Loss Leader

Loss Leader

Loss Leader, a commodity sold by a retailer at less than its 'trade' price in order to attract custom. Shopkeepers who oppose price competition sometimes refer to all low-price offers as loss leaders; but a selling price which might involve them in a loss may nevertheless yield a profit to a competitor who buys at a lower price because he buys in larger quantities or receives discounts given by the manufacturer to introduce new lines.

Loss leaders are a long-standing form of advertising in retailing from which shoppers may benefit directly. It is sometimes suggested that they lead customers up the garden path: having been -tempted into the shop by 'call birds they are then mulcted by being charged enhanced prices on the main stock. This suggestion gives little credit to the common sense of shoppers; even if it were true, shoppers would suffer only if their total purchases cost more. Another objection is to 'cherry-picking': shoppers will buy only loss leaders. But if this were so, shopkeepers would soon have to stop it or go out of business.

It is sometimes argued that manufacturers may suffer by having their brands sold as loss leaders on the ground that short-lived price-cutting leads to fluctuations in sales and makes production planning more difficult; so that prolonged price-cutting may cause shopkeepers to stop carrying the brand. There are two difficulties about this view. A manufacturer can scarcely be said to suffer if his sales are increased even though they fluctuate. Further, as only well-known brands make suitable loss leaders, shopkeepers cannot easily keep their customers if they stop selling such goods.

McCulloch, John Ramsey (1789-1864), Scottish statistician and economist. He studied for some time at the University of Edinburgh, and soon decided to devote himself to political economy. His work in statistics led him to be appointed Comptroller of the Stationery Office in 1838, a position he held until his death. McCulloch had the misfortune to be over-shadowed by his contemporaries. His main work, Principles of Political Economy (1825), shows an unquestioning faith in Ricardo's doctrines, but its lucid exposition of these doctrines served as a basic text until displaced by John Stuart Mill's consumeraffairs.org.uk of the same title.

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consumeraffairs.org.uk

Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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