Originally published at: https://boingboing.net/2020/09/25/costco-co-founder-to-new-ceo-if-you-raise-the-effing-hot-dog-i-will-kill-you.html
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Great example of a “loss leader” in retail. I used to manage a health foods store that offered unlimited complimentary (not free) coffee to shoppers. Wise retailers are willing to take a loss on certain items that attract customers and result in a bigger profit somewhere else.
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manufacturing our hot dogs.
Welcome to the dystopia.
cf. tortilla chips in Mexican restaurants.
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19 posts were split to a new topic: Meat wars
I dont have a Costco membership, but I do get my drugs from there. They allow non-member to get their drugs and they are more affordable with no insurance than CVS and other places.
I would often swing by the snack bar on the way out. Sometimes for a hot dog, sometimes for pizza. I figured the prices were at or near cost or a modest markup, but keep customers shopping and can offer a small treat like their ice cream. Good will, as they said.
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Costco hot dogs are like the Swedish Meatballs of the IKEA world.
Cheap, shuts the kids up for $4 while I try to make it out of the store without spending $400.
Entrins 12B. Ha!
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well now the ceo knows the disappearance of the co-founder is a pre-requisite to raising hot dog prices. mmm maybe send him unlimited free papanasi coupons and hope for a heart attack.
A few years ago here in Dallas, there was a new upmarket Mexican restaurant that subverted the dominant paradigm of complimentary chips and salsa, thinking that their customers would pay extra for what they could get free everywhere else. Diners stayed away in droves, and they were compelled to change their policy.
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Deja-vu?
Links to the same article, even quotes same passage about why the low price is worth it. Gentle reminder: The site has a search function.
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2 points to be made here:
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The goodwill and return business generated by the hot dog deal is worth far more than could be generated from increasing the price of the deal. Happy customers who feel that they are being treated well are return customers.
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Costco is a prime example of a business that pays its employees fairly, treats its customers honestly, vets and sells good products, and competes openly in the marketplace while still generating a good profit. It absolutely is not necessary to screw your customers and employees to be profitable. Because they pay a fair wage, with benefits, they attract employees who do their jobs well, and are friendly and meticulous about customer relations.
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Costco has gone to huge lengths to keep the price of the $5 chicken at $5 too.
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Having seen the real numbers behind a ‘fast food’ restaurant - I can say with confidence that labor, is only around 10% of the cost of the store. Rent and Utilities make up the most cost - with product next in line. Doubling the wages of the workers - would only force a minor increase in food prices - the cost of labor has sunk to that little of the overall cost of your food. Increasing the wages by double - and scheduling people for 40 hour shifts that are decent lengths - would drive up the cost of your meal by 50 cents to a dollar.
However - I have to ask you this question - if you had a choice between two stores - one staffed with enough people to feel confident in the workload, being paid enough to want and value the job they are doing, and more importantly, worried about the quality to ensure they keep the job. The second option is what we have now - staff that could care less about your meal, the job, or the quality because they can get a job with the same hours and pay anywhere else.
Would that dollar be worth it for the better staffing?
I think it would.
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@frauenfelder just posted an article basically saying this.
The fact that they’re selling hot dogs for $1.50 doesn’t mean they’re taking draconian measures to keep hot dogs profitable at that price. It means they’re willing to break even or even take a loss on hot dog sales because they create other benefits for the company.
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I wish I could pay 1.75 for a polish.
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I’m still sad about my favorite sandwich place in LA more than quadrupling the price of their coffee back in 2012. Wasn’t doubling the price in the 1970s enough??
https://www.latimes.com/food/dailydish/la-dd-philippes-45cent-coffee-20150430-story.html
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Costco hot dogs are like the Swedish Meatballs hot dogs of the IKEA world.
Ikea had 1€ Hot Dogs for years now. Curiously they too never raised their price.
Probably stole the idea from Costco.
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Don’t touch the veggie ones though. Not a good experience.
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…and Happy Mutants have fairly good memories.
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This relates back to the fight over the ACA. I don’t remember the exact figures cited, but the owner of Papa Johns Pizza made a big stink about how he couldn’t afford to provide health insurance for his employees, because he would have had to raise the price of each pizza by 10 cents (more or less) to cover his costs.
How fucking stupid and short sighted is that? Instead of gaining the appreciation of every employee, making his stores better places to work, and preventing the government from having to cover injuries and illnesses for those employees through Medicaid, he claimed that a 10 cents per pizza increase in cost would make him lose money.
And ultimately, his ignorant statement caused him to lose his position as CEO.
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