Heartache at the Feeders
- Posted on
- By Bobbi Wright
- Posted in bird seed, birdseed, black oil, niger, nyjer, Right Stuff, safflower
Have the post-holiday blues about the price of bird seed in your feeders? Let's talk about it.
The price of seed was stable for quite a long time. I think I could ask my employees how often price changes would happen with the previous owner, and they would likely say, not often.
It certainly didn't move much in the first few years of taking over The Birdhouse.
Then Covid hit. Then the Ukraine/Russian war. And a whole lot of stuff in the midst of all that that were by-products of those issues plus droughts, the US exchange, huge herds of Chinese pigs that shockingly survived swine flu and needed feeding. All of these in some way impacted the price of seed.
And it continues.
Sometimes when you live in small town Ontario, you think that you are largely insulated and not impacted by what happens in the world at large.
This couldn't be farther from the truth.
We've all seen the impacts at the pumps. In the grocery stores - I was looking for an english cucumber the other day that just didn't exist. What did exist were 5 mini cucumbers on a yellow tray - minute, likely bitter, little siblings to what I was looking for, for the tidy sum of $6.99. What? And that was on sale from $8.99!!
Jaw drop and back away from the veggie aisle please!
I've learned a lot since joining the retailing crowd as an entrepreneur. It's been a huge learning curve, and I'm sure I've a tonne more to learn in the upcoming years. What I know now vs 5 years ago is steep and I also understand that there are a lot of people who don't understand how pricing works in retail.
I only have to browse Facebook to see the anger and misunderstanding over pricing. While I am sure that there are bad apples in the crowd who try to scam and cheat people over the pricing of their items, I can assure you that the majority are just honest people trying to survive the current markets and be able to pay their bills and put food on the table.
Here is a little breakdown of how pricing works that I hope helps the misunderstanding. Taking out your anger at small business folk is misplaced. There are forces here that we have zero control over.
The wholesalers we retailers purchase from are dealing with economic drivers the same as everyone. Shipping costs are still up although some vendors are expressing a little relief in that area. Rent is going up for those who rent their spaces. If they have mortgages on their commercial space, those are going up as we are all well aware. Utilities are going up for commercial as well. Exchange rates are brutal. If they purchase seeds and grains, it's a little like dealing with stock markets. The prices are volatile and can go up or down, but with all the world impacts into these items they've been driven up. All of this info impacts their prices on their products to us. We retailers purchase our products that we are going to resell from wholesalers at wholesale prices.
When wholesale prices go up, retail prices follow. The difference in the price retailers pay to what consumers pay is what hopefully keeps retailer businesses going, their employees employed and all the other bills that every business has to pay, paid.
Every dollar a retailer spends has to earn a return. Every bit of space in their brick and mortar store has to earn its keep to be profitable and keep the wheels of that business turning. The difference between wholesale price and the retail price is called the margin. Typically a margin aims for 50% (thanks Google search!) - so if a retailer purchases something for $10, it sells it for $20 and through the magics of mathematics that is a 50% margin.
However, that margin is often wrecked by competition and the need to keep people coming through the doors. Consumers are savvy and often know what the best prices are and where they can be found. Even Big Box stores will have something called Loss Leaders - items in demand with low margin (well below the 50%) and they'll put the item in a corner of the store that people have to work their way through the store to pick up and hopefully see something else they like and put it in their cart as well. The Right Stuff is our Loss Leader. If you were to buy all the seeds individually in the amount to build the 20lb Right Stuff at full margins - well lets just say sticker shock would ensue! And we'd be out of business.
Where seed is concerned, there is competition out there, although we aren't always comparing apples to apples. Big box stores may seem like they have deals, but they often offer lower quality and lure the unsuspecting consumer to buy bird seed full of fillers - stuff that the birds don't eat, but make the shopper think they're buying quality. The box stores are often the ones buying up seed on the market in huge quantities, making it harder for the smaller wholesalers to buy seed at decent prices. It will then sit in their warehouses for who knows how long before it hits their shelves. So that box store seed may not only be lower quality, but old as well. It's shelf life at your house will not be as long as you'd hope to expect.
Here at The Birdhouse, we buy from wholesalers who also love the birds and have made it their business to offer quality seed and suet. Our seed and suet is brought in weekly from people we know love the birds as much as we do. They do their level best to secure quality seed at as decent a price as the market allows. I know they don't like the price increases any more than we do, or any more than you do. And when it lands here, and price changes happen, after I pick my head up off my desk, I sit and deliberate and do the math, because typical margins are not going to work and we want to offer the best seed at the best prices possible that will keep us open and moving forward, employees paid, bills paid, AND keep customers as happy as is possible in such times as what we are dealing with now.
And these are not easy times.
We've been notified that seed prices are going up again, so I'll be sitting at my desk doing math again. I hate doing math, have I mentioned that?!
Anyhow if you've read this far thank you. It's much appreciated. Please like and share it on social media, because the more consumers are aware, the less us retailers get yelled out!
Our wish for you is a beautiful 2023 - may your feeders be filled with incredible birds and your skies blue.
Thanks Amy Quinn! Thrilled to hear its all been such a success!
I bought a pole system with baffles and a quantity of nuts earlier this year. I am so pleased with everything I bought and not sorry for a moment! You quality of nuts is far superior to anyone else. The birds took note... I did two large piles of nuts on my large tray feeder, one was yours and the other was from a somewhere else. Here are the results- Red-bellied Woodpecker, Nuthatches both Red-breasted and White-breasted, all preferred your nuts. Only the Red-bellied would not be pushed off by Blue Jays, the Blue would settle for other pile if the Red-bellied was there. I will be back soon for more nuts and seed! I have no squirrel issues with the baffles! All the best and thank you for being there.
@John - Bobbi's wording is as follows: Typically a margin aims for 50% (thanks Google search!) - so if a retailer purchases something for $10, it sells it for $20 and through the magics of mathematics that is a 50% margin.
You may confusing margin with markup. Margin, or gross margin (or gross profit) is the difference between Sale price and cost of goods sold. She is correct in saying there is a 50% margin. $20-$10 = $10 gross margin. Gross margin / Sale is $10/$20 or 50%. Your comment refers to markup and not margin. Thanks John for supporting the store!
Thank you Don. We appreciate your kind words.
50% is margin. 100% is mark up. Either way the numbers are the same.
Thanks Bobbi for the explanation. Providing personal service and convenience while competing with huge retailers like Walmart isn’t easy. We appreciate everything you and your staff do.
Good article but I question the math. Buying an item for $10 and selling for $20 is a 100% markup, 50% markup should sell for $15