Real Life, Hands On Economics

Written by azhar.

For those of you taking Economics, this post may be an insightful one for you. It has been three months since I took up the job as a cashier in the oldest supermarket chain in Singapore, Cold Storage. I have gained a lot of knowledge there, up to the point that I wished I had known all that I learnt before taking up Economics two years ago. The hands on approach to learning Economics helps me to understand the concepts better. Most importantly, it provides me with an opportunity to witness first-hand, in real life, how huge companies utilize the strategies and policies taught in college to maximize their profits and stay competitive.

I have decided to make this post more interesting with real examples and hope it can aid your understanding in some Economic theories. The topic for this post will be on non-price competition.

Non-price competition
In college, I remembered how my tutor would explain the idea of non-price competition. Advertising, excellent service and sales promotions were the three things that she would usually touch on. Well, I am here to share with you how supermarket giants use non-price competition to compete with each other... out of the textbook!

The Self-Pack Rule
This is a relatively new rule introduced by NTUC Fairprice. Customers will have to pack the goods they bought themselves after making payment. My mother, who is a regular NTUC Fairprice customer, had tried it before and told me that the rule actually helped clean up the queue faster. I believe this innovative rule can help improve the quality of service of the supermarket giant.

Full Refund Given
This is what Cold Storage is known for. The supermarket chain emphasizes a lot on quality and freshness of its goods and items. As a cashier, I have witnessed how strict the conditions that the vegetables and fruits have to meet before being displayed on the shelves. Apples which are not yet rotten but are about to, are thrown away or sold to staff members at a discounted price. The company incurs extra costs of training its staff of the latest food safety techniques. Expiry checks are conducted occasionally. The expiry date of the items, especially for canned goods, must be at least two months ahead of the expiry check. We are human beings and sometimes slightly rotten fruits or expired products are overlooked. If customers happen to purchase and discover them after payment, a full refund will be given.

This is how Cold Storage compete with NTUC Fairprice. Although the items sold by the former hold more expensive price tags, there are customers who still buy them. The reason being is because of the quality ensured of the (mostly) imported products. Step inside a Cold Storage store and you should be able to view banners here and there guaranteeing customers of the finest quality in its items and showcasing the full refund policy.

Spend $30 And Receive One Stamp
This is a very popular non-price competition strategy used by supermarket giants such as NTUC Fairprice and Cold Storage. The idea is that for every $30 spent in a single transaction, customers will be given a stamp. They need to collect a minimum amount of stamps to redeem a free frying pan (or any other gifts). Cold Storage is currently holding this promotion whereby customers can redeem a free Wedgwood kitchenware.

Product Differentiation
As a cashier, I have scanned thousands of products from hundreds of brands every single day. It is really interesting how companies within the same industry are competing with each other to claim a bigger market share. A very good example is the toothpaste/toothbrush oligopoly industry, dominated by Darlie, Colgate and Kodomo Lion. Colgate designs toothbrushes with pictures of popular cartoon figures such as Spongebob Squarepants. Kodomo Lion, on the other hand, competes by mass producing toothpastes with fruity flavours!

Outlet Design
A few months, the Cold Storage outlet I was working for underwent a renovation. Guess what was the renovation all about? The management had decided to reserve a portion of the outlet for Singapore Pools despite the extra costs for hiring and training of new staff! This is their plan:

1) We all know how popular Singapore Pools is, right?

2) So why not obtain a license and open one in the store...

3) Customers can then drop by and purchase items from Cold Storage...

4) More sales!

Wa-la! It worked like a charm. And believe it or not, a NTUC Fairprice outlet located just opposite my house had just included a small Singapore Pools booth in its store recently.

That's about it for today. =)


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