michigan retailers did no study whatsoever comparing Michigan prices to those of neighboring states to see if in fact there were any price differences today. And even if they had done a survey and found a difference, who is to say that item pricing would be the cause?
So how did the 2010 Michigan study come up with their claim that item pricing is costing Michigan consumers $2.2 billion a year needlessly? They said that Michigan consumers spend $24.2 annually on groceries and household goods, and since grocery prices were 9%Â higher in New York, on average, that means that Michigan goods are $2.2 billion more expensive than they should be.
*MOUSE PRINT
Remarkably, the 2010 Michigan study contained data that definitively disproved their own claims.
They say there are two basic cost components of item pricing: the cost of labor to put prices on items, and the cost of the labels and price guns. As to labor, they say a typical supermarket spends 2083 man hours a year item pricing 5 million units of groceries. Let me assume the wage there is $15 an hour. That works out to $31,245 as the labor cost component of item pricing in a typical supermarket. The study also confirms that the labor necessary to do item pricing is the equivalent of one full time worker.
The second cost component of item pricing is the paper price stickers and label guns. They say that stickers and label guns cost $6000-$10,000 per store. I will take the middle number, $8000, and add that to the labor cost. Therefore in total dollars, the initial cost of item pricing based on THEIR REPORT is $39,245 per supermarket per year. Since they say that such a store sells five million units of groceries per year, that works out to a mere $0.008 — 8/10ths of one cent per item as the true cost of item pricing — not the 25 cents per item (9% of total cost of groceries) they claim. Therefore the $2.2 billion claimed cost is wildly exaggerated, has no basis in fact, and serves only to wrongfully fuel public outrage and anti-item pricing sentiment.
Since the actual cost of item pricing BASED ON THE RETAILERS’ OWN FIGURES is only 8/10ths of one cent per item, not 25 cents per item, that works out to only $17.98 a year per household as the real cost of item pricing — less than 35 cents a week — not the $562 per year that they claim.
*MOUSE PRINT
The retailers indicate that costs are higher for them because of item pricing, and most of that cost is in the form of labor costs. However, the report’s own statistics show that Michigan has fewer employees on average per retail store than 39 other states. And the report quotes retailers as saying that “their Michigan staffing levels are the same as those in non-IPL [item pricing] states.”
So, if Michigan retailers do not have more employees because of item pricing, how is it costing consumers there $2.2 billion extra? And, if retailers are to be believed that they will not fire workers, but rather reassign them to other tasks in the store like customer service, where are the savings?
The implied message in the retailers’ argument that item pricing is costing Michigan consumers $2.2 billion extra a year is clear. If you get rid of item pricing, prices will fall to the tune of $562 a year per household ($2.2 billion). If you believe that, I have a bridge in New York to sell you too.
The media in Michigan can also be faulted for blindly reporting the $2.2 billion lie without a critical reading of the study.
My guess is that Michigan consumers will be the big losers in this battle. Without item pricing, it will be harder to find and compare prices in the store. Shopping will take more time if a consumer has to find a distant self-service aisle scanner to verify prices. And it will be more difficult to catch scanner errors both at the checkout and at home since there will be no price on the item to act as a double check.
“Let me assume the wage there is $15 an hour” – I Would LOVE to work at THAT supermarket.
As a Michigan resident, I can say the big retailers shouldn’t have a problem with this either way. For the most part, they don’t bother to comply with the price sticker on every item mandate. The vast majority of canned items in MI will not come with a price sticker.
Gee, what a surprise. Greedy self-interested Retailers fighting something that would force price honesty to consumers. Why pay your clerks to price mark items when you can pay them to stand around, smoke in front of the store, hang with their friends, and walk around the store rearranging items in whatever new way the retailer comes up with to try and fool the customer? And retailers then wonder why they go under and people cheer
My personal experience has been that price stickers on items are always the highest price the store sells them for.
I’m not sure there is a lot of value in having a price sticker on each item. When I price compare, I do it with the shelf stickers. Also, the shelf stickers usually have the unit cost (at least where I live in North Carolina) which is a fast way of determining value. The only benefit I can see to individual item stickers is for making comparisons between comparable items from different stores once you get the goods home but how many people really go to that much trouble anyway? If I had a choice between individual item stickers or shelf stickers, I would go with clearly marked shelf stickers with unit pricing.
I assume that stores want to remove individual stickers mainly to simplify their operations in two areas: 1) labor, 2) inventory price control. Labor has been touched on by the author. While I agree that the labor cost to add individual prices is likely minimal, it does add to the complexity of stocking. Rather than just being able to bring out a case of product and load it onto a shelf, the store employee must find the pricing gun, verify the price of the item, and then tag each item before stocking. Not a big deal but it still increases the time to stock and the chance for errors. The bigger issue I would imagine is with inventory price control. In the old days before CPC codes, all prices were manually rung in by the checkout person. In this case, inventory was charged out at the price on the tag. With CPC codes, the current price is contained in the computer system. It is easy to see how individually priced items can get out of sync with the computer on old or sale inventory. This creates angst for the customer when s/he brings up a can of peas marked 79c and get charged 83c by the computer! Oddly, people rarely complain when the opposite occurs and the computer charges less than the marked price! Inventory price variation probably also creates accounting issues since the store likely uses a first-in-first-out accounting system that assumes old inventory has been used up before new inventory is sold.
I’m not involved with retail and I don’t want to sound like an apologist for retail stores but in this case I think I can see their point.
I would hope that in this day and age, receipts and smart phones can lend a hand in definitively pricing items for consumers.
I remember P&C stores in NY having multiple stickers on an item, all featuring different prices. IF there a label on the shelf (far too often not the case) that itself would be a completely different price. Typically the price would the highest of all the stickers, or some other – even higher – price.
Any wonder that when I ever shopped there, I stuck to the stuff in their ads that were definitely advertised at a certain sale price…. And always kept the ad with me.
@John: Like you, I am not super sold on mandating that every single item has a price sticker. Seems to me like a lot of work for no good reason when you can simply label the shelf itself. With the way prices fluctuate (they do, right?), it’ll make it easier and faster to update the price on a the shelf than on every single item. But I am not sure if it’s $2.2 billion more expensive like the supermarkets are claiming. And using 10-year old data (which coincidentally happens to be from the booming economic years) is just deceptive.
Personally, I think posting unit prices provides the best value for consumers. And of course making all the unit price labels be in the same unit is key (no sense pricing 1 item in terms of quarts and another in terms of ounces).
I have to agree with some of the existing postings. The item may not be initial pricing and stocking of shelves. Its repricing items when they change (up or down). Do you rip off old stickers? Do they rip something else in the process? While I agree with mouseprint that the study/advertising is questionable, it may be a more complicated question.
The reason for the “item pricing” law is consumer protection. It provides the consumer a simple way to verify that the price on the item is the same as the price read by the check out scanner. Elimination of the existing pricing requirement will result in that verification process being eliminated. There are many people employed to do this pricing work, if they are no longer needed to do this work, what is the reason to keep them employed. When their job is lost so is the potential, for that former job holder, to buy from whatever business you are involved in. The “item pricing” cost to the individual consumer is small but the loss of jobs and consumer protection is LARGE. Data gleened from the Michigan Retailers Assoc.(MRA) study, by the Anderson Economic Group, indicates there are, roughly, 18,000 full-time(2080 hrs./year) employees doing this work. What if it were your JOB? I find it interesting, in the thirty plus years that Michigan has had this law, that no consumer advocacy group has called for repeal, only various retailer associations. Hmm?
Speaking as someone who was employed in the grocery industry for almost 25 years, I have a few comments to make on individual pricing of items. Since the policy of the chain where I worked was to give items for free if they scanned higher, this caused many problems. A lot of pricing is done by teenagers trying to get the job done as quickly as possible, mostly because they were given a lot to do and not much time to do it. This leads to errors, such as accidently pricing the item from the wrong shelf tag or just simply setting the price in the gun wrong. Also, the policy of item pricing and the scan give away leads to a form of shoplifting, whereas the customer would switch the price tag in order to get the item for free. Of course the customer does not think of this as shoplifting, but rather as “beating the system.” The scan give away costs the major chains millions of dollar every year. I really think today’s consumer is smart enough to figure out the prices from the item unit tags, rather than having an individual sticker on every item.
I am inclined to be in favor of shelf pricing as well–except I have observed that many, many times (particularly when an item goes on sale) the unit price is calculated incorrectly–or in such a way as to make unit-price comparisons a gigantic pain. Why is there no uniformity–for example, why is XXX liquid laundry soap priced per oz–while another liquid soap priced per pound? This is a general example of one of many frustrations encountered while attempting to unit price compare.
I was comparing the “sale price” of a particular brand of toilet paper last week. I noticed the sale brand shelf tag had the “non-sale” unit price on the tag–and the paper I was trying to compare it to had calculated the unit price incorrectly, stating the unit price was calculated per hundred sheets, when it was clearly calculated at a per/1,000 sheet base.
Shopping is frustrating enough without dealing with disparate units of measurement and dopes who can’t multiply or divide.
There should be some forced standardization of unit pricing throughout the grocery industry — and some kind of “check” in place to make certain that the posted price/unit price of an item is calculated correctly. Now *that* would make me far happier as a consumer than worrying about whether or not a sticker was placed on each item in a store.
Oh, and I neglected to mention that sometimes even the shelf price is not an accurate reflection of a product’s price.
I have to agree with CindyM on unit pricing. The same type of product – soap, molasses, etc. – will be priced two different ways. Maddening.
From a consumer veiwpoint, having price labels on items makes it easier to keep track of spending, and also double checking that the scanned price is the same as the price on the item. Also, labels make it so much easier if I want to compare the prices of two similar items. Olives, for instance, are stocked with the pickles, but they are also on the shelves in the ethnic aisle. “Are the Italian olives the same price as the regular ones?” Trot back clear a cross the store to double check, and then discover the old pounds vs ounces routine. No wonder I carry a magic marker to the store!
As far as changing prices goes, back in the “old days” the grocer just put the new label on top of the original one. The labels have an X shaped perforation, making them impossible to remove in one piece, so switching stickers isn’t really a concern.
Black Marker, all the way!!!! This won’t fix all the shenanigans pulled by grocery stores (and other big retailers) but it sure solves being able to do receipts comparison at home, in other aisles, and at the checkout.
By the way, if you are really watching pricing behavior keep an eye on the country’s biggest retailer. They have discovered by marking a certain area of the store as “clearance” that people tend to flock to this area. They are now slowly increasing the size of the “CLEARANCE AREA” and stocking it with everyday items at EVERYDAY prices. I know. I checked the prices of 3 items in the clearance aisle. Then when I got to the regular part of the store, I looked up the prices of those same items. They were exactly the same. Clearance aisle/area DOES NOT mean clearance price, anymore than Bulk is always cheaper still applies. It doesn’t.
…and by the way, anyone relying on the shelf tag unit/pound price to do the math for them better look again. I have often found, after doing the math my self, that those are “mistakenly” incorrect.
I live in WI and no one but small retailers use price stickers. I couldn’t care less as long as the shelf tag is in place. I can see why retailers would hate to have to pull multiple sale products off the shelf and re-tag during a sale, and again after the sale. I can also see why discount retailers like Save a Lot and Aldi, who sell product straight out of the case, would not want to have to unload the cases to apply stickers. They way they do it is fine with me and I save. I think if we just pay attention at the checkout, we’ll be fine. Most retailers around here have large displays showing the description and price as it’s scanned so it’s not like you have to study your receipt if you’re watching the screen at checkout.
I pretty much only shop at stores that have price checking stations and/or self check so I can watch the prices and make sure the balance is correct. I’ve long since given up on being able to ‘watch the screen’ when someone else does it; they are way too fast and don’t always stop when you bring up an issue, making my overall wait time longer and much more frustrating. I don’t see individual stickers aiding in this at all. Sale items would need to be re-tagged every week, possibly more often as some stores have weekend sales or special events, and given the rate of ‘computer errors’, I’m concerned that sale prices would not be honored on older stock with a non-sale sticker. Mark the shelf clearly, give the consumer the opportunity to check the prices before getting to the check-out (I want those things at the end of every isle) and honor advertised prices in the event there is a difference; this is all I ask of retailers.
The only time individual stickering would be a good thing is on clearanced items; real clearanced stuff, not the sneaky regular priced junk just moved in there to see if some poor sap will get it.
Justin Johnson, $15 an hour would cover pay plus overhead and overhead on an employee can be 50 to 100% of their pay.
FWIW, out here in California we do not have price tags on items, just on the shelves, and it hasn’t occurred to me that it might be different elsewhere. Perhaps I don’t get out much. I really don’t see the point – ultimately the item is going to be scanned and looked up in a computer. Having a sticker on the item just introduces another inconsistency and makes it that much more difficult for a retailer to adjust the price.
Retailers value their reputation, or they should. If there’s a problem with the scanned vs the shelf price people will figure that out.
Oh my gosh, I thought tags on individual items was a thing of the past. Here in Washington state we have price tags on shelves for as long as I can remember.
I’m curious, has it always been that way in Michigan? Or did it change to shelf stickers then “go back” to item stickers? I see so many problems with item stickers – all of which has been mentioned already. Sorry, I’m with the retailers on this one.
I’m not too bothered about price stickers. What I really wish is that stores showed prices inclusive of tax. It is very annoying to constantly have to perform mental arithmetic to figure out how much I will actually have to pay for something.
Tax-inclusive pricing works just fine in other countries. Why is it so rare in the USA?
This might help non-Michiganians to understand our state’s unit-pricing law: If a scanned/charged price is higher than the shelf price, the store must pay a graduated penalty up to $5. If the customer does not have ready access to the price on the item, it is difficult to spot overcharges or undercharges for that matter.
I really don’t like price stickers. In this digital age, many of my local supermarkets have personal scanners, which I take along with the cart, to scan prices while I shop.
But I can’t believe that these Michigan retailers took inconclusive statistics from a decade ago and warped them to their content. Stat-benders, I like to call them. But even then, they are some high-quality statbenders, usually from a highly successful corporations, and they are kindergarten grade statbenders. Michigan retailers belong, of course, to the latter.
Put me down for another vote on the retailer’s side, although I don’t like the scummy way they argue their case.
> Prices change often. Shelf labeling is much more efficient and more informative than item labeling.
> More labels mean more chance for error and confusion. Assuming shelf labeling is used in addition to item labeling, there’s more chance for a label to have erroneous or inconsistent information. Even without shelf labeling, assuming UPC scanners are used at check-out, the item label might be wrong simply due to error or to it’s being out of date.
> Item labels increase the chance for consumer fraud. A dishonest consumer might switch labels and affix a cheaper price to an item. The retailer can use labels that aren’t easily switched, but those cost more AND are more inconvenient for the purchaser to remove at home when needed.
> Some packaging has no available space for a pricing sticker. The item label might obscure information about the product.
> Finally, in most cases the state government should just butt out and quit telling businesses how to run their operations, adding overhead costs in the process which ultimately are paid by consumers. The item labeling law appears to be a sweeping and intrusive solution to a small or nonexistent problem. We do not have an item labeling law in my state of Missouri and I in no way feel deprived because of it.