I see the anti-dog eat dog rule is alive and well.
REDDING, Calif. — An owner of a handful of gas stations has filed suit against Safeway, claiming they sell their gasoline below cost.
James Dombrowski, the attorney representing the owner, told us that they submitted documents earlier this month to the Bay Area Judge hearing the case.
He said those documents show how Safeway’s club card discount program is selling gas below cost, which is illegal under the Unfair Practices Act.
Safeway’s club card discount program offers three cents off to holders of the Safeway Club Card. Each time you spend $100 in groceries, you get an additional ten cent discount.
Selling one item at a really low price, even at a loss, in order to attract traffic to a store so that they’ll hopefully buy other products is a common tactic in retail. It’s called a “loss leader.”
Basically, Safeway is selling gasoline at a loss (or at a very, very slim profit margin) in order to attract crowds to their store where they’ll hopefully leverage into profits through their purchase of other items. It’s a win-win all the way around. Consumers get a lower price for a product we all need and use, while Safeway gets more traffic to their stores.
Except for Safeway’s competitors who think this sort of marketing and price innovation is unfair. By which they mean, inconvenient for their bottom line.
This sort of thing is actually pretty common. Back in 2004 I wrote about a dozen or so gas stations that got fined by the State of Minnesota for failing to make a minimum of $0.08 profit on every gallon of gasoline they sold.