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Unit pricing

April 21st, 2010

When we were at the supermarket the other day, I noticed, and made use, of some helpful new information for buying toilet paper. Next to each of the various offerings was the price per sheet. Since the brand was the same, it was easy to identify and buy, the cheapest offering, rather than doing a complex estimation and calculation.

I vaguely assumed I was enjoying the benefits of the market for corporate control, as the supermarket, formerly a small Coles outlet had been taken over by Foodworks. But this article by Ross Gittins informs me that a requirement for unit pricing has been introduced by the Rudd government. Gittins is sceptical, saying:

It’s a nice idea – the kind that appeals to economists – but I doubt it will do much good. It assumes shoppers are a lot more diligent and coldly calculating – a lot more ”rational” – than most of us are.

Since I’m an economist, my delight in this innovation is consistent with the first part of Gittins’ claim, but as a shopper I disagree with the second part. The great thing with this is that I don’t have to be diligent or calculating – the calculation has been done for me. Certainly, I’m benefiting from this without even knowing there was a policy, whereas I never even looked at the unlamented Grocery Watch site.

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  1. April 21st, 2010 at 08:39 | #1

    I couldn’t agree more with your conclusion John – it gives me far more power in the buying process, has certainly resulted in choice changes (and savings) at the supermarket shelf and, for someone who was never great at mental maths, saves me heaps of time (not to mention wear-and-tear on the fingers)

  2. BilB
    April 21st, 2010 at 08:40 | #2

    Perhaps Gittins does not shop for his family, or perhaps at his age his “choices” were settled years before, ie shopping by habit.

  3. Robert in the UK
    April 21st, 2010 at 08:52 | #3

    I’ve had similar experiences to you John. I’ve noticed a bit of skepticism about it on the right-of-centre blogs, but I find it very helpful when shopping. For instance, some products seem competitive until you check the weights (e.g. brand cereal might cost $3 a box, home-brand also $3 a box, but a quick comparison reminds you you have overlooked the fact that the home-brand is a 750g box while the brand is 500g, or something like that). I think it’s a great innovation and can only benefit consumers. I guess my only hesitation is that I don’t know how much it costs producers/supermarkets to conform with this requirement. I wouldn’t want the additional labelling costs to be too high.

  4. Donald Oats
    April 21st, 2010 at 08:53 | #4

    Ross Gittins obviously doesn’t know anyone on the aged pension. You can bet that they know which supermarkets have what product on special and buy accordingly, and plenty of other people do this too. Unit pricing makes it much easier to avoid the pseudo-special.

    However, there has been a move by the product manufacturers over the last year or two to reduce the size of their “standard” product, or substitute lower quality material for the original (sometimes just dilution with a proportion of lower quality material), and the one I really hate, outright deception.

    Am I the only coffee drinker who has noticed that some instant coffees have become weaker, noticable by the distinct lack of caffeine jolt? The colour of the brew is about the same but the caffeine seems to have dropped a fair bit, suggesting that a non-coffee bean substitute has been used to bulk up the product. Speculation on my part but I’ve drunk both instant and fresh barista prepared coffee mixes for years, and the effect of the barista coffee at my local coffee haunt has remained the same, while instant has dropped off by roughly a third, judging from how much extra I need to use per cup now.

    While unit pricing is fantastic and should have happened years ago, the metaphorical arms race continues…

  5. Bemused
    April 21st, 2010 at 09:33 | #5

    Interesting that this has arisen now considering I worked on a project back in the mid 80s to provide exactly the same information on shelf labels in stores operated by independent supermarket owners supplied by a particular wholesale co-op.

    I think at the time the big issue was the introduction of scanning checkouts and to counter objections to no longer having the price on every item, shelf label information was improved.

    Like JQ I only noticed this in Coles in the last few days and it is something I will certainly be paying attention to when evaluating the value of different package sizes. It counts for less when choosing between different manufacturers products where there are other factors, such as taste preferences, but for more generic un-differentiated products it is very handy.

  6. Dominic
    April 21st, 2010 at 10:02 | #6

    I noticed this as well and its changed my shopping habits. My supermarket has all the different types of tofu with price per packet in large print, and price per 100g in small print. Makes it so much easier to make an informed choice.

    I have to admit, when I heard about this policy (before it came in) I was skeptical. I was thinking mostly about fruit and wondering what the incentives would be if apples were sold for $1 each instead of $7 / kg. Obviously, there’s an incentive for growers to grow larger apples, because many shoppers would think they’re getting better value for money if they get a bigger apple for the same price. But this doesn’t seem to be how the policy works, so I’m fairly happy with the outcome.

  7. Fran Barlow
    April 21st, 2010 at 10:04 | #7

    Personally, I tjhink the Grocery Watch website concept was a reasonable one. As usual, implementation and data collection were the stumbling blocks.

    If it could have been fed into instant messaging with links to prices on items or baskets of goods nominated by a user and narrowcast to desktops, laptops and mobile phones I think it could have been highly effective. As usual it got picked to death by carping critique from an opposition desperate to appeal to populistic reservations about technology and the inclination to see new things in IT as insubstantial and the fact that the most techno-phobic and ignorant people tend to be the main shoppers. (I’m not saying that this was why you paid little attention PrQ — just that this was the marketing rationale for the political attack by Nelson and his chorus of whiners)

    Unit pricing does seem a very reasonable idea and one that is entirely in keeping with all but the most rightwing libertarian rubrics. I note also that the government seems to be moving for a default no frills approach to super contributions, much to the shrill condemnation of the retail super funds. That too seems a good idea.

  8. Emma
    April 21st, 2010 at 10:05 | #8

    It’s also a result of competitive pressure, I think, as Aldi provided unit pricing way before it was required to, which was a major factor in my choice to shop there. If you are shopping regularly for a large family, it’s an absolute godsend, and makes a huge difference to what you buy. It also makes it very easy to choose within brands, and pick the packages that are best value (NOT always the biggest ones). Major win to the government for imposing it on the big retailers, who resisted strongly, for obvious reasons, while Aldi was already doing it.

  9. Ikonoclast
    April 21st, 2010 at 10:52 | #9

    These are welcome steps but there is a long way to go to break the duopolists’ power. For a supposed first world country Australia seems to have food that is inordinately exepensive and of almost uniformly poor quality; safe and edible in the main but tough, tasteless and seldom genuinely fresh. The standard supermarket definition of “fresh” in the fruit and vege section is a bad joke. I think “fresh” means 90% remains of barely edible quality today if you choose carefully and about 50% will be of barely edible quality tomorrow.

    Does anyone know? Is it actually possible to get good fruit and veg on Brisbane’s northside?

  10. Charles
    April 21st, 2010 at 10:54 | #10

    It has made shopping much much faster for our family, although the reduced weekly mental arithmetic means we’ll probably both have to take up Sudoku or something.

    I’ve noticed in our local large suburban supermarket that many, many people pay attention to the labelling. The supermarkets fought this like crazy (it cuts through so many of the pricing tricks that they employ), and they tried at first to circumvent it with tricks like 5-for-five-dollars where the label would show the single purchase unit price but not the multiple purchase price – but clearly someone is holding them to account because the quality of the unit pricing info is continuously improving (many labels show both prices now in this example). Toilet paper showed the price-per-roll until recently, manufacturers responded by reducing sheets per roll, now the pricing is per sheet. Brilliant!

    And of course it doesn’t mean we all start buying the lowest unit cost item – but it does allow us to make direct price-vs-perceived-quality tradeoffs, easily. Unless you’r a supermarket or food manufacturer, what’s not to like?

  11. Jason
    April 21st, 2010 at 11:04 | #11

    John, Whilst it is perhaps not surprising that you and those reading this blog benefit from unit pricing (I have), does that mean that everyone benefits? It may be that those of us who ‘could not be bothered to do the calculations’ previously paid more, but this likely means that those that could previously ‘be bothered’ previously paid less. This is because toilet roll sellers previously earned higher margins from ignorant/apathatic (rich?) customers, and lower margins from engaged/interested (poor?) customers. Basic price discrimination. Unit pricing means toilet roll sellers can no longer ‘take advantage’ of ignorant customers to sell to more price elastic customer. Remember its not really ‘taking advantage’ as the overall/average margin earned by toilet roll sellers is determined by competition in the toilet roll selling market. Therefore ,there may be winners and losers from unit pricing. But are we overall better off with unit pricing? Maybe not, if it means we are all buying fewer toilet rolls (bad example perhaps) and there are economies in selling toilet rolls. Jason

  12. wilful
    April 21st, 2010 at 11:24 | #12

    Now we need unit pricing equivalent for mobile phones. Oh man, we’re trying to work out who to go with on a range of different factors, it is all such complete designed to confuse crap.

    Like how you get “hundreds of dollars of free calls” on a Optus plan, but they set the call costs at an extreme rate, well over a dollar a minute. Quite dishonest.

  13. Ernestine Gross
    April 21st, 2010 at 11:36 | #13

    Fully concur, John. Overall I quite like Ross Gittin’s articles and was a bit surprised he seems to stuck with the ‘economic man’ caricature notion of rationality.

  14. Ernestine Gross
    April 21st, 2010 at 11:42 | #14

    Let me re-write this.

    Fully concur, John. Overall I quite like Ross Gittin’s articles but I was a bit surprised to see him presenting an argument that indicates he is stuck with the ‘economic man’ caricature notion of rationality.

  15. Emma
    April 21st, 2010 at 11:43 | #15

    I suspect that BilB is right, and Gittins doesn’t do the shopping. Or that perhaps it doesn’t matter much what the total is. One effect is to make it totally clear how very expensive a lot of the brand name products are, which prompts me, anyway, to calculate whether Kelloggs or Jif really are three times or more times as good as the alternatives. Where they clearly aren’t, I can spend the difference on things that really are better (like vegies from the farmers’ market, or saltbush lamb from the butcher). Overall, a loss for both the brand name and the supermarket. No wonder they resisted.

  16. April 21st, 2010 at 11:55 | #16

    I found Gittins’ article to be weird. This makes it much easier to compare for most people. I’m sure it is very widespread in the US. Don’t know if it is regulated there or not.

  17. April 21st, 2010 at 12:05 | #17

    This is an example of the type of simple change that can improve a nation’s productivity by a small but valuable amount. It will save thousands of hours a week nationally, not just in shopping times, but it will also reduce the effort put into fooling consumers. Hopefully some of this effort will be put into improving products and lowering prices instead. By lowering the cost of information it makes markets more efficient. It is a pro-free market move. By reducing shopping times it reduces congestion in stores and so reduces the amount of retail infrastructure required.

    If we can get rid of those annoying point cards it would be even better. Or at the very least only people who use the loyalty cards should pay for the cost of operating the loyalty system and the amount of the surcharge they pay should be clearly printed on the card.

  18. April 21st, 2010 at 12:06 | #18

    I like to read Ross Gittins, but at times I have felt that his enthusiasm for behavioral economics leads him to over-state the evidence coming from that discipline.

    Yes, there are personal biases that inform our choices as consumers. But no, that does not exclude most of us benefiting from better information, most of the time.

    What harm in providing better information, just because some people with gloss over it sometimes?

  19. April 21st, 2010 at 12:09 | #19

    Ronald Brak @ #17

    “It is a pro-free market move.”

    It is a pro-market move. It’s not a pro-free market move, it’s regulation.

    And it’s good regulation.

  20. Freelander
    April 21st, 2010 at 12:10 | #20

    If people wanted the information the market would supply it without coercion. Next you will be expecting government to force them to let you know what is in it, and give you guarantees that what they tell you about their products is true. Where would it all end?

  21. jquiggin
    April 21st, 2010 at 12:15 | #21

    Freelander, you forgot the irony alerts. This is bound to cause trouble, in a Pareto-optimal fashion, of course.

  22. Ernestine Gross
    April 21st, 2010 at 12:20 | #22

    JQ, you also forgot the irony alert, no?

  23. Rationalist
    April 21st, 2010 at 12:30 | #23

    Aldi has been doing it for yonks.

  24. April 21st, 2010 at 12:41 | #24

    Thanks for the help with terminology there, Joel. I learnt what a free market was from an Australian book before I had access to the internet so my definitions might be a bit off. Interestingly, before I had access to the internet I hadn’t heard of libertarianism, the rapture, Rick Astley or monorail kitty.

  25. April 21st, 2010 at 12:43 | #25

    Monorail kitty? Gotta check that out!!!

  26. April 21st, 2010 at 13:06 | #26

    I’m a bit surprised that some are only just beginning to notice the unit pricing given that it seems to have been around for a while now. I find it very useful for comparing products such as canned tuna where packaging sizes vary and small cans can come in 95g and 100g sizes for very similar product. It’s also useful as an easy direct comparison between packaged foods and the unpackaged deli section offerings. What it doesnt help with is large differences in quality which can particularly apply to products such as toilet paper. I note that JQ was comparing the same brand here.

    The toilet paper issue actually appeared a year ago in this article in the SMH ‘toilet roll price checks likely to hit a sheet storm’ with discussion of the appropriate price comparison for this product.


    I remember passing this around some people at the time and a lively response from a female friend who insisted that the only way to price compare toilet paper was a weight based price per gram rather than sheets?!

  27. jquiggin
    April 21st, 2010 at 13:34 | #27

    Monorail Kitty new to me also, and I thought I was Aware of All Internet Traditions. LOL! CAT!

  28. Chris Warren
    April 21st, 2010 at 13:41 | #28

    How about unit pricing airline seats?

    Some free-market capitalists have slightly different practices.

    The British Airways website is showing a price of up to $12,000 for some tickets from Sydney to London in the next week, especially over the weekend.

    See: |ABC Report|

  29. paul walter
    April 21st, 2010 at 13:50 | #29

    Donald Oats got closest, price per k is no real help; if you are on a limited income and have the time comparison shopping is the go.
    You need to know what rivals are charging, price per k, can only operate if you know whats up the road. Was not the government going to put something the like online a while back, then chickened out?
    buying low code on special and divorcing oneself from brand loyalty can help as well.

  30. Rationalist
    April 21st, 2010 at 13:51 | #30

    I for one think this picture is relevant: http://i41.tinypic.com/9h0w7l.jpg

  31. paul walter
    April 21st, 2010 at 14:04 | #31

    Ronald Brak, #21.
    That’s nothing- wait till you get to Agenda21 and the other conspiracy theories.

  32. gregh
    April 21st, 2010 at 16:50 | #32

    Ikonoclast :

    Does anyone know? Is it actually possible to get good fruit and veg on Brisbane’s northside?

    Why put in northside – Brisbane is a shocker for all shopping 🙂
    Unit pricing has been standard for ages in many countries. The industry in general here has resisted it for quite some time (although it looks from bemused that not everyone has). I’ve always assumed that resistance meant it was effective at increasing consumer discretion.

  33. Freelander
    April 21st, 2010 at 19:18 | #33


    Great Photo! Looks like the cat was shot out of a cannon!

  34. paul walter
    April 21st, 2010 at 20:43 | #34

    You are right, Freelander.
    Well done Rationalist.
    How you can come up with something as brilliant as that after some of the other stuff you’ve posted, completely defeats me.

  35. Alice
    April 21st, 2010 at 22:08 | #35

    @paul walter
    Wow Paul – and I thought I could be catty…!!

  36. libertarian
    April 21st, 2010 at 22:50 | #36

    In the US it is called “Uniform Unit Pricing Regulation”. I believe it is optional for the states but I suspect most have adopted it because I don’t recall going into a grocery store that did not have unit pricing. I doubt it was forced on anyone: on something like this the trade associations would rather one set of national rules than 50 different sets of state regulations.

    However, beware unintended consequences. The Alzheimer’s rate has skyrocketed since the introduction of unit pricing. Obviously seniors were benefiting from all that forced mental arithmetic(*).

    * [/joke] for all those who would accuse me of finding causation in correlation.

  37. Freelander
    April 22nd, 2010 at 00:05 | #37

    Maybe the uniform pricing was a consequence rather than a cause of Alzheimer’s and the general intellectual decline which seems to have gripped the US. I imagine Unit Pricing started and is more in evidence in the Red States.

  38. Jill Rush
    April 22nd, 2010 at 00:24 | #38

    I have been buying using the unit price on items since last year. Not all the time as if I know that a product is better I will pay for quality. However I do make that choice having looked at the unit price – ie cost does not always equal value. For instance with toilet paper the price per sheet needs to be considered in the context of size and ply as well.

    My thinking is that Ross Gittins doesn’t do the grocery shopping very often and if an item isn’t on his list it won’t be purchased, whereas others like myself, will buy things not on the list because I remember that I forgot to put the item on in the first place ie I wrote the list rather than someone else who takes ultimate responsibility for the list’s completeness. Not everyone will use the unit price to determine purchases but a lot more will than won’t. There will even be those who will use the unit price to pay more for status or other reasons – however they too will be in the minority.

  39. paul walter
    April 22nd, 2010 at 03:10 | #39

    It is exquisite, isn’t it, Alice?

  40. Tim Tempest
    April 22nd, 2010 at 09:24 | #40

    We use unit pricing in Canadian supermarkets. It revolutionised the way I shopped. I determine my product of choice on the unit pricing and since supermarkets have lots of price bargains this is a weekly event.

  41. brisbanedavey
    April 22nd, 2010 at 10:50 | #41

    The main use I have found for unit pricing so far is to see just how ‘special’ the specials at my local Woolies are. In general they aren’t special at all. It’s good to be able to see this at a glance, rather than stand there doing maths in my head, with furrowed brow and twisting lips.

    Case in point, my usual brand of laundry powder suddenly appeared in a 5kg box, with a very large special tag over it. Comparing the unit price with my normal 1.5kg box showed that buying bigger produced a massive saving of $0.01 per kilo. Yes, the 1.5kg box was priced at $10.00 per kg, the 5kg box priced at $9.99 per kg. Not even five cents difference! I bought my usual box and walked off, shaking my head at the so-called ‘special’.

    I have found the introduciton of unit pricing to be wholly positive, getting rid of complexity caused by different box sizes and so forth with a single, simple measure.

    Ikonoclast – the Mitchelton markets (first Sunday of the month). That’s one day taken care of. Other than that, try Kelvin Grove. Otherwise, it’s buy at the city markets on a Wednesday and cart the stuff home, which sucks.

  42. Jason
    April 22nd, 2010 at 15:09 | #42

    brisbanedave, The interesting thing is that supermarkets are still bothering to run ‘false’ specials, when everyone can see the unit price. I would expect that unit pricing would mean fewer ‘genuine’ and fewer ‘false’ specials. Maybe Ross Gittins is right, people still like buying toilet paper in packs of 8 not 12 or 24 or 48. Fits in the cupboard better? Jason

  43. Ben
    April 22nd, 2010 at 17:33 | #43

    I have followed unit pricing ever since it was introduced by Aldi first in Australia. I believe some of the supermarkets followed suit, even without regulation requiring it. I use unit pricing in two ways: one, to find the most economical size of product in a range of sizes (eg. Weetbix) and also as a normalised price that makes it very quick to compare products between supermarket chains (eg. Coles sells only 500g boxes and Woolies only sells 1kg boxes). I love unit pricing!

  44. Alice
    April 22nd, 2010 at 21:07 | #44

    “It assumes shoppers are a lot more diligent and coldly calculating – a lot more ”rational” – than most of us are.”

    These days I am. There were days when I wasnt. I have become diligent and rational due to forces beyond my control – due to monopolistic rises in grocery prices. I dont know who does Ross’s shopping – maybe not himself but yes..I use those labels and I like them..and Im amazed at the differences in the per ounce / per sheet/ per whatever rates.

    But its a poor substitute ultimately for competition laws with more teeth.

  45. Chris O’Neill
    April 23rd, 2010 at 19:54 | #45

    I think Gittins like to suggest cases where normal economic theory may not conform very well with reality. Other examples of his suggestions:

    Stamp duty on property is normally considered to be very economically inefficient (as well as iniquitous). Gittins pointed out behavioural pschological arguments that may act to reduce the disincentive effect, and hence inefficiency, of stamp duty.

    Gift giving can be considered to be inefficient because the gift giver is unlikely to have as good a knowledge of what the receiver would prefer to spend money on as the receiver. Gittins pointed out that this ignores psychological effects associated with gift-giving. (I personally think gift-giving is materially very wasteful in a lot of cases, but that’s beside economics.)

  46. April 24th, 2010 at 00:37 | #46

    Ikonoclast, you could try one of the fruit and vege box schemes, which you might find more convenient than the Wednesday markets in the city. We use Food Connect.
    It’s more expensive than the supermarket but all the produce comes from local farmers and the food’s actually fresh.

  47. paul walter
    April 24th, 2010 at 05:04 | #47

    It’s the deteriorations in quality and choice. Relatively tolerable icon brands like Golden Circle and Campbells and many more have disappeared lately, replaced anonymous looking home brand stuff that turns out suspiciously like Black and Gold, as to quality.
    If its the worst of my problems, I’m sailing, but the age-old battle of consumer and supermarket does look set to carry on into yet another generation. No time for complacency!

  48. TerjeP (say taya)
    April 25th, 2010 at 21:16 | #48

    The market was already headed in this direction and I believe that the government was merely playing copy cat. My local Coles and Franklins have had unit pricing for a couple of years. Even the senate commitee enquiry in 2008 acknowledges that the market was already going down this route.


  49. TerjeP (say taya)
    April 25th, 2010 at 21:17 | #49

    p.s. As a consumer I do use this information.

  50. Freelander
    April 25th, 2010 at 21:21 | #50

    @TerjeP (say taya)

    And if you really deserved to have it I am sure the unfettered market would have provided it to you. As the unfettered market didn’t, obviously the information was far too good for you.

    Remember, the market only has your best interests in mind.

  51. TerjeP (say Taya)
    April 27th, 2010 at 08:36 | #51

    Your personification of the market is amusing.

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