Sunday, September 02, 2007

Its that time of year again

Hello Everyone,
Whenever I blog I attempt to keep it vague and non-specific as well as trying to keep entries upbeat and avoid negative topics. That being said for the last couple of years there's something I've been wanting to discuss and get off my chest once and for all.
I guess you could say that the new year has begun in the north as this is when the communities encounter the most changes, Most southerner's try to take vacation during the summer and the teachers all take off for the summer so every summer the influx of new faces reoccurs and we go through the same thing every year. In each community there always arrive a few new teachers, who wish to express to you their displeasure with their shopping choices for the next year, I read on someone's blog this year that one of these people actually referred to Northern as "Evil" (how one attributes such a morality judgment on a inanimate object I'll never know). Now I realize these people are still wandering around thinking they are in the south and everything is the same here as everywhere else but I feel the need to discuss some very simple business realities with my readers in hopes that we can share some understanding. Any business details given here are simply example ratio's and do not reflect any actual charges or values of any store I have been in. Here, my southern example will be a large Southern chain that we'll refer to as WallyWorld and then a northern alternative.
In my time in the south we had to apply (actually it was built in) to any products we received at Wally's, this rate was the equivalent to 6 cents a kilogram, this charge pays for warehousing, at the distribution center, delivery by truck to your store and general receiving charges to get merchandise to your store. This charge was universal and it didn't matter what was being shipped really everything was 6 cents a kilogram for this southern Ontario location, items that required refrigeration trucks could cause a extra half a cent if the vendor didn't take care of delivery themselves. profit margins are then applied to these base costs and a retail price is established. There's a old truckers adage that states "if you got it, it came by truck" and that applies to almost everything you'll find in a southern store.
Now the northern example as many other factors to consider. Firstly not all freight is the same.
There are 4 basic types or freight; food mail (perishables such as milk, produce, dairy products etc), these items are heavily subsided by the government in order to make them the staple of a healthy diet even in the north, but they still carry allot of extra charges that you wouldn't see in the south. Instead of traveling by truck to your store these items travel by truck and/or rail usually to a distribution area near a northern hub airport. There, they are separated and sorted by community to await flight to their destinations, this involves warehousing facilities that include freezers, refrigeration facilities as well as cargo storage. Food mail always has priority over all other cargo. Based on the southern example I gave the equivalent shipping charge for these items would be $1.50 a kilogram. Now we have the product hopefully in a northern community sitting at the airport, we either ave to pay a local service or more commonly we go ourselves (to save costs) and unload the plane into our own truck and take it to the store for receiving , repackaging and placement upon our shelves. we take the value of the goods, add shipping costs apply margin and create the retail price. And yes we are a business that operates same as in the south, we would like to recover our costs and make a profit on items we sell in our store's. Why people assume we should operate as a charity up here is beyond me when most of the people from the south who come here to work are simply here for the money. The other difficulty with this type of product is that it is highly perishable, this means you must build into your profit margin the fact that these items frequently arrive in beyond sellable condition, due to missed flights etc. That and the fact that many people up here will bypass fresh, healthy product to get to product they consider fresher (when there going to use it within the next 2 days anyway) further increasing spoilage and driving costs up again. That is how fresh products arrive in our store.
The next category is dry goods. These items are food items that are part of a healthy diet but not perishable, such as canned peaches, spaghetti, healthy drinks, flour, some cereals, canned soups etc. These items also receive some subsidy from the government bringing their shipping costs in respectively at $2.00 a kilogram. These items follow the same shipping route as the perishables minus the refrigeration process, but they usually fail to have the added disadvantage of spoilage, the common problem with these items is shipping damage, ripped bags, dented cans, 22 packs etc. These items however can't be allowed to freeze which affects how much you can carry and where you can store them. The shelf life on these products is usually good enough for the next 8 months but space constraints mean you carry your supply for weekly needs.

The next type or regular order is Cargo, these are items where the actual costs of shipping must be paid and the government offers no assistance to their purchase, such as Pop, potato chips, candy, cookies, toilet paper, paper towel, health and beauty items, unhealthy foods basically and everything other than food. The respective cost of shipping these items would be $5.00 per kilo + extra costs for bulky and poorly weighted products. These products are the last priority in shipping and the reason these items are usually the first to be sold out and sit empty until a free plane can make room for them. These are the items people always hold up as examples of northern pricing for the shock factor.

The last type of shipping is Sealift/ Winter Road shipping. These are seasonal shipping alternatives that we get to use in some stores to reduce retail prices at certain times of year. For Sealift it means we try to order high volume items with high shipping costs that we can store and sell, hopefully before expiration dates. The relative cost for this type of shipping would be around the level for dry goods but represents substantial saving on some of the items. reducing the freight charges by half, which is passed on to the consumer. These products get shipped, usually to Montreal, where they are stored until the load is together, loaded into SeaCan's and loaded onto large ships such as the one's you seen on this site, they are then shipped around the Arctic and unloaded in their respective communities. We have to store these items until we can fit them all in the store and stores would like to be able to hold about a 8 month supply of these items in a perfect world. Winter Road shipping is for communities that are inland during the winter we commission convoys of trucks to perform this same function, and they travel up the frozen rivers to the various communities with the same goal.
I will not reveal true shipping charges for any community I have been in but these vary greatly as well for both the boat and the regular fly in, as fuel prices continue to rise so do these prices and the more airline's, trucking companies, railroads, and boats involved the higher the cost. So far I have seen it range from a ratio of around $50.00 nortern dollars vs $1 southern dollar, to $300 to $1.00, and oddly enough the profit margin's of the north vs the south, almost identical.
Thanks for letting me vent,
Take care,


jen said...

I think (from my own personal experiences), that the process in which food arrives to us isn't taken for granted. I think it is merely the visual shock that gets everyone. I can't believe the price of pop! It's insane! However I understand and accept why it has to cost as much as it does, and will still buy it. But seeing something one way your entire life and then one year have it change dramatically is cause for a double take at least, and maybe a few comments on ones blog to family down south. I am not saying I have complained about it on mine, but I am guilty of trying to shock my southern friends with price stories.
One might complain about the Northern prices, however they would be starving without them, so there has to be some love along with those complaints.
Cheers, Nice blog!

Anonymous said...

Having just moved to the North and am now working for the Northern, I have to agree with you. Our prices are not anywhere near as high as yours, however, there is an obvious difference compared to that of Yellowknife. The biggest beef I have with the customers right now, are the fees involved in cashing a cheque.The people here dont seem to understand that we are NOT a bank and that there are fees involved in being a third party. As well as the fees involved in the Cash Link Card. GET A DARN BANK ACCOUNT AND DIRECT DEPOSIT!