loss leader example

Behind the scenes of IKEA’s Swedish meatball pricing scheme

Everyone knows companies use low prices to lure us into its stores.

This pricing strategy is called a loss leader.

These are products that are sold at (or even below) its cost to give the impression everything is priced low.

It is a classic retail scheme – attract shoppers with low prices on some items…

Then make profits when the same customer buys more profitable items during the same shopping trip.

IKEA uses food as its loss leader…

Food blogger Chris Spear reveals IKEA’s loss leader food secret:

I can speak about this with knowledge.
Because I once ran one of IKEA’s foodservice operations.

While you don’t think of them as a restaurant in the traditional sense, they have a quick-serve restaurant, as well as their Swedish food market downstairs.

They are using their foodservice department to reinforce their low price profile on items in the rest of the store, even if it means selling food items at a loss.

I’ll break it down:

You have no idea how much a couch costs.

You see one you like for $599. Is that a good price?

You have no idea because you’ve never bought a couch before.

But, you can get a full meal that’s only $3.99.

You do know that food is much more expensive elsewhere.

Then, on the way out, you see that they have hot dogs for 50 cents, as well as soda and cinnamon buns.

Why do they have American items at the Swedish grocery store?

Because you can identify with those items.

We can pretty much agree that 50 cents is the best price you will find for a hot dog anywhere.

Their policy is to be the absolute lowest price on that item within a 30 mile radius, even if it means selling at a loss.

They’re reinforcing the low-price profile of the store.

So, they take a hit on the food, but just sold you $1,000 in furniture.

It’s the same thing other stores do with loss leaders to get you in the door…

But I thought it was interesting to use food to sell furniture and housewares.

Bottom line: smart shoppers get better deals.

Cheap meatballs and hotdogs do not fool me into buying overpriced furniture.

The good news is today’s technology helps us make better shopping choices.

Everything from Yelp to Google Plus – even YouTube helps us find the best products and services… often in just one click.

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Markus Allen

Family man. Truth seeker. Life hacker... more about me here...

 


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