Getting Cheap Candy for Halloween

If you ask someone where the cheapest candy is sold, the most common answer is Walmart or Costco. That is the wrong answer. If you pay attention when you’re shopping, you will realize that the cheapest candies are in fact at pharmacies (e.g. CVS, Walgreen and Rite-Aid). The pharmacies routinely undercut even Walmart when they price their candy. Since Walmart has a much larger buying power than than the pharmacy chains, and hence is likely to buy their candy at the lowest possible price, the pharmacies are likely to be losing money on candy sales if they undercut the prices at Walmart. Why, then, did the pharmacies coincidentally all decide to use candy as loss leaders?

My initial thought was that perhaps the pharmacies are all involved in a massive conspiracy to feed candy to their customers to sicken them, so as to increase the sales of their more profitable drugs. Then, I stumbled upon a working paper on loss leader pricing by the Federal Trade Commission (with the pdf here), which says that the most profitable way to use loss leaders is to target the most profitable customers. In other words, the pharmacies offer candy as loss leaders because their most profitable customers (ergo, their sickest customers who buy the most drugs) all like candy! By losing a little bit on candy, they make much more profit on the drugs these profitable customers also buy at the store.

Now that you know where to get the cheapest candies, remember to enjoy candy in moderation so that they sweeten your life, and not sicken you. And the next time Halloween rolls around, remember to hit your local pharmacy chain store for the candy!

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