Pricing at the Co-op

Co-op Prices

An educational dive into the co-op pricing and grocery economy. 

“Why do things cost what they cost at the Co-op?”

We try to bring you the lowest price we can while keeping the doors open and the team paid. Some essential items are marked lower to help affordability, but this means some luxuries are marked higher to make up for it. To determine these prices we were using the most common pricing model for retailers, but want to note that recently we made a small tweak that seems subtle, but has a big impact on your wallet. In standard retail pricing, you take the wholesale cost of the good and add the shipping to it to come up with the total cost of the good, then you multiply it by your markup to get your sale price. The store markup covers rent, utilities, staffing, insurance, taxes, and product loss, as well as any profit margin. This is a fixed ratio of costs compared to estimated sales.

We have tweaked this by only using the wholesale cost before multiplying by markup, then adding the shipping. Subtle, but impactful. Here’s how it impacts you:

Regular method (simplified) to markup a loaf of bread that cost $4 wholesale and $1 to ship, with a 50% markup:

Price = ($4+$1)*1.5 = $7.50 

Our method: Price = ($4*1.5)+$1= $7

Our method saves you $.50. Scaled across your cart, it adds up.

“Then why is my shopping bill still high?”

We have seen shipping scale dramatically since the start of the Iran conflict. The fuel surcharge went from $.205 per pound to $.31 per pound in two months. This drove up not only shipping costs, but also wholesale costs. We have done our best to maintain prewar prices by changing the price structure as noted above. So you did not see it as savings, but as a lack of price increase. Unfortunately, some items have gotten so expensive that we have no choice but to increase prices. You will see this on all beef products.

“Who is getting rich off these prices?”

Maybe the wholesalers? None of us are for sure. We strive to pay a living wage to our team members, but we are not close to this at our current point. We are also unable to offer even basic benefits such as healthcare, retirement, or paid vacation. Our board is all volunteer. We do not turn a profit and will not likely do so for years as any excess will go back into the store to improve our offerings to you, into our team to meet basic benefits, and provide a cushion to prevent unexpected costs from bankrupting the store. As an example of costs that go into the store, we estimate a deli to cost nearly $40k, and we are told this is a very low estimate.

“Why are prices “high” versus Corporate box store chains?”

First, we feel the correct question should be “why are corporate box store prices not much lower than the co-op when they have massive economies of scale in purchasing and shipping contracts, and can spread administrative, accounting, software, and equipment purchases across 1000s of stores? 

Please note the co-op only breaks even, corporate stores are posting record profits

We buy products on a very small scale. For example, we buy 30 half gallons of milk a week, whereas one big box store may buy 200. Our purchase price will be much higher because the wholesaler has less economy in scale selling to us. It would take 6-7 purchases like ours to equal one box store. Some wholesalers will not deal with small stores until they reach a certain size.

For shipping, one box store might bring in 1-2 shipping containers a week versus our 5-8 pallets. This gives them a huge price break advantage on shipping costs. And they may negotiate regional breaks for all the stores in a certain area.

This scales across all costs. A large corporation negotiates things like commercial liability insurance at a national scale. Software may be purchased outright versus paying monthly use fees. Refrigeration equipment is purchased in bulk, so manufacturers will compete to offer the best price.

So the next time you see an organic avocado cost $3.49 at the box store and $4 at the co-op, the question shouldn’t be “why is the co-op more expensive?”, it may be more appropriate to ask “why is the box store avocado not $3 or less?” And please remember, the co-op is not gouging that extra 50 cents from you, it is part of the real cost to make it available. Instead we encourage you to ask “why is the co-op able to price anywhere near what a nation-wide corporate store charges despite massive economies of scale differences?”.

“Why buy at the Co-op if it is cheaper at the corporate box store?”

Great question. We are locals buying from and selling to locals. Our money is spent in the community to the best of our ability. While just one national corporation made $19 billion in profit off of sales to their customers, we broke even on our sales to you. 

You are paying what it actually costs, not a bunch of excess profit for corporate dividends and CEO bonuses. We also strive to give you superior quality options wherever possible. Look through our ingredient lists. We consider your health when stocking the store. Believe me, we could make a lot more money if we sold you red bull and sugary products with corn syrup and soy products. We try to offer foods from small producers with a good ethos. We pay appropriate prices to our local vendors. This allows our producers, growers, and fishers to make a living. And finally, by offering local competition, we help keep corporate prices from skyrocketing.