BETTER FRUIT 



AN ILLUSTRATED MAGAZINE PUBLISIILD MONTHLY IN THE INTEREST OF MODERN. PROGRESSIVE FRUIT GROWING AXD MARKETING 



The Effect of Retail Prices on Fruit 



By Ralph E. George, Department of Economics and Business, Whitman College, Walla Walla, Washington 



A FACTOR of great imporliuicc in 

 the marketing of large fruit 

 crops is the elasticity of prices. 

 The great iiia.jority of apple producers 

 recognize at present that one handicap 

 which they must overcome is the fail- 

 ure of retail jjrices to fluctuate with 

 the prices received by the farmer. At 

 the present time tiie normal dillicultics 

 in selling the croj) in years of large pro- 

 duction are greatly increased by the 

 apparent inability of the farmer to se- 

 cure larger consumption of apples in 

 years of large crops than in years of 

 small crops. I'nless the consumers can 

 be induced to eat more apples when a 

 large crop is produced, the farmer must 

 naturally sull'er heavy losses. In the 

 past this increased consumption on the 

 part of the general public has been 

 most diflicult to secure, with the result 

 that in such years much of the crop 

 has frequently gone to waste or been 

 sold at great loss. This failure, how- 

 ever, can largely be traced to the fact 

 that retail prices seldom represent with 

 any accuracy general crop conditions 

 and prices. The farmer may be receiv- 

 ing extremely low prices where the 

 retailer is charging the same or only a 

 slightly lower price than in short 

 years. The wholesale market may be 

 glutted, apples may be spoiling in the 

 terminals, farmers may be receiving 

 unremunerative ijrices and still the 

 retail price may be the same as in 

 periods of scarcity, ^^^len consumers' 

 prices change so little, it is natural that 

 consum])tion should not be materially 

 increased. Tlie elTect of lowering i)rices 

 in increasing the consumption of such 

 a commodity as apples can hardly be 

 overestimated. A reduction in prices 

 is one of the standard methods adopted 

 by all big stores and other retail dis- 

 tributors to sell a surplus stock. Take, 

 for example, the luethod now followed 

 by the big clothing stores. Almost each 

 season such stoies offer for sale at pre- 

 sumably reduced prices the samples of 

 their stock, thus preventing any accu- 

 luulation and storing of stock, with all 

 the loss which such a policy causes. 

 The apple is in nuich the same market 

 position from the standpoint of the 

 consumer. It is not at present a stand- 

 ard article for consumption. It does 

 not enter into the necessary budget of 

 the average family as does sugar. 

 Under such conditions, it becomes a 

 luxury which will be affected very ma- 

 terially in its consumption by the price 

 of the commodity. In the case of 

 another luxury, the automobile has 

 been increased enormously by lower- 

 ing the prices and advertising the re- 

 duced prices. So if the retail price of 



apples could be lowered in periods of 

 so-called overproduction it would be 

 possible to increase consumptiim to a 

 very marked degree. Families with low 

 incomes, unable in the past to buy 

 apples, would then consume them and 

 families of higher incomes would de- 

 mand more apples or apples of better 

 quality. It seems evident, then, that 

 lowered retail prices would do much 

 to dispose of the crop in years of over- 

 production. 



To secure these lower retail prices 

 when the farmer's returns are low is 

 one of the problems which the farmer 

 must study. Various factors are re- 

 sponsible for the inelasticity of retail 

 apple prices. The conditions which are 

 the result of our present system of 

 marketing through a long series of 

 middlemen undoubtedly tend to keep 

 retail prices more or less rigid. But 

 one of the most important factors is 

 the lack of knowledge concerning the 

 conditions of the apple crop, a lack of 

 knowledge prevalent not only among 

 the consumers but also among the re- 

 tailers. By the time a number of deal- 

 ers have bought and sold the apples 

 knowledge of crop conditions has be- 

 come so dissipated that the retail 

 grower does not realize the actual con- 

 ditions of the market. But if the grower 

 is fre(|uently only slightly informed 

 concerning the seasonal cro]), the plight 

 of the consumer is much more dense 

 ignorance. Seldom indeed does the 

 consumer know that the crop is large 

 or small, of good or poor quality. He 

 is generally inclined to consider the 

 retail price as a sign of general condi- 

 tions, if he considers the question 

 at all. 



But if more adequate Information 

 were available to the consumer much 

 of the i)rcsent rigidity of prices should 

 disappear. In seasons of large produc- 

 tion he would be inclined to demand 

 from his grower lower prices for this 

 much-prized conmiodity. Furthermore, 

 he would watch for lower prices with 

 the expect ation of buying more or bet- 

 ter apples as they came on the market. 

 This attitude on his part would do 

 nuich toward making more elastic 

 jjriccs possible. One factor making 

 tlie average retailer conservative in the 

 I)urchase of api)les and in the setting 

 of prices is the fear that he may be 

 unable to sell more than bis ac<'us- 

 tomed amounts. When he feels hesi- 

 tant to lower prices because he feels 

 this step will not increase his trade 

 greatly he cannot he blamed nuicli. In 

 many cases he does not feel able to 

 advertise these lower prices, and con- 

 sequently doubts the cirect of lowered 



prices in increasing consumption. He 

 consecpiently prefers to secure a cer- 

 tain profit from his business rather 

 than to run risks of lessening that 

 fairly certain profit. If the consumer, 

 however, is looking for lower prices 

 and expecting to increase his pur- 

 chases, the grower will change his 

 opinion on the question of the price 

 level. If the retailer himself is not 

 required to advertise these lower 

 prices, if the consumer is well informed 

 on the general crop and market condi- 

 tions, then the grower will feel that 

 lowered prices will result in increased 

 sales, and that therefore such a policy 

 will prove profitable to him. There is, 

 fu}thermore, a more pronounced ad- 

 vantage to be derived from the educa- 

 tion of the consumer on such (luestions 

 as that of the wholesale market. In 

 these days of criticism of the middle- 

 man, all retailers are on the defensive 

 with regard to this change. If they 

 feel that the consumer knows that 

 wholesale prices have been reduced 

 and that consquently lower retail prices 

 shoulil be made, the retailers will be 

 inclined to satisfy the informed demand 

 of the customer for lower prices. The 

 education of the consumer, then, on 

 ([uestion of production and wholesale 

 prices is of very great importance in 

 determining retail prices. If the gen- 

 eral body of apple consumers under- 

 stand that the crop is large and that 

 the wholesale prices are lower than 

 usual, the grower will not hesitate long 

 in lowering his retail prices accord- 

 ingly. This lowered retail price, it 

 must be remembered, is of gicat value 

 to the farmer through its effect in stim- 

 ulating demand. Conseciuently the 

 widespread education of the general 

 jniblic as to market conditions becomes 

 a (luestion of considerable importance 

 to the farmer when he is considering 

 ways and means of disposing of a large 

 crop. The more directly apple prices 

 to the consumer fluctuate with whole- 

 sale prices and the more the consumer 

 understands concerning Ihe wholesale 

 l)rices, the more elastic will !.<e the 

 demand and Ihe higher prices will be 

 in periods of large crops. The con- 

 sumer will he trained to look for low- 

 ered retail prices and on a decline in 

 these prices will buy larger (juantilies. 

 If this view be cori'ecf, among the 

 questions which the farmer should con- 

 sider is that of seeming this education 

 of the general consuming public as to 

 market conditions and prices. M first 

 glance this would seem to be a 

 most diiruult ])i'oposition. Yet recent 

 changes are making such a proceeding 

 not only possible but practicable. In 



