Why is it that we focus on why a particular product is “so expensive”? Why don’t we ask the opposite question of why a competing product is so cheap?
Recently I was in our local discount store and they had toothpaste available for $2. Two bucks. As a business owner, my mind is fascinated by breaking down the cost of goods and I’d love to do that with this tube of toothpaste.
So the retailer’s sale price is $2 and let’s assume that their purchase price is $1.40. This particular toothpaste was made in China, so let’s assume the Australian importer/distributor cost is half their sale price. Their margin has to cover things like marketing, freight, insurance, import fees, staffing and rent.
So the Australian distributor might be paying 70-odd cents per tube (landed cost, not what they pay the supplier/manufacturer) and we’ve now got to go a step further back and look at production costs.
The manufacturer of this toothpaste, which has 14 ingredients, would have to procure those ingredients from multiple suppliers. They’d also have to incorporate packaging, staffing, factory running costs and more into their price.
So how much are they paying per ingredient per tube? And what’s the ingredient manufacturer getting for their work? And what the heck is in each insanely cheap ingredient?
Can a company produce highly quality, safe and effective tooth paste ingredients for a few cents?
This same concept flows over to the food we eat, the stuff we clean our homes with and the clothes we wear.
Look, I love a bargain as much as the next person, but we need to redefine value. Toothpaste is something we put in our mouths twice a day. Is it better to get the cheapest possible option on the market? Or pay a bit more for something we know is safe?
We’ve only touched on the monetary cost with regards to procuring the ingredients; we haven’t looked at the ethics behind who gets paid what at the bottom of this chain… Next time you’re at the shops, instead of asking why a product is so expensive, maybe turn your attention to the alternative product and ask why it’s so cheap.
