In March, Alan P. Oppenheimer of Muskegon, Mich., wrote to the Shoreham Hotel. "Enclosed is a copy of the bill for my stay at the Shoreham on the first night of our honeymoon in 1948. What would it cost me to stay in the same room this year?"
Richard E Abati, managing director of the Shoreham, wrote back: "Although times have changed, we will be happy to have you stay with us at the same $10 rate."
This was no publicity stunt. Abati didn't tell me what he had done.
However, Oppenheimer sent me copies of the correspondence. When I received this letter, I asked the Shoreham Americana, "What is the daily rate for room A-603?" The answer was that most of the year it is $70 a night, but during "peak season" (April, May and June) it's $102.
Alan Oppenheimer, I hope you can get as good a "factory rebate" on your next automobile purchase as you got from a sentimental hotel manager. COUPONS REVISITED
Speaking of factory rebates brings to mind cents-off coupons and some complaints I've been receiving.
When I wrote about coupons recently, I said we'd be better off if coupons were eliminated and prices were reduced in the same amount. Reader reaction was, "You should live so long! When they eliminate the coupons they won't pass the saving along to us."
That, I said naively, would be a ripoff. Now I'm not sure. Mrs. Ray Sanders of Silver Spring complained to me that Giant had eliminated the 30-cent coupon on its $1.93 per gallon milk, but had reduced the price "by only 15 or 20 cents."
That's not what I expect from Giant, a leader among consumer-oriented chains. So I called Isarel Cohen, who is Gaint's president and chairman of the board. "Is she right?" I asked.
"She's right," he said. "When a housewife tells you something about food prices, she usually knows what she's talking about."
"If she's right," I said, "you'll have to explain to me why you didn't lower the price of milk by 30 cents when you took the coupon off."
"Begin at the bottom line, as a businessman must, and work backward," Cohen said. "The basic question for the store is how much will all this milk cost me and how much will I be paid for it? When the coupons were in effect, 70 percent of our customers didn't bother with them, 30 percent used them. That meant we were collecting 4.66 percent less on milk than we would have gotten for it if we hadn't offered any coupons. To compensate for eliminating the coupons, all we had to do was lower the price by 4.66 percent, or about 9 cents a gallon, and we did better than that. Are you with me?"
"No," I said, "you do this stuff faster in your head than I do it with this calculator I'm using. If you sell 70 gallons of milk at $1.93 you get $135.10 for that batch, and if you sell 30 gallons for $1.63 you get $48.90 for that batch, so that gives you a total of $184. If you had sold the entire 100 gallons at $1.93, without coupons, you'd have collected $193. So the coupons diminished your gross by $9, and $9 is how many percent of $193?" I jabbed at the calculator for a few seconds, and then read off the answer: 4.66 percent.
When I collected my wits, I said, "So if you eliminate coupons and charge 9 cents less to everybody , you will collect the same amount for your milk as you did under the coupon system. The only difference will be that nobody will have to fool with coupons?"
"That's right," he said. "In our best year, we made just over 14 cents in net profit on a $10 bag of groceries. If you tipped the boy 15 cents for loading your groceries into your car, he made more on your business than we did. This year, our volume is up -- we'll do about a billion and a half -- but our profit margin is back down to 1 percent, or 10 cents on a $10 sale, because price competiton is so keen. Some stores use milk as a loss leader, some use other things. This week, for example, we're selling sugar at cost. The purpose of these specials is to bring people into the store. To stay in business, a supermarket must maintain its volume at a high level. So this one advertises one special and that one advertises another. The test for the consumer is this: Buy your normal market basket in one store one week and in another store another week. Compare totals on all the things you need, not just the advertised specials -- and then you'll know who is cheapest. You'll be in a better positon to judge what your are paying for a quality, convenience, or other intangibles."
Cohen has been in the supermarket business since 1935. He says, "I've learned that the housewife is alert. She knows price, she knows value. I've also learned that our competitors are sharp. Every day is a new crisis a new challenge to earn the loyalty of customers. The pressure to meet competition is unrelenting -- but I wouldn't switch to any other business for all the money in the world. I love it."