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Why Above-Retail Whiskey Pricing Is Not So Bad

by on March 23, 2018
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Anyone who has been a whiskey drinker for very long has likely come across bottles of whiskey on a shelf at prices higher than retail – often much higher.  The first reaction is often outrage.  How dare they try to rip us off?  But, as so often is the case with complicated issues, the fair answer is not as black and white as it seems.

Usually, such over-priced bottles are in great demand.  So, this begs the question, why is it not reasonable for the price to rise in the face of high demand?  No one needs whiskey.  It is a luxury item, so claims of “price gouging” are inappropriate.  Price gouging is when, due to an emergency situation, necessities are being sold for excessive prices.  Items such as bottled water, gasoline, and canned foods fit this description.  Whiskey does not.  If the demand for an item exceeds its supply, the price rises.  We see this every day.  A freeze in Florida causes a shortage of orange juice or the price of a popular toy rises as they sell faster than they can be made.  Since whiskey is an elective purchase, there is no real reason why it shouldn’t be affected by supply and demand principles.

I constantly see pictures of a rare whiskey sitting on a shelf for 4 times the suggested retail.  The photographer is railing about the store and its business practices because this is the first time they saw this bottle and they can’t afford it.  They never stop to think that the store has done them a favor.  If the store had priced it at suggested retail, the bottle would probably be long gone.  Whoever the first customer to see it was, they would have cleared the shelves, buying all 6 bottles.  No one else would even know the store ever had it.  However, by raising the price, the store discourages this behavior, making it more likely that multiple customers get to purchase one. 

Let’s look at an example:

First scenario:  Joe walks into store A and sees someone looking at six bottles of Old Weller Antique on the shelf for $50.  The other customer walks away.  Joe knows that $50 is double the suggested retail.  However, he has never found it before and really wants to try it.  Joe decides to buy one bottle, leaving the rest because the cost would add up to too much.  He takes it home and enjoys it.  He knows he paid a premium, but is glad he had an opportunity to get it.  Additionally, 5 other people may get to buy one.

Second scenario:  Joe walks into store A and sees an empty shelf where Old Weller Antique is supposed to be.  The price on the shelf says $23.95.  He glances over at the checkout counter and sees a man buying six bottles.  Joe goes to the counter and inquires if they have any more.  No, six was all they got.  That guy bought them all.

Which scenario was better for the customers?  In this case, more customers were served by the price being higher, because it prevented any one person from buying all of them.  The question each of us must ask ourselves is:  Would I rather pay a premium for it or never have it at all?  Often, these are the only choices.

There is another factor that must be considered in the pricing of rare/allocated whiskey.  Often, stores must earn the right to have those allocated bottles.  They are not sold to every store.  Many stores sell huge volumes of undesirable alcohol in order to be considered worthy of receipt of a few rare bottles.  Why are they not entitled to a bit of a reward for their expense and effort?  Why is it wrong to keep the rare bottle on the shelf for a while for many customers to see?  Why should the retailer make a tiny profit on a highly desirable bottle while the guy who buys it at retail price may resell it for 4 times the profit made by the store?  Feel free to add your own thoughts and opinions in the comments.  Cheers!

All thoughts and opinions expressed are original to the author of the review or article. We are in no way paid to express any specific opinion about any specific company or product.

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  • Bill Varnell
    March 23, 2018 at 12:08 pm

    My only issue with that is, store owners have the right to limit purchases to one per customer. I agree it’s a free market and can do whatever they wish. I personally don’t think elevating prices to secondary level generates good customer relations. Just my opinion.

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  • Gene Arnold
    March 23, 2018 at 2:40 pm

    Very good blog, Brett. Some, like Bill, will disagree with your opinion… But that is his opinion. Owning a small business, such as I do, I get and understand where you are coming from. I don’t like what retailers do to highly allocated bourbons/whiskys, but I understand supply and demand. Simple economics. Cheers, my friend!

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  • Gene Arnold
    March 23, 2018 at 2:42 pm

    I didn’t mean Bill disagrees with you… I meant he disagrees with the premise… Sorry…

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  • Rich Carlson
    March 23, 2018 at 4:40 pm

    I feel people will do what they see is best for them. They will not say to themselves ” This might affect a larger scale issue or Joe Smith doesn’t get any Antique Weller. All in all it is a dog eat dog world and although you might not agree with what he chooses to do, you must understand he has the right to do it even if it is not the choice you hope he makes. Man is a selfish beast by nature .

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  • Bill Richardson
    March 23, 2018 at 6:08 pm

    LOL I really disagree with your premise. I live in Ohio and the state sets the price, all stores that sell liquor are licensed by the state. Overcharge and bye bye license. Scored a bottle of Stagg jr. because I am a regular customer. No Monetary advantage here just Happy customers. OH and the big boys the Van Winkles and crew…. Lottery…

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    • Brett Mullins
      March 25, 2018 at 2:31 pm

      Bill Richardson, in states with state operated Liquor stores, there is no competition, no free market. Prices are mandated by the government. It is socialized liquor sales, so the situation I am addressing does not exist.

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  • March 24, 2018 at 11:09 am

    This is spot on. I have no “right” to any particular bottle just because I want it. Does this mean I miss out on some? Absolutely, but that’s just how the free market works. In Michigan, store owners only get 15% profit margin at state minimum and that’s what most liquor sells at. They should have the opportunity to make extra money when there is scarcity.

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