Few shoppers compare hundreds of prices between retailers, yet most hold a firm view about which shops are expensive. That impression is formed from a very small sample.

Only some prices are remembered

Accurate price recall exists for items bought frequently, in a familiar unit, with little variation in specification. Staple groceries and fuel are the clearest examples.

For everything else, the stored memory is vague or absent. Shoppers know roughly what a category costs but cannot say what a particular item cost last time.

Judgement about a retailer's overall pricing therefore rests almost entirely on the small set of items where memory is reliable, and generalises from them to the whole assortment.

Known value items become the battleground

Retailers identify the items where recall is strongest and treat their prices as public positioning rather than as ordinary margin decisions.

These lines are matched closely against competitors and held low, sometimes at very thin margins, because their prices do work that no advertising can replicate.

The cost of holding them down is recovered across the far larger set of items where shoppers have no reference and no basis for comparison.

Margin is distributed unevenly across a store

The result is that margin varies widely between categories within the same shop rather than being applied evenly across the assortment.

Items bought occasionally, bought in a hurry, or difficult to compare across retailers carry the higher margins. Specialist ingredients, accessories and impulse lines are typical.

A shopper's total bill therefore depends less on which shop they chose than on which parts of the shop they bought from.

Comparison sites changed which items are visible

Online, the items with strong recall are joined by items that are easy to match exactly, because an identical model number can be compared across sellers instantly.

Sellers respond by competing hard on precisely matchable products and taking margin on variants, bundles and accessories where no exact match exists.

This is why an identical model can be priced sharply while the case, cable or extended cover sold alongside it is not. Only one of them is being compared.

Testing an impression

Checking a retailer's price on items outside the well-known list gives a different and usually less favourable picture than the impression formed from staples.

The comparison also has to hold specification constant, since a slightly different model or pack size is the standard way that a direct comparison is avoided.

What emerges is that cheap and expensive are not properties of a retailer. They are properties of particular lines within it, chosen deliberately.