Woolworths has announced that it will be rounding all its prices to numbers with a zero at the end.
Regardless of the prices being rounded or not, consumers should always look at the unit pricing when shopping at the supermarket.
However, what do you think of this move?
Itâs great for all the people who pay cash and canât be bothered to do math in their head. Oh wait, I cannot remember that last time I ever saw a person pay cash at a Coles or Woolies. Just another way to slip a few more cents into the pockets of those who need it the least.
99c can of tuna? Oh look, itâs now a dollar can of tuna⌠really seems like a pittance until you think that for every 100 cans of tuna they sell thatâs another dollar in the pockets of the rich. I know this is an over simplification, but assume a can of tuna contains 100g. It is estimated that we consume 31,000 tonnes of canned tuna in Australia. That is roughly 310 million tins of tuna. At 1 cent extra a tin thatâs 3.1 million dollars extra in the pockets of the retailer. Even if we assume that only 50% of consumers pay by card (although I seem to recall the figure is much much higher) then we can still say that this rounding is an extra 1.5 million dollars in the pockets of retailers across Australia. And thatâs just one staple alone, do it to all the products in a store/chain of stores and its big money indeedâŚ
This is where statistics comes in - of those transactions, 50% round up, 50% round down. On average it makes no financial difference to Woolies.
Note that we already round our purchases to 5c increments, so this isnât any different to that, just the amount. Your 99c example already rounds up to $1 and has since the removal of copper coins a couple of decades ago.
Have no issue as the one or two cents you may miss out of from the rounding process will not be of consequence to the value of the whole shop.
All the supermarkets already round up at the checkout to the nearest 5câŚunless you pay by electronic means.
The only thing of interest will be how they deal with price rises. Say a CPI rise of 3% for a $1 item. Will it stay at $1 until subsequent increases bump it up to $1.10 or will it creep up to $1.10 first and then wait until other price rises catch up.
The difficulty is that it will be very unlikely that it will be a 50/50 split, and this is why the corporations arenât willing to realease the specific figures to end consumers. Sure it wonât be 100% but it will be much more like 70/30 than that. You say we already round our transactions to the nearest 5 cents, but when you consider that this is individual items and not whole transactions, the difference will build up quickly. And currently very few stores round on electronic transactions, only cash transactions, and with electronic transactions sitting at 53% and with an upward trend, this will get expensive quickly.
That is only true when cash is used. When cards are used it is supposed to be to the exact cent. If you add a basket of groceries the rounding would have been to the basket. Now Woolies is rounding each individual item.
Statistics can tell you whatever you want, but if you buy one item it almost assuredly will round up if you use cash, but if you buy a basket of goods the statistics probably work as expected.
Itâs only a 50/50 split if the pricing is evenly distributed across all possible values. My belief is that most prices that are not already on a 10c boundary would strongly favour the âround upâ option, being x.x9 x.x8 or x.x5. I donât have data to support that however.
It seems they are not ârounding pricesâ, but âchanging to round pricesâ - not quite the same thing underneath the marketing doublespeak - the woolies buying bloke quoted in the linked article says this:
The prices are not all rounded up or rounded down, itâs about hitting the right number
So if my jar of Sauerkraut was 2.99, it might now be 3.50, if thats the âright numberâ they want to âhitâ. Interestingly of the 5 products they currently offer of the pickled cabbage persuasion, two are 3.00 even, one is 2.99, one 3.29 and one 3.38, none of which would round down ⌠Kransky is similar, one at 8.00 per kilo (deli) but of the pre-packaged (per pack) they are 6.49, 6.49 and 7.39. But I think weâve worked out that they arenât ârounding up/downâ - looking at their online site now at various products it looks as though many have been changed already - also from the linked article:
Woolworths has already moved to round prices on its most popular fresh and dry grocery items, with its latest catalogue featuring only a handful of prices ending in 99¢ or 95¢.
So they are just changing to round prices - any prices that are effectively rounded based on the start and finish price seem to be just coincidence ??
Coles are doing it as well:
Coles also appears to have moved to a round or whole pricing strategy with its latest catalogue featuring only a small number of products with prices not ending in zero.
But the Germans arenât fooled, theyâre still going to use all the numbers 
German discount giant Aldi hasnât jumped on the round pricing bandwagon, with its latest online catalogue full of prices ending in 99¢, 49¢ or 29¢ but it could be forced to change that, particularly if the five cent coin slips out of circulation.
So Aldiâs Sauerkraut and Kransky will remain as is âŚ
To THEBBG : You seem to be the only one who has picked up the same inference that I have: that this rounding seems to be planned to occur for EVERY ITEM purchased, and NOT just for the total at the end â which is what I think already happens anyway.
If we are correct in understanding it this way, then that is a HUGE change, and one can bet that even if it is supposed to work out as an even split with 50% up and 50% down â their unit pricing will determine that such balance will not occur in favour of the customer! ha ha.
To THEBBG : You seem to be the only one who has picked up the same inference that I have: that this rounding seems to be planned to occur for EVERY ITEM purchased, and NOT just for the total at the end -- which is what I think already happens anyway.
This is not the case where they are rounding the price as you scan then summing up the total of rounded numbers. This is the displayed price on the shelf before scanning. Unless one is paying close attention, I doubt any difference will be really noticed before and after. With the supermarkets moving their prices regularly it would be difficult to attribute the basket cost this week being cheaper or dearer than the week before. We do have our annual supermarket shop reports, so it would not be hard for Choice to look at a before and after of this change - and compare it against Aldi that are not doing it. I would be personally surprised if any difference was noticed given the huge variability already present in your weekly shopping (ie fruit & veg)
Thank you Justin ( jcouch ) But to my ignorant mind, that is exactly the same EFFECT â that is: rounding the price per unit on the shelf, as against rounding the price per unit at the cashierâs. The difference is that in the former, one is or can be aware of the price differential; whereas in the latter one is unaware of it.
Thank you again.
To me this is just another way to gouge the Aussie consumer. Who will police the 50/50 mark up/down? Do Woolies and Coles really care about fairness? Do they treat their farmers fairly?
Itâs interesting to note that Aldi will not be following suit.
Pardon my cynicism, but for those having taken marketing spin 101 at any level, their rationale is that this is a way to raise prices under our radars by comparing rounding concepts that are not one to one comparable; they are different. They expect and bank (pun intended) that nobody is paying that close attention.
The number of variables are many as you write, but I for one would punt $100 that the cost of a consistent basket of groceries will be up, up, up after adjusting for the variable prices of perishables.
If you take 1000 SKUs of grocery, most now priced at an odd cent, usually an 8 or 9, and round (price) them up to a 0, that might only be 0.01 or 0.02 each, and you have just added $10-20 to your bottom line. Multiply that by the number of customers and the quantities in play and it becomes meaningful to P/L and nudges individual basket prices upwards in a way they hope is under the radar.
A relevant item - http://thenewdaily.com.au/money/your-budget/2017/04/13/woolworths-prices-whole-numbers/
This 99c pricing rubbish has long been a bugbear of mine. It says to me that Industries think we are stupid enough to believe that something priced $5.99c is much cheaper than $6. Having said that, most people only tend to look at the dollar value and not the cents.
It could have an impact on prices now (when existing prices are adjusted) and later when new prices are set.
The overall effect could be to increase prices above what they would otherwise have been.
Someone quoted in this news item
also argues that it may result in more changes in pack sizes.
Hi Brendan
I think that the move to zero numbers is really neither here nor there, as the only time there is rounding is at the final tally on the bill. This occurs to the nearest 5c. One would (foolishly) hope that the days of fooling consumers with 1c below the $ pricing has gone.
Probability indicates that it would be a 50/50 split, but supermarket bills are NOT probability, as chance is not involved. We donât know whether there is more rounding up or down, but Iâm sure the supermarkets could provide that information, is they wished.
My perception, is that the use of 8c & particularly 9c on the end of prices is predominant. It is in my opinion rare to see prices ending in the 1c-5c range. Therefore, I would suggest that WW would overall profit from the rounding to the zero. But PLEASE ask WW. If WW is not willing to provide the actual percentages on up/down rounding, I would suggest that it is a very clear indicator that the majority will be UP!
Iâm sure if Choice went back over the costs for an âaverage basketâ (as a very small sample), it would be possible to get an idea of what rounding could occur under the proposal.
Call me a cynic, but I donât see either of the major supermarkets doing anything that will not enhance their bottom line.
This rort is not just about .98 or .99, it is about .x0, so .x5 goes up too, noting price adjustments are always up, even when they start down as a teaser.
Looking at the Woolies (and Coles to a slightly lesser extent!) catalogue this week it appears the vast majority of their headline sale items are even dollars and â0â amounts. Clever of them to start this way to soften (hide) the blow. FWIW over the past months the sales seem to have been less of a discount over fewer useful products. They absolutely know the psychology of what they do. The wild card is how we consumers react, but what are our choices? As with the ALP and LPA Woolies and Coles are mostly Tweedledee and Tweedledum at the end of the day. Or more succinctly, âname your poisonâ.
My âpoisonâ is that Leoâs Fine Foods gets more of my grocery dollar than ever before because of their range, usually premium perishables, and are just pleasant to wonder through.
Appreciate everyoneâs thoughts so far. No doubt thereâll be more to come on this from CHOICE, so please feel free to keep adding your thoughts below.
This is just another reason to love Woolworths and Coles. To paraphrase Stephen Fry (or Alan Coren?) âI love Woolworths because it helps to keep the riffraff out of IGA!â
It will save my brain from always converting up to the dollar I think it is interesting that some people and children will say itâs only $2 and drop off the ninety nine cents ,but I am a realist or if you like a pssemist and it will ease my mind ! Yay
Do any of us seriously consider that a price that ends in .00, .69, .88 or .99 etc reflects the actual cost of the item to a retailer rather than their marketing price point?
In the end, most retailers sell most items according to they price they can get rather than they paid. Margins are flexible according to demand.
