Lather over Lotion?
November 15, 2009 10:07 AM   Subscribe

Why does Palmer's Olive Butter Formula Lotion vary so wildly in price?

In looking for a hand lotion, I noticed that their new offering began showing up in Big Lots for $2.00 for a .60 oz tube, $2.50 for a 8.5 oz bottle and $3.00 for a 17 oz pump. Besides that not making any sense, it was on the shelves throughout last winter and spring at these prices, only to disappear for about a month with only the bottle returning at twice the price (which, BTW is the same price it was selling in the grocery stories). Then it disappeared for another month and now, all three are back at last year's prices. Understandably, it is flying off the shelves, again. But (1) Why the disparity in price vs. quantity, and (2) Why even in the discount stores, was the price raised and then reduced again? I'm wondering what kind of market or corporate forces might be at work?
posted by CollectiveMind to Shopping (2 answers total)
Best answer: Short answer: Cosmetics pricing is not based on the quantity of the raw ingredients involved, and Big Lots' business model allows them to opportunistically obtain some inventory at variable costs.

1) Most of the costs associated with producing cosmetics are fixed. You're only looking at a few cents difference in terms of the cost of producing .6 oz of lotion and 17 oz of lotion. It may be that the .6oz tube is more expensive to package and distribute than 17 oz pump.

2) Big Lots is a closeout / overstock retailer. They obtain most of the merchandise they carry at discount prices from companies looking to reduce inventories or that are discontinuing carrying or producing the the product. There are many ways this could happen:
a) Company A could be E.T. Browne (the manufacturer), Company B could be (grocery store chain.) A could have overproduced 100,000 extra units of each size that they need to sell to reduce inventory, and are willing to sell at 50c per container regardless of size. B could have 10,000 bottles that they over-ordered and sold to Big Lots for $2 per bottle.
b) Any company with a stock of product could be A or B; they could even be the same company; the price difference could be due to purchasing different quantities or at different times.
c) Big Lots could have seen the sales volume of the discounted units and bought a quantity of the 8.5 oz bottle at regular (supermarket) prices to sell, then determined that there was not enough demand at full price. Once the higher-priced 8.5 oz bottles sold out, they then switched back to buying overstock merchandise as it became available.
posted by theclaw at 12:16 PM on November 15, 2009

Response by poster: Thanks for this. It makes sense, in a counter-intuitive way.
posted by CollectiveMind at 1:16 PM on November 15, 2009

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