RE: Re: Wal Mart/Sam's Rawks... or It's Called A Loss Leader
...but it's what I did yesterday evening ...
I hope you filled up. By this afternoon, the price at that Wilco/Hess will be pushing $4. On the other hand, I expect I would still be able to get $2.59 at Sam's on my way home. There's a reason for that: Sam's is selling gas today that it bought a month ago. Wilco/Hess buys its gas from a single source and every five to seven days. The basis price of the gas you put in your tank last night will be exactly the same tonight. However, Wilco/Hess will be charging you a dollar more for the same gas. Simple supply and demand. The perception is that the supply is going to be temporarily scarce so the demand has risen, putting tremendous upward pressure on price.
Sam's buys its gas from multiple vendors at contract prices and well in advance. This, along with high volume sales allows them to enhance the "club" perception because they can generally sell at somewhat lower prices and resist fluctuation. There is a downside to that as well. Just Sam's business model resists upward price pressure, it also resists downward price pressure. We haven't seen it for a while, and probably won't see it for a while, but when everyone else drops their prices, Sam's will be the last to follow. This is the Wal-Mart business model as well, except substitute the general low price perception for the club perception of Sam's.
Even if you don't buy your Coca-cola in 55 gallon drums, you should say thank you to Sam's (and Costco). If they weren't selling gas at $2.59, you would likely be seeing $4 everywhere else this morning and $5 on your way home tonight.
I hope you filled up. By this afternoon, the price at that Wilco/Hess will be pushing $4. On the other hand, I expect I would still be able to get $2.59 at Sam's on my way home. There's a reason for that: Sam's is selling gas today that it bought a month ago. Wilco/Hess buys its gas from a single source and every five to seven days. The basis price of the gas you put in your tank last night will be exactly the same tonight. However, Wilco/Hess will be charging you a dollar more for the same gas. Simple supply and demand. The perception is that the supply is going to be temporarily scarce so the demand has risen, putting tremendous upward pressure on price.
Sam's buys its gas from multiple vendors at contract prices and well in advance. This, along with high volume sales allows them to enhance the "club" perception because they can generally sell at somewhat lower prices and resist fluctuation. There is a downside to that as well. Just Sam's business model resists upward price pressure, it also resists downward price pressure. We haven't seen it for a while, and probably won't see it for a while, but when everyone else drops their prices, Sam's will be the last to follow. This is the Wal-Mart business model as well, except substitute the general low price perception for the club perception of Sam's.
Even if you don't buy your Coca-cola in 55 gallon drums, you should say thank you to Sam's (and Costco). If they weren't selling gas at $2.59, you would likely be seeing $4 everywhere else this morning and $5 on your way home tonight.
posted by Anonymous | 10:29 AM
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