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Variable Pricing FAQ

Question Answer

What is variable pricing? How will this change savings for patrons?

  • Variable pricing is a strategy where multiple factors are considered in determining the price of a product – such as market price, cost of acquiring the product, importance to the customer, etc. This is the standard pricing method used by grocery retailers.
  • This strategy differs from DeCA's traditional cost-plus approach, which adds a flat 5 percent surcharge to the cost of a product.
  • In the current environment, prices fluctuate periodically based on changes made by manufacturers. In the future, prices will continue to change periodically just as they do today, but the overall out-of-pocket cost of groceries for commissary patrons will not increase. Although variable pricing will adjust some individual item prices up or others down, variable pricing will not impact the level of savings patrons can expect to receive. In fact, the 2017 NDAA mandates no change to patrons' overall level of savings.
Question Answer

Why is DeCA moving to variable pricing?

  • In the past, DeCA operated on a cost-plus approach, which adds a flat 5 percent surcharge to the cost of a product.
  • This sounds great – but it isn't actually what's best for the patron or the taxpayer. The cost-plus model means that any fluctuations in cost get automatically passed on to the patron – including when costs increase. In turn, that can mean that savings are not consistent across the store, some products are way cheaper at the commissary and others struggle to compete with groceries downtown.
  • Now, DeCA can do what every other grocery store does and respond to the market. The agency can absorb cost increases that it doesn't want to pass on to its patrons, and can respond to customer preference and market competition. And, DeCA can make sure its business runs efficiently and covers costs.
Question Answer

When will these changes take place?

  • DeCA conducts regular category reviews and is in the process of conducting a category performance improvement effort.
  • DeCA presented regional savings baselines to Congress at the end of January 2017, fulfilling its prerequisite to begin implementing these operational changes.
Question Answer

What does success look like for this transformation effort?

  • Patrons will experience prices that make more sense. DeCA will distribute savings more evenly across the store and across products of different sizes.
  • DeCA can focus on being more competitive on key items that its patrons sometimes indicate are less expensive downtown.

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