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Retail Chains and Pricing Strategy of road-side vendors

As we see more retail chains selling fruits and vegetables, the road-side vendors are adopting an interesting pricing strategy. I felt the Yellaki Banana is getting more expensive over the last few weeks. It used to be Rs.12/- to Rs.15/- a dozen with a small fruit vendor near my home and has become Rs.18/- a dozen now. A retail chain nearby is selling the same at Rs.21/- a dozen and another chain 500 meters away is selling the same at Rs.24/- a dozen [nothing much to differentiate in the quality of the fruit as all of them are of similar size/quality]. I asked the road-side vendor why Yallaki Banana is more expensive now and does he know the price in the retail chain near-by. His response was a revelation for me. He told me, he checks the price every day and fixes his price a shade lower than the price fixed by the retail chain [so that he is very competetive and he can give better product / service].

I had a similar experience buying watermelon this season. Till last year, you pick a watermelon and the vendor will just see what you have selected and quote a price. But this year, many road-side vendors selling watermelon are equipped with weighing scale and quote a price based on the weight of the watermelon. While buying watermelon last week, I told the shop owner watermelon is cheaper in the chain store [just tried to see whether he knew the price]. Again, I was surprised by the response as this guy knew the price per kg at the chain and he also told me he rounds-off the weight to the lower kilo [5.6 kg watermelon was give at 5kg price]. He told me I will pay for 5.6 kg in the chain but only for 5kg with him [It is another matter that the watermelon that I used to buy for Rs.20/- last year is costing me Rs.30/- last weekend and Rs.35/- yesterday].

So, my conclusions : The retail chains are increasing the productivity of the road-side vendors as most of them can make more money than they used to [as the retail chains help establish / baseline the price in the mind of the consumers]. This is assuming the product is the same. In the case of fruit like watermelon and banana, the road-side vendor in his push-cart sells better quality product with better [personalized]  service and better shopping experience [bargain / have a conversation].

For now, consumers are paying a higher price for the same product [we are starting to pay for service also]. It is interesting to see the crowds inside the retail chain outlets and also watch the brisk business done by the road-side vendors.

– Kumar Vembu