The consumer rules – especially when buying groceries or gasoline.
These are among the most competitive retail businesses, I believe. Here are two examples, the first from the grocery store.
In December, a drought in California and a weak Canadian dollar pushed the price of a fresh cauliflower as high as $8 in Ottawa supermarkets. Consumers stopped buying, and the price of cauliflower at many big grocery stores dropped to about half what it was at its peak.
Meanwhile, the price of oil has fallen through the floor with serious implications for Canada’s economy, which heavily is dependent on oil production. But it’s an ill wind that blows no one any good, and consumers are reaping the benefits in the form of the lowest pump prices in years.
Why do retail gasoline prices go up and down like a yo-yo? I believe it has little or nothing to do with profiteering. In fact, it’s quite the opposite.
In my view, it is chiefly due to retail competition, as oil companies and individual gas stations gradually lower their pump price to gain a temporary edge (of a fraction of a cent per litre) over their nearby competition.
For gasoline retailers, sooner or later there has to be a price correction, and then the gradual slide in prices starts again. When I bought a tank of gas earlier this year, I had noticed the price was unusually low. Sure enough, the pump price went up by eight cents a litre as soon as I left the station.
Consumers must pay attention and fill up when the price of gas is slipping. If not, they will usually end up subsidizing motorists who time their purchases when prices are on a downslide.
But don’t be greedy. It’s like the stock market – you can’t expect to buy a stock when it is at its rock-bottom price. I happened to be lucky the day the price went up as I left the station.
In Ottawa, competition in the sale of gasoline seems to have intensified in recent years since retail giant Costco began selling gas at its location on Hunt Club Road near Merivale Road.
Costco is a shopping club that charges members a fee, enabling it to sell gas at a lower margin. It also offers fewer options to pay by credit card than most gasoline retailers, meaning it doesn’t have to absorb as many fees from credit card companies.
But while there appears to be plenty of competition among gasoline retailers, it pales in comparison with competition among supermarkets.
In the past, when the federal government tracked supermarket prices across the country, Ottawa’s food prices were among the lowest in Canada and sometimes the lowest. Today, competition among Ottawa grocery stores appears to be as intense as ever.
By some estimates, a typical Canadian family can expect to spend about $345 more on groceries this year than in 2015 due to rising food prices, largely accounted for by the fall in the value of the Canadian dollar.
Most of the advice I’ve seen from so-called experts suggests families can cut their food bills by switching to lower-priced alternatives, such as canned vegetables instead of fresh ones – an awful suggestion.
How about good, old-fashioned shopping around? You will save much more that way.
I recently checked out four big grocery stores all within a short distance of my home in the west end, and found I could save a staggering sum of almost $90 on a total of 18 fresh grocery items by cherry-picking the lowest price I found for each item.
I checked prices of the 18 items at Farm Boy, Real Canadian Superstore, Sobeys and Walmart. The items were mostly fresh fruit, vegetables and meat. I added up the lowest price I found for each item, and then I added up the highest price for each item. The difference came to $89.23.
The quantities were what a family of four might buy on a single grocery visit. The biggest price difference was on one kilogram of strip loin steak.
Oddly, I found the highest and lowest prices for this item in the same store (Sobeys). The store offered a choice of strip loin steak of two apparently varying qualities – one about $45 a kilogram and the other about $20. So there was a potential saving of $25 on just that one item.
I asked the butcher if the more expensive steak was worth the much higher price. “I don’t know. I’ve never tried it,” he replied. He said the higher-priced steak was from more expensively raised cattle. I bought the lower-priced steak, and it was fine.
There is some truth in the saying, “You get what you pay for.” But it’s a much greater truth that “It pays to shop around.” And that’s especially true in the fiercely competitive Ottawa retail grocery scene, where stores compensate for big discounts on some items by charging high prices on others.
Michael Prentice is OBJ’s columnist on retail and consumer issues. He can be contacted at email@example.com.