Friday, May 16, 2008

Same brand of rice, very different prices (A real life example of price discrimination? Or the effects of inflation?)

TODAY Online (15 May 2008)

YOU could be paying up to 50 per cent more for the same bag of rice depending on where you buy it from, a survey by the Consumers Association of Singapore (Case) has found.

Checking on the regular price — before any discounts — of fragrant rice at supermarkets/hypermarts over May 6 and 7, the consumer watchdog found some huge price differences.

The biggest disparity was for a 10kg bag of Golden Phoenix Fragrant Rice, which cost $18.80 at Prime but $28 at Sheng Siong.

Among the 5kg packs, Golden Peony Fragrant Rice was $9 at Cold Storage but $12.80 at Prime, Mustafa and Carrefour.

In all, 10 brands of fragrant rice were examined across eight randomly-chosen retailers: Carrefour at Plaza Singapura, Cold Storage at Harbourfront Centre, Giant at Vivocity, Mustafa at Little India, NTUC FairPrice at Clementi Central, Prime at Hougang Ave 1, Sheng Siong at Ten Mile Junction and Shop 'N' Save at Toa Payoh Central.

"We were quite surprised by the big differences," said Case's executive director Seah Seng Choon. "But it is the commercial decision of the supermarkets. They have different cost structures, different target customers and ... different locations."

Sheng Siong's managing director Lim Hock Chee, whose Ten Mile Junction outlet had the highest prices for most of the brands surveyed, said perhaps other supermarkets were selling rice from older stock, which would have been cheaper.

"Our stock of rice is new, so we are using the latest prices," he said. "Our stock sells fast because we don't order a lot. We need to keep warehouse space for our house brands."

Its Royal Golden Grain Premium Fragrant Rice retails for $12.30 and its Nang Rum Thai Fragrant Rice for $9.30, for a 5kg bag.

Mr Lim also noted that while Case had listed Sheng Siong as selling a 5kg bag of Golden Phoenix Fragrant Rice at $15, the price was actually $13.20.

Prices at retailers may have changed since the survey was done. For instance, when Today visited Giant yesterday, the regular prices of a 5kg and 10kg bag of Golden Pineapple Fragrant Rice were $10.70 and $21.20, respectively. Case had listed the prices as $9.64 and 19.40.

House brands continue to be cheaper, the survey found. FairPrice Thai Fragrant Rice (5kg) was the cheapest at $6.60, while First Choice Fragrant Rice (5kg) at Shop 'N' Save and Cold Storage was the priciest, at $9.10.

NTUC FairPrice has touted its house brands as being at least 10-per-cent cheaper than comparable national brands. And last week, Today reported how the supermarket, to keep rice prices low, has been advising customers to buy no more than five 10kg bags of rice each.

While consumers were shocked at the huge price differences, those Today spoke to would not change their choice of supermarket.

Housewife Pooja Dutt, 31, gets her rice from Giant as it is convenient. She said: "It is too much a hassle to go elsewhere ... petrol and time still makes up for it at the end."

Customer service officer Audrey Koh, 28, said: "The fluctuating prices are so confusing that I don't really keep track anymore. I am surprised such basic staple like rice does not have a fixed price control system."

But the consumer watchdog will not go beyond surveying prices — Case will not interfere with a commercial decision, Mr Seah said. "We leave it to consumers to decide."

Case will continue to periodically conduct surveys on individual items.

Early this month, it released a survey of the prices of budget items at eight supermarkets.

Question
Explain why prices for the same brand of rice may vary between different locations; and consider what effect this may have on consumers.

Updates: Case checks on rice price: right or wrong?

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