I did say in last week’s post that the topic of price dispersion was becoming a bit one-dimensional, and, because I repeated it so often, frankly, a bit dull. I can say it, it’s my blog.
But, that was until zucchini and summer squash hit the market in a tidal wave and brought with them a 200% price dispersion!
You can get summer squash for either $1/lb. or you can get it for $3/lb. (neither certified organic). Imagine if everything we bought over the course of a typical summer day had the same price dispersion. Your $2.50 iced coffee costs $7.50 down the street. That $7.50 deli sandwich costs $22.50 around the corner.
But, for the farms selling these crops, the impact is even greater. If we could assume that the cost of bringing a pound of zuke or squash to market (growing, harvesting, and distributing) is more or less equal (a big IF that will cause some debate, but, so be it), the gross margin that the seller of the $3/lb. squash sees would be 3-201X that of the seller of the $1/lb. squash.
Realistically, it’s probably around 5X…. For example, if the cost to bring zucchini to market is $.50, the $1/lb. squash leaves $.50 to pay all other overhead expenses and provide the farmer with a profit. The seller of the $3/lb. squash has $2.50 left for each pound sold. This obviously doesn’t address the impact of price on sales, but we can safely say you’d have to sell a lot more $1/lb. squash to see as much profit as you would from the $3/lb. squash.
And, here are the facts and figures on the prices of zucchini & summer squash at the market last week:
Prices for summer squash ranged from $1.00-$3.00/pound with a price dispersion of 200%. The mean (average) price was $1.90; the median price was $2.00, and the mode price was $2.00. While the majority of sellers were in the $2.00 range, there were quite a few outliers, as well.
Below is an illustration of what this price dispersion would mean in terms of revenue at different volume levels: