The Price of Convenience

A Comparison of Convenient Store and Supermarket Prices




Ann Grelecki

April 29, 1997


Introduction

With all of the annoying one-way streets and the out-of- control bike riders and roller bladers, I elected not to bring my 1995 Pontiac Grand Prix down to school with me this semester. As a result of this decision, my range of activity is limited to places accessible by bus or by foot. I see movies at the Co-Ed, for example, because the Savoy 14 is not within walking distance and the last bus stops before 10:00 p.m. on Saturday night. The Co-Ed Theater could increase the price of their movie ticket by a sizable percentage and I would still be the first in line to get a seat. Because I lack a personal mode of transportation, my grocery shopping expeditions are also slightly compromised. Once a month or so I can sweet-talk an understanding friend into letting me tag along with her to the supermarket, but most often my shopping is done somewhere along Green Street at a convenient store. Although I agree that this is convenient, I began to wonder just how much this convenience was costing me. I assumed that these local stores charged more for the products in their easily accessible store, but I wanted to know how much more. For my consumer economics project, then, I decided to explore this very question. I set out to compare the prices of 14 commonly bought items at four convenient stores and four supermarkets. This topic is important to Champaign grocery shoppers as well as product consumers all over the country. Just what is the price of convenience?

Data Section

In order to begin collecting data, I needed a list of items for which I wanted to compare prices. Upon the suggestion of my professor, I started by simply brainstorming common products for which a consumer might run out to the convenient store. After thoughts of Tylenol, Pepsi, and Bud Lite came to mind, I just kept rolling. The 14 items that I came up, with along with the eight different stores I selected to shop at, are included in the data collection section beginning on the next page.

I started the actual data collection process at the small convenient stores. I went to the first store on the list, The Corner Store, and I wandered the aisles looking at prices. I learned this was not the way to conduct the investigation after the store manager followed me through the store accusing me of shoplifting. Once I explained my situation, the research went a bit more smoothly. From The Corner Store, I went to three more convenient stores along Green Street. This time I informed each of the store managers what I would be doing so that I might avoid further confrontations. For the second leg of the data collection process, I borrowed my visiting brother's car and drove to four relatively nearby supermarkets. I did not bother to warn any of these store managers of my presence in their store, because I did not know whom to tell and I figured they would probably not be suspicious of me. In these larger stores I walked up and down the aisles recording the prices as marked. If the store happened to be running a sale on the products in my study, I included that price on my chart. I figured that if this were an ordinary day, and I an ordinary shopper, that would be the cost I faced.

The data that I gathered informed me of the price for convenience. On average, convenient stores mark up their prices by about 20.7%. After finding prices at four different convenient stores and four supermarkets, I found the average prices for each type of location. I also calculated the percent increase in price. For actual data on each of the stores as well as the averages, refer to the next pages of information.

PRODUCT BRAND NAMES AND PRICES

Toothpaste Tarter Control Crest Original Flavor Paste (2.7oz)
Tampons Tampax Regular (8 count)
Tylenol Regular Strength (24 caplets)
Potato Chips Ruffles (6oz)
NyQuil Vicks NyQuil Liquid Caps Multisymptom Cold/Flu Caplets (12 soft-gels)
12 pack beer 12 pack Bud Lite Beer (cans)
12 pack pop 12 pack Pepsi (cans)
Bread Butternut White Loaf (16oz)
Milk 2% Lowfat Prairie Farms (1/2 gallon)
2L Pepsi 2L Plastic Bottle Pepsi
Frozen Pizza Totino's Party Pizza
Contact Sol. Renu Multipurpose Contact Solution All In One (12oz)
Detergent 22oz Ultra Tide Powder (10 loads)
Ice Cream Ben and Jerry's (1 pint)

STORE NAMES AND LOCATIONS

Supermarkets Convenience Stores
County Market The Corner Store
2901 W. Kirby 801 S. Lincoln
Champaign, IL Urbana, IL
(24 Hours) (Daily Hours)
Jewel Food Store Colonial Pantry Food Store
105 W. Green St. 312 E. Green St.
Champaign, IL Champaign, IL
(24 Hours) (24 Hours)
Schnuck's Home Town Pantry
109 N. Mattis 601 E. Green St.
Champaign, IL Champaign, IL
(24 Hours) (Daily Hours)
Jerry's IGA Discount Den
3112 W. Kirby 505 E. Green St.
Champaign, IL Champaign, IL
(24 Hours) (Daily Hours)

CONVENIENCE STORE PRICES

The Corner Store Colonial Pantry Hometown Pantry Discount Den
Toothpaste 2.45 2.12 2.19 2.19
Tampons -- 2.35 2.49 2.39
Tylenol 4.39 4.79 4.89 --
Potato Chips 1.59 1.59 1.59 1.29
NyQuil 5.95 -- 6.59 5.49
12 pack Bud Lite (cans) -- 8.99 8.89 7.99
12 pack Pepsi 4.49 4.99 3.99 3.99
Bread 1.61 1.75 .99 --
Milk 2.28 1.65 1.89 --
2L Pepsi 1.49 1.89 1.69 1.49
Frozen Pizza 2.39 -- 2.59 --
Contact Solution 8.99 -- -- 8.49
Detergent 6.19 -- 4.19 --
Ice Cream 2.99 -- 3.49 --

SUPER MARKET PRICES

County Market Jewel Schnuck's Jerry's IGA
Toothpaste -- 1.93 1.79 1.89
Tampons 1.59 -- 1.99 1.74
Tylenol 3.10 3.59 3.09 3.63
Potato Chips 1.49 1.59 1.59 1.59
NyQuil 4.19 4.69 4.29 4.19
12 pack Bud Lite (cans) 7.72 7.99 5.99 6.99
12 pack Pepsi 3.99 3.29 3.99 3.69
Bread .99 1.75 1.69 1.39
Milk 1.59 1.79 1.49 1.65
2L Pepsi 1.19 1.39 .99 1.09
Frozen Pizza 1.39 1.29 1.59 --
Contact Solution 7.89 -- 5.99 7.89
Detergent 2.69 -- -- 2.83
Ice Cream 2.98 3.19 2.99 3.09

AVERAGE PRICES

Convenience Stores Supermarkets Price Mark-Up
Toothpaste 2.26 1.87 17.25%
Tampons 2.41 1.77 26.5%
Tylenol 4.69 3.35 28.5%
Potato Chips (*) 1.52 1.57 -3%
NyQuil 6.01 4.34 27.34%
12 pack Bud Lite (cans) 8.62 7.17 16.8%
12 pack Pepsi 4.37 3.74 14.4%
Bread (*) 1.45 1.45 --
Milk 1.94 1.63 16%
2L Pepsi 1.64 1.17 28.65%
Frozen Pizza 2.49 1.42 42.97%
Contact Solution 8.74 7.25 17%
Detergent 5.19 2.76 46.8%
Ice Cream 3.24 3.06 5.5%

(*) On average, supermarket prices were not cheaper for these items.

Discussion Section

There is no difference in product quality since I compared the same items at each store. The only variation between these products is the store shelf on which they sit. Though the two types of stores sell products to the same consumer market, they offer different incentives to buy from them. Supermarkets, though larger and often more distant, boast less expensive prices and offer their services 24 hours a day. As a college student, I appreciate this money saving situation. Convenient stores, on the other hand, may charge higher prices, but they are located closer to one's home, often within walking distance. This also appeals to the car-less person that I am. The question remains as to whether or not it is worth it for the consumer to drive to the supermarket when the convenient store is a block away. It appears that if the consumer needs only a few items he or she will willingly pay the marked-up price for convenience. When the grocery list is long, however, that same consumer will choose to drive to the supermarket. This relates to the idea of search theory. How much a person is willing to search for the lowest price affects where he or she shops. Often it becomes time consuming and costly to search for the best prices. The variables of time, quantity bought, and product volume affect the differing search costs across consumers. A person who has more time and consequently lower search costs, will be more likely than the hurried shopper to get into the car and drive to the far supermarket for the lower price. A person who buys a great quantity, will also probably opt for supermarket shopping to benefit from more lower prices. Search costs differ according to the volume purchased as well. Convenient stores, I noticed, tend to sell smaller sized products. The 22oz size of Tide detergent, for example, was the convenient stores' largest size. Supermarkets, on the other hand, sold products more than double that size. The price generally reflected a discount for the larger sized product.

Sometimes, consumers are willing to forgo a cheaper price in order to benefit from another feature. This idea describes the Peltzman Effect. With this concept, it is demonstrated that some consumers do not want as much safety as in built into the product. They are then willing to trade off some safety features for other attributes such as fun, cost, or convenience. Some grocery shoppers, especially when they have a short list of items to buy, would rather trade off the cheaper price to benefit from the more easily accessible convenient store.

In all but two products, the convenient stores charged more than the supermarket. Potato chips were, on average, 3% cheaper at the convenient stores, and bread was equally priced at both locations. Convenient stores are aware that their business will not suffer greatly if they mark-up the prices of their products. They need to include an added cost for their easy accessibility. The manner in which they determine just how much more to charge probably depends on what they believe they can charge without penalty. In other words, convenient stores increase their prices by an amount they know will not affect their sales or their net product. They increase their prices to compensate for the added feature of convenience.

Conclusion

As stated in the discussion section, convenient stores, on average, increase their prices by 20.7% of the average supermarket price. Consumers with higher search costs willingly pay this inflated price. These men and women sacrifice the extra cash in order to benefit from the easy accessibility of the convenient stores. Consumers who have more time, are shopping for a greater quantity of products, or buy their items in bulk, however, are more likely to shop at the supermarket. From this research experience, I have decided that saving money is more important to me than convenience. A 20.7% mark-up is substantial especially when considered with my college financial situation in mind. I also prefer the 24 hour service of the supermarkets. And I give supermarkets an extra plus for offering free samples on Saturday afternoons, the day I conducted my data collection.

My consumer economics report shows strong data comparisons between four convenient stores and four supermarkets. By selecting that many stores, I received a more accurate average of the price charged for each item. I also selected 14 items commonly purchased by consumers at both convenient stores and supermarkets.

One area of weakness for my data is that not all stores carried the specified items. Or, in some cases, the product was carried, by the size was incorrect. I wonder if price mark-ups are the same in non-college towns. I assume that convenient stores still charge more, but I wonder if the same products would be affected in the same way. This is a possible area for further research. I also question if convenient stores, which typically do not buy as much of one product as a supermarket, are charged more by the manufacturer. Again this is an area worthy of further consideration. In conclusion, the price of convenience is, in general, too much for me.