Supersized

Notice everything seems to get super-sized.

My favorite candy bar getting supersized.

Its really simple.  Costs are fixed.  The wrapping foil it comes in.  The truck that distributed the candy bar to the store.  The labor involved to make it.

It's all about the up sale and margin.  Why not sell something that costs $1.50 vs $1.00.  Remember the costs are fixed.

From the consumer point of view, you think you are getting more value.  You are.  But the manufacturer and retailer is gaining even more gross margin dollars per transaction.

Lets pretend today, this particular store sold or will sell two candy bars.  If they sold the candy bars at $1.00 each.   Total retail sale is $2.00  Lets assume the profit is .30 per candy bar. Thus netting out $2.00 sale, .60 in profit.

Now on the other hand if the two sales of the day walked in and all they saw was the $1.50 bars...and bought those...the retailer gross sales now look like $3.00.  A 50% increase in sales dollars.  Lets pretend the cost of the bars are actually higher, say closer to $1.00 for those $1.50 bars.  For each transaction, the profit is now .50 each.  Net profit is $1.00 vs .60 originally.  A 65% increase in gross margin dollars.

This leads me to a couple of points of this blog post.  #1.  This is why things are supersized.  #2. Why sell cheap stuff, when your costs are fixed and the effort to sell the $1.00 bar is the same as the $1.50 bar.   The consumer wins if they perceive better value.  You win by selling for more profit dollars.