Banana Arbitrage

Photo: jetheriot

Bananas are a popular topic on this blog. In February, a reader wrote in with this odd banana stand pricing phenomenon. And in 2008, Dubner explored the potentially tenuous economics of the far-flung fruit.

I’ve recently run across something similar to the banana stand case: the Starbucks closest to my apartment now sells bananas at the counter for $1 each, while right outside the door, a fruit stand sells them for 25 cents each, or 5 for $1. And the fruit stand bananas are always better looking than the ones at the Starbucks register.

Now, I can’t say I’ve ever seen anyone buy one of the Starbucks bananas. I certainly try to watch when I’m in there, but for a store as carefully orchestrated as Starbucks, I can’t imagine that they would waste counter space on a product that doesn’t sell. Though maybe with the huge margin they presumably get on each banana, they have to sell just one or two to justify it.

So, ideas for banana arbitrage, anyone? Also, what other examples can you think of where huge price discrepancies for the same product exist in such close proximity?

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  1. Bart says:

    This is a different price discrepancy I have noticed and even to the point that I am watching for it and teaching my son and wife what happens.

    It goes to ‘value packs’ of things like batteries, etc. Most of us reach for the giant value pack – more is cheaper, correct? Less package and handling? Well, the cost of goods may be lower, but the sticker price? Not necessarily so.

    At Wal-Mart and other places I see where the cost of batteries per unit is higher in the larger packs. And the next week? The reverse. I think what happens is this – the software they use that tracks sales tells them when sales are falling off – so they switch prices on ‘economy’ vs. standard packs based on volume. If you don’t pay attention you pay more for more product – that cost them less.

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    • Denise says:

      Ha! I noticed this as well at a local supermarket… JELL-O pudding. The 3.4 oz were several cents cheaper when you compared it to the unit price of the package that held about twice as much.

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      • James says:

        Noticed a similar thing a few months ago: for several weeks, the large box of (my cereal) was less than the small box. Not just less per ounce, mind, but less as in $2.75 vs $2.95 for the small box.

        Another place in which you see pricing disparity is gasoline. On the northeast corner of the intersection, Brand Name station has regular for $2.85/gal; on the northwest corner, El Cheapo has it for $2.65/gal. Now I’ve never actually seen the same tanker truck deliver to both stations, but I bet if I sat there for a few days, I might.

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  2. Gianni says:

    My guess would be the same reason their coffee is $5 and you can get a $1 coffee anywhere else…

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  3. matthew wengerd says:

    http://www.starbucks.com/menu/catalog/product?drink=smoothies#view_control=product

    I’m currently reading Onward, and am at the introduction of Vivanno drinks. Schulz said this product represented the company’s first time using fresh produce (and the logistical challenges of inventory control, transportation, and disposal) at the chain.

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  4. Hobbsy says:

    There’s always money in the banana stand…

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  5. Cort says:

    Perhaps having a few pieces of inexpensive fruit lying around is an investment in creating an aura of “health” in the store. Maybe the bananas put a healthier lens on the eyes of consumers choosing between the Giganto Muffin and Pumpkin-sized Pumpkin Bar.

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  6. JL says:

    Seeing bananas in Starbucks makes you feel their muffins and lattes are healthier than they really are. Bananas send off a health halo. They don’t put bananas there to sell them; it’s a small price for them to pay to make you feel like you ate something healthier than you actually did.

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  7. chris says:

    the starbucks manager should go purchase ALL the bananas from the fruit stand. As long has he sells 20% of them (or less if he gets a better price break than 5-for-$1), he broke even.

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  8. Mythosopher says:

    I’m under the impression that it’s also the bananas they use in smoothies. Starbucks orders the bananas for use in the smoothies, but if some sucker is going to buy just one banana for the crazy mark-up price of a dollar, bless their little hearts, let them. Starbucks makes a greater profit than it would have if it kept all the bananas behind the counter.

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