I realize booze is popular, but you look behind the counter and you see bottles of extremely expensive booze that have been sitting there for who knows how long.
How can liquor stores in poor neighborhoods do business for so long?
byu/joeyjoejums inAskEconomics
Posted by joeyjoejums
2 Comments
“but you look behind the counter and you see bottles of extremely expensive booze that have been sitting there for who knows how long.”
So what? The cost of having that booze sitting behind the counter is whatever their investments would make otherwise, so what 5% a year? So having $5000 of expensive booze is costing them what? $250 a year holding cost? Then take into account occasionally they sell an expensive bottle, I’d guess 1 or 2 sales a year makes up that $250 a year holding cost.
So that point of having expensive booze sitting there behind the counter breaking the business for them is essentially a bad point
This might be more of a marketing discussion than economics.
If you see a $300 bottle of Dom Perignon in the shelf, you might think that a $50 of Veuve Clicquot isn’t that pricey.
If the highest priced bottle was Veuve, you might think that you don’t need the most expensive bottle and so get a $25 bottle.
There’s varying degrees and effectiveness of this, perhaps the store in a poor neighborhood only shifts the avg sale price up a few cents while in a wealthier neighborhood it would shift it up a few dollars and even sell some of the top shelf items.
It’s very cheap to have those bottle sitting there as a marketing/pricing tool. Using my Dom Perignon as an example, if it sat on the shelf for 3 years, the daily cost as a marketing tool would be less than $0.30 per day (using its retail price and no resell value at the end of its life).