4 ms·

Selling for a loss in a retail as a lot of benefits that don't really translate well to restaurants though. One of the biggest I'd think is the 'shelf life' of

by rtkwe 9y ago

Selling for a loss in a retail as a lot of benefits that don't really translate well to restaurants though. One of the biggest I'd think is the 'shelf life' of products. In retail items move in and out throughout the year but an item in stock doesn't really go bad so the main reasons to sell at a loss are just to clear out space for other newer items that might sell better. (Also even fairly deep sales aren't even necessarily actually losses for the business because wholesale prices are much cheaper) In the restaurant business there's not really a good analogue on a regular menu, a loss leader isn't clearing out any stock because the items are constantly just degrading naturally so you'd be better off just pulling the item if it costs more to make and not constantly making it. It'd be like if JiT manufacturing was a thing and stores made shirts for a loss in the store from raw materials, it just doesn't make sense unless that item has consistent accessories (your drinks and apps) that sell for much larger margins. It's a dangerous game because you're counting a lot on consistent consumer behavior.

munificent 9y ago
> a loss leader isn't clearing out any stock People need something to chew on while drinking the wine that has a very large markup on it. Consumer expectation is a big part of pricing. For whatever reason, people are OK shelling out cash for wine and beer at a restaurant, so those get a big markup. That gives you wiggle room to sell some entrees at cost or a loss, which you need because consumers aren't as comfortable with a big markup on chicken since "I could cook this at home" (even though, like the article states, their home-cooked chicken probably hasn't been marinating in duck confit for the past 48 hours...). Restaurants also need to have a certain amount of variety on the menu to deal with the one picky eater in a party. That's why every seafood restaurant still has one token chicken dish, every steakhouse has a vegetarian dish, etc.
- rtkwe 9y ago
  True but then you have to make absolutely sure that the customers you attract are going to order those make ups consistently and that's really hard to do. As for picky eaters usually those will be one of a handful of cheap easy to make meals where the restaurant just aims to have something reasonably acceptable for those. There's no reason to make those dishes loss leaders.
- crispyambulance 9y ago
  FWIW, the universal mark-up for wine in US restaurants is about 4x-6x. That is, the PRICE of one glass of wine is roughly equal to the COST of one bottle of the same wine. Restaurants, of course, source their wine through commercial distributors. They get price breaks in volume that consumers can't typically get.

by rtkwe 9y ago

munificent 9y ago

> a loss leader isn't clearing out any stock People need something to chew on while drinking the wine that has a very large markup on it. Consumer expectation is a big part of pricing. For whatever reason, people are OK shelling out cash for wine and beer at a restaurant, so those get a big markup. That gives you wiggle room to sell some entrees at cost or a loss, which you need because consumers aren't as comfortable with a big markup on chicken since "I could cook this at home" (even though, like the article states, their home-cooked chicken probably hasn't been marinating in duck confit for the past 48 hours...). Restaurants also need to have a certain amount of variety on the menu to deal with the one picky eater in a party. That's why every seafood restaurant still has one token chicken dish, every steakhouse has a vegetarian dish, etc.

rtkwe 9y ago
True but then you have to make absolutely sure that the customers you attract are going to order those make ups consistently and that's really hard to do. As for picky eaters usually those will be one of a handful of cheap easy to make meals where the restaurant just aims to have something reasonably acceptable for those. There's no reason to make those dishes loss leaders.
crispyambulance 9y ago
FWIW, the universal mark-up for wine in US restaurants is about 4x-6x. That is, the PRICE of one glass of wine is roughly equal to the COST of one bottle of the same wine. Restaurants, of course, source their wine through commercial distributors. They get price breaks in volume that consumers can't typically get.