Woolworths vs Coles: Item's price difference sparks debate

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Customers were shocked to find a significant price discrepancy with a particular type of potato chips at Coles and Woolworths, which even a retail expert found bewildering.

One shopper noticed the price difference of Smith's Thinly Cut Potato Chips Share Pack Salt & Vinegar 175g between Coles and Woolworths and shared this information with thousands online.

At Woolworths, the shelf price for the chips was $4.30 while they were $2.20 at Coles.

"Not a markdown but a super markup! Woolworth price compared to Coles price," the wrote on Facebook, saying inflation had "gone mad".

Some noted the Woolworths tag in the store mentioned the chips were gluten-free, however, the chips from both were gluten-free.

The Smiths chips at Coles (left) were cheaper than the same product being sold at Woolworths (pictured right). Source: Facebook
The Smiths chips at Coles (left) were cheaper than the same product being sold at Woolworths (right. Source: Facebook

High-low pricing at supermarkets

Speaking to Yahoo News Australia, retail expert Gary Mortimer said the price difference was "interesting".

"It's very peculiar at face value, they look like exactly the same product and exactly the same size," Prof Mortimer said.

"I guess there could be a number of reasons why we've seen a price discrepancy between essentially the exact same product in different supermarkets."

He suggested Coles could have negotiated a deal with Smiths to provide a rebate that would enable the supermarket to sell the product at a lower price for a longer period of time.

The price tag at Coles indicated it was an "everyday low price" item.

"An everyday price tends to indicate a permanent price reduction and a stabilisation of price," he explained.

"So with an everyday price, you would not expect to see that price discounted further, like a weekly special, you would also not expect that price to go up."

Most supermarkets will do high-low pricing, so customers will be able to snatch up a deal. Source: AAP
Most supermarkets will do high-low pricing, so customers will be able to snatch up a deal. Source: AAP

Prof Mortimer noted the Woolworths tag did not indicate it was at a lower price or on special, so there is a chance the chips could then go on special.

A lot of supermarkets have a high-low pricing strategy, where products are set at a recommended retail price and then that price is discounted.

"So all products are put on a supermarket shelf based on the cost to supply plus a margin, which the retailer takes as profit," Prof Mortimer explained.

"And then when they discount those products, both the retailer takes a hit, as in the retailer funds some of that discounting, and the supplier funds some of that discounting."

Generally, the prices will be discounted for about a week.

Supermarkets respond to price increase

A Woolworths spokesperson said that while the supermarket is "working to continue to provide our customers with great value it's important we also support our suppliers in covering their increasing production costs".

This is to "ensure they can continue to meet the food and groceries needs of all Australians".

"Managing industry-wide inflationary pressures will continue to be the focus for us as we work hard to provide customers with great value in partnership with our suppliers through programs like Prices Dropped for Winter and Price Freeze, as well as the thousands of weekly specials," a spokesperson told Yahoo News Australia.

Yahoo News Australia also reached out to Coles for comment.

How inflation changes shopping habits

Customers like high-low pricing and they will be attracted to a certain supermarket if they see their favourite brand of coffee or biscuit at a discount.

However, there is a change in consumer behaviour when inflation hits.

"As inflation starts to hit, and consumers are more conscious of budgeting week-to-week, what they tend to look for is price consistency," Prof Mortimer said.

Usually, customers will shop across a few brands, simply looking for specials.

Some people noted on the Facebook post that the same products will sometimes be at different prices at different supermarkets.

Prof Mortimer said there would be other items from popular brands which are cheaper at Woolworths when compared to Coles and suggested people shop from the items which are subject to Woolies' price freeze.

This is why Prof Mortimer suggests people utilise apps that compare prices for you. Shopfully was one app that was mentioned online.

He also said while customers love getting items on sale, having a consistent price image on popular brands is one way supermarkets keep their customers loyal.

A shopper is seen carrying bags at a Coles Sydney CBD store, Sydney, Monday, July 2, 2018.
Customers will generally shop at different supermarkets to take advantage of sales and specials. Source: AAP

Is $4.30 for a bag of chips too much?

Regarding the Smith Salt and Vinegar Thinly Cut chips, Prof Mortimer doesn't seem to think that Woolworths has them priced at something overly ridiculous.

"I think, in general, because supermarket shopping is such a habitual, and mundane activity, we do tend to simply grab those same products we normally buy, without really looking at the price," he said.

"And I imagine if you asked 10 customers, how much a pack of chips normally costs in a supermarket, nobody would be able to tell you."

However, what is expensive for one person might not be the same for another.

Most consumers will have some sort of reference price, especially for items customers by consistently, Prof Mortimer said.

But for other items customers don't reach for every shop, they likely don't know how much they usually cost.

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