
In Manhattan Pizza War, Price of Slice Keeps Dropping - asnyder
http://www.nytimes.com/2012/03/31/nyregion/in-manhattan-pizza-war-price-of-slice-keeps-dropping.html?hp=&pagewanted=all
======
sak84
I work at Parse.ly, who's office is literally right next door to these pizza
shops. Last week, when they changed their prices, I asked the owner of the
Indian shop how low he'd go, and he said two very interesting things:

1\. He hates two bros and wants to go low enough to make them leave the area.

2\. He didn't make money from pizza even when it was priced at one dollar. The
pizza barely pays for the cost of the labor to make it. So why do it at all?
Because it acts as lead gen for his Indian food which has a much higher
margin. He has essentially a freemium model that works to beat his competitor!

~~~
andyakb
interesting logic, but honestly just doesnt seem very prudent [not saying that
you are defending them]. doing something out of emotion, while old school isnt
a reason on its own. and for the freemium model, it just doesnt make a ton of
sense. if somebody is going in for cheap pizza, are they really going to pick
up some indian food in the same order? if they want indian food, are they
going to go to a place they consider a cheap pizza shop, or are they going to
pick an "actual" indian restaurant?

the whole article just sorta reminded me of old school business practices that
arent well thought out, are based on emotion and not metrics and dont seem to
work out in the end except in rare cases of luck.

~~~
sak84
I'd give the guy the benefit of the doubt. He's been running this joint for a
while now, and I bet he actually is making decisions based on metrics he has.
Though I agree that conversions from pizza to indian food is probably pretty
low, it may just be that the margins are high enough that it warrants selling
the pizza. I don't think he would do the pizza business unless it had promise
in one way or another.

~~~
larrys
You are right. The guy is there everyday. If he's like a typical small
business owner (I've dealt with thousands) he knows exactly what he is doing
and has it all in his head.

------
Zirro
What they need to realize is that price isn't everything. Or doesn't have to
be. There are more ways to compete:

* Better pizza

* Better customer service

* Better facilities

* More variety in ingredients

* Fresher ingredients

Just like people pay more for Apples computers for equal reasons in the
computer-world, even though the competition is cheaper, I wouldn't mind paying
a (much) higher price than the one mentioned in the article if the points
mentioned above stood out against the other restaurants.

~~~
hippich
I can say only for myself, but I suspect it will work the same way for many
many others out there.

For me price is something easily measurable, where everything you described -
hard to measure.

For me model of discounts/groupons/etc work pretty well. If I see I can try
something new without paying over what I would pay in other place - I would do
it. And if it is really good - I would stick to them even with higher price.

~~~
electromagnetic
> where everything you described - hard to measure.

Quality isn't hard to measure. Where I live, in terms of pizza, there's the
chains Dominoes and Pizza Pizza. I haven't bought from Pizza Pizza in over two
years, because in their peak times they just crank their ovens and burn their
pizzas.

I'm sorry, but when I'm dropping $50 on an order burning/=cooking. When the
bottom is so black and charred and the cheese barely melted, you haven't
cooked it.

Of the smaller stores, it's mostly a matter of they can't deliver in a
reasonable time. One that does I refuse to order from because their delivery
guys try to rip you off when you're drunk (order came to ~$75, I had two
fiftys and a twenty and wanted to give him eighty. After about 5 minutes of
juggling money and change between him an me I realised he had both fifty's and
I just said 'I've got it', took the money back off him, gave him 70 and told
him to fuck off and slammed the door - I think at one point he was getting a
tip of $15 because I grabbed a 20 from a friend. The next time we ordered from
there they tried it again by 'not having change').

Every time, I end up back at dominoes because their stuff is fresher, properly
cooked and not overly greasy.

~~~
Klinky
I think you made the other posters point. You had a bad experience once and
still bought from the same pizza joint, possibly a couple more times to have
further bad experiences. Maybe it was price that drove you to continue in your
effort to get a bad business to give you a good product? Maybe you wanted a
change and thought the previous experiences were anomalous? Regardless it took
you some time to figure out that the business was bad. Now repeat that for
every pizza joint in NYC, not so easy...

Customers don't have access to the kitchen, the ingredient supply chain or
background checks on the employees. Looking at a coupon flyer doesn't tell you
that the staff is rude, the pizzas are bland and the employees don't wash
their hands. Some companies work by pumping out a poor, low cost product and
wait for the suckers to bite or the previous suckers to forget or think it was
a one-off. There are also a lot of people who will put up with crap so long as
they think they're getting a deal.

------
travisglines
"Mr. Kumar said he was contemplating checking with a lawyer to see if there
might be a city law that somehow prohibits a business from selling pizza at
outlandishly cheap prices."

This thought is sickening.

~~~
kalleboo
Predatory Pricing is illegal in many countries
<http://en.wikipedia.org/wiki/Predatory_pricing>

~~~
olalonde
There are notable opponents of predatory pricing regulation as well. (e.g.
Milton Friedman <http://www.youtube.com/watch?v=j0pl_FXt0eM>)

~~~
ubernostrum
Well, that's to be expected; Friedman's philosophy basically consisted of "If
an action is taken by a government, then that action is morally evil".

~~~
olalonde
He was indeed in favor of free markets. However, your statement is factually
wrong on two counts.

1) He was in favor of some government action, most notably monetary policy.[0]

2) His arguments were consequentialist and had little to do with morality. For
instance, he once described Ayn Rand as "an utterly intolerant and dogmatic
person who did a great deal of good.".[1]

[0] <http://en.wikipedia.org/wiki/Monetary_policy>

[1] <http://en.wikipedia.org/wiki/Libertarianism_and_Objectivism>

~~~
luriel
> 1) He was in favor of some government action, most notably monetary
> policy.[0]

Not really, he actually was in favor of privately issued competing currencies,
but he was a realist and realized this was not politically possible, so he
advocated monetary policies that did the least harm given the current system.

But always stressed he didn't believe all government actions were evil, he
thought national defense and law enforcement for example were best
accomplished by government.

On the other hand his son David Friedman is a well known anarcho-capitalist
that considered the privatization of all government functions.

------
waterlesscloud
I'm just amused that people make decisions on where to buy pizza slices on a
25 cent difference. Even the slightest difference in quality and I'll pay a
quarter more.

~~~
Jach
25 cents is a lot. If the difference in location/quality/texture/etc. isn't
enough to favor the $1 pizza, I'll buy the cheaper pizza. And I'm different
than you, a slight difference in quality isn't enough to shift me one way or
another, I need a reasonably significant difference. Anyway, if I eat only 200
slices in a year (not unreasonable) at the cheaper place, I can buy a video
game (or something else for $50) that I couldn't have otherwise gotten (all
else equal) if I bought the more expensive pizza every time.

I don't see what's so amusing to you about saving money, even if $50 is a
trifling sum for a programmer...

~~~
arthurbrown
How does your body feel about all this?

~~~
Jach
Somewhere between <http://www.youtube.com/watch?v=a6tSyDHXViM> and
<http://www.youtube.com/watch?v=HUll5SnavOw> Pizza rules.

------
chime
This is the better advertisement than what either of the two pizza joints
could have bought. A little bit of neighborhood rivalry, costing each of them
probably a few hundred dollars per day got them in NYT.

~~~
asnyder
2 Bros is pretty known and established. They have a network of numerous (I
believe the article says 11) restaurants, so I doubt they need the publicity,
if anything it can cause issues as customers may demand lower prices in their
other stores.

Personally, I believe 2 Bros is likely the better $1 pizza as they have enough
stores to buy more quantity, thus they can probably use better ingredients. I
find their slices to be comparable, of not better than your average run of the
mill pizza place that charge $2,25 to $2.50 a piece. They make money on
quantity, thus can sacrifice a bit on the price.

------
dot
And I thought the $2.75 slice at that place at 16th and valencia was a good
deal.

~~~
njharman
If you're from were I think you're from you should be eating Zante's Indian
Pizza.

~~~
zackattack
I really like that 16th & Valencia slice too. Super cheap and tastes like NYC.

I'll check out Zante's this weekend. Serrano's (21st & valencia) is cheap;
Pizzeria (17th & mission, looks like a front) is delicious. The one across
from Zeitgeist at 14th and Valencia delivers past 2am, but tastes uncannily
like Domino's.

~~~
eridius
Is there any delivery pizza in SF that doesn't use low-fat cheese? Every pizza
I've ever ordered for delivery in this city does not survive being
refrigerated and reheated. I've been told it's because of low-fat cheese. If I
go back to visit my parents in MA, get some pizza there, and reheat it, the
cheese melts beautifully and tastes divine. But any delivery pizza in SF, when
reheated the cheese doesn't even melt, I have to touch it to tell if it's hot,
and it tastes terrible.

------
selamattidur
Here's an article claiming the best dollar slice in Manhattan is at Percy's in
Greenwich Village, which I haven't tried yet:

[http://www.nypost.com/p/entertainment/food/the_best_slice_in...](http://www.nypost.com/p/entertainment/food/the_best_slice_in_new_york_lg8MCiB8RW6O30afQMnQ6N)

I think the most interesting point is that all pizzerias in New York City will
soon be either the <$1 places or the higher end places like Artichoke, with
not a lot in between. A $1 slice place moved into my neighborhood, and then
there were 2, and it's clear that some of the other pizza places are getting
hammered - one sent their daughter out on the street handing out leaflets. Of
course, that place isn't very good, either, so it's hard to cry them a river.

------
firefoxman1
The moral of this article was pretty well summed up in the conclusion:

 _"While the pizza parlors insult one another, the eating public couldn’t be
happier."_

...and that's what it's all about, Charlie Brown. After all: "It is the
customer who pays the wages.” - Henry Ford

------
InclinedPlane
I guess this isn't true anymore then: [http://www.observer.com/2010/10/with-
subway-fare-upped-to-25...](http://www.observer.com/2010/10/with-subway-fare-
upped-to-250-will-pizza-slice-prices-follow-suit/)

~~~
Someone
I cannot find good data on it, but on what I read on Wikipedia, I doubt the
correlation is that strong. Wikipedia states:

 _"In 2005,[8] and again in 2007,[9] Haberman noted the price of a slice was
again rising, and, citing the Pizza Connection, worried that the subway fare
might soon rise again. The fare did indeed rise to $2.25 in June 2009, and
again in 2011 to $2.50.[10]"_

So, the subway prize increase that "matched" a 2005 pizza slice price increase
was in June 2009?

I bet you can find similar correlations between many pairs of products. If you
pick a simple model that states the price of an item is "x liters of oil and y
hours of unskilled labour", products with the same y/x ratio will correlate
highly in price. Pizza slices and subways fares might be such a pair, with
four years of inflation correcting for the difference in absolute values.

------
lars512
Sounds like an iterated prisoner's dilemma.

[http://en.wikipedia.org/wiki/Prisoners_dilemma#Strategy_for_...](http://en.wikipedia.org/wiki/Prisoners_dilemma#Strategy_for_the_iterated_prisoners.27_dilemma)

Apparently successful strategies should be "forgiving", meaning they can
retreat from this price war, and "non-envious", meaning they can live with the
next-door shop earning more.

Maybe they can get some publicity and get that area known as the pizza part of
town, so they can both raise their prices and win.

~~~
VMG
... and start getting in trouble for price fixing once they start cooperating?

~~~
keenerd
There can be emergent, uncoordinated cooperation between competitors. If two
both adopt similar policies of price matching, one can raise prices without
consequence and the other will soon follow. It has come up on HN before...
google really needs an ability to limit the search to a range of years.

------
ricardobeat
> _We have enough power to wait them out_

Always a great way to do business...

------
yaix
Seriously, if I saw two places next to each other, one selling for 0.75 the
other for 1, I'd go to the slightly more expensive one. Its almost no
difference in price, but at least I know that the owners don't have to
sacrifice the quality of their ingredients and well-being of their staff in
order to make a profit.

~~~
antirez
Exactly, the key point about good pizza is good quality of ingredients, (and a
wood oven, no good pizza is possible with electric oven in my opinion). How
many pizza can you eat every month, considering it's full of carbohydrates?
Not enough for 0.75, 1.00, or 1.50 to be that different after all. Quality is
the first feature one should search in food.

~~~
goblin89
Price, sadly, may not reflect quality of ingredients used. It probably depends
on country culture, but at least here you can go to an expensive place and get
stale cheese buns. And vice-versa, large networks are in position to sell
better quality for lower price due to economic factors. I'd say that having
paid more you can't be less alert about what you eat.

That said, I agree with your point (considering that I'm from Russia and
you're from Italy, my positions in a pizza argument would be fairly weak
anyway =)), my objections mostly apply to grandparent post.

~~~
yardie
I've always found with a sufficiently large organization if they had the
choice between using their clout to purchase cheap but inferior goods or
slightly less cheap but better quality goods 90% of the time they choose the
former.

Invariably there are exceptions to the rule when competitors want to
differentiate themselves. Walmart is cheap quality cheap, Target is better
quality cheap.

Acer was trying to get out the cheap computer business and the CEO got fired
for it. No one ever gets fired for squeezing a few more cents out of the
system.

------
stephengillie
Non-paywalled article: <http://mobile.seattletimes.com/story/today/2017878041>

This sounds like typical business and economics in action. One company is
selling a comparable product for less than their competitor. What's the story
here?

~~~
shabble
slow news and he said/she said?

My immediate thought was 'Hotelling's Law'[1], but apparently price is a
special case and called the 'Bertrand Paradox'[2]

[1] <https://en.wikipedia.org/wiki/Hotelling%27s_law>

[2]
[https://en.wikipedia.org/wiki/Bertrand_paradox_%28economics%...](https://en.wikipedia.org/wiki/Bertrand_paradox_%28economics%29)

------
ck2
Race to the bottom, no one wins.

What I don't understand is why this doesn't work in the gas industry.

It only costs them $3 per barrel (unless it's from deep sea drilling( but yet
every corporate owned station next to each other has nearly the same price and
never "race to the bottom" like the pizza wars.

~~~
vaksel
sometimes there is.

i.e. there is an intersection by me that has 3 gas stations on it. They used
to have identical pricing. Then one station started charging the same amount
for credit card transactions as it did for cash(other stations had cc
transactions cost 10 cents more per gallon)

result? that station is always packed...there is a line to actually get
gas...while the other stations barely have any business.

So it costs them 10 cents out of $3.70 a gallon or 2.7%(you know the actual
cost of cc transactions..that every business in the world pays without a
second thought) to get market penetration.

And since now the cost of gas is pretty high, they are getting a ton of money,
since every fill up gets them $40-80

~~~
jamesbritt
_And since now the cost of gas is pretty high, they are getting a ton of
money_

How much of that do they keep?

~~~
vaksel
not much, the profit margin after they pay their bills is about 3-5%

------
Hominem
The 99cent place on 8th and 41st is great. The turnover is high so the pizza
is always fresh out of the oven.

------
lost-theory
This episode of Internets Celebrities is entertaining and relevant:
<http://www.youtube.com/watch?v=2QE96FAWX4M> :)

------
pirateking
At those prices, and with the locations being right next to each other, I
would buy 1 slice from each! Best of both worlds (or less bad from any single
world).

A worthy slice is $4 here!

------
reubenswartz
Price wars: a way to transfer money from producers to consumers. If you're a
business owner, avoid at all costs (no pun intended).

------
portlander12345
Why are even lousy cheap cheese pizza slices $2.50 in Portland?

------
tbsdy
It's interesting to see this occuring. Both of these firms are going to get
hurt by this, or worse both will go bankrupt. Even if one firm survives, when
they raise their prices, who's to say that their customers won't go to another
of the numerous pizza places that are nearby?

I think it's a real lesson for startups - don't let your pride and pig-
headedness rule your head, or else that will be the end of your company!

~~~
defrost
There's more to these things than meets the eye.

Where I live petrol stations make relatively little profit on fuel sales, the
bulk of their profit comes from "also bought" items - milk, newspapers, ... ,
they're essentially high markup mini malls.

The two advantages to cheap cheap pizza are firstly in can get the crowds in
and secure the sales of "also bought" items with better profit margins,
further it leeches the crowd away from the competitor.

I was witness to a price war in geophysical surveying, over a decade in which
fuel and manpower costs rose and inflation occurred the per line/km cost of
flying aircraft with state of the instrumentation onboard dropped from $17 to
$7 and effectively eliminating any profit in taking on million+ dollar survey
jobs with risks.

Why the hell would the companies do that?

I would hazard a guess that the owners, being part of a much larger business
that profited from resource extraction, weighed the benefits of having lead
information on deposits potentially worth billions over the drawbacks of
having losses of several tens of thousands.

------
RichardKim
Sooner or later we'll see a groupon deal for the 99c pizza!

What we effectively have is an arms race in not just pizza, but one can argue
that it's happening in all of NYC value to 3 star restaurants and spas and
other commodity services via various promotions created to get traffic through
the door. The jury is still out there to see if traffic can be converted into
loyal customers (which I argue NO for NYC) whether that's groupon vendors or
99c pizza.

What's the difference between a restaurant that charges 99c cheese pizza but
2.00 for pepperoni pizza v. a spa that gives 70% off of a $100 spa service
through lifebooker or groupon deal sites? (btw, if you look at the way these
coupon site's business model works, $100 70% off that you buy for $30 doesn't
mean vendor gave only 70% off. Groupon take ~30% of that $30 so vendor really
only get $21 in return for value of $100. Furthermore, groupon squeezes net
working capital by giving that cash to the spa after 15-20-45 days from when
Groupon received the money).

Both type of businesses should be near break-even profitability at best UNLESS
THEY HAVE THE ABILITY TO UPSELL their services/products or they do it to drive
in traffic in hopes of converting them into return customers (marketing cost
of doing business). However, in NYC where there are 10,000+ restaurants and
hundreds of groupon-esque deals daily and in every corner there's a 99c
pizzeria, this traffic is worthless traffic and it's permanently creating a
lower RONA (return on net assets) for the entire industry. These pricing
schemes get played out in the convenience stores as well in the boonies (w/r/t
cigarette and beer pricing).

Maybe these local vendors are smarter than I think and have figured out a way
to upsell people into purchasing 100% premium pizza for 1 additional topping
or restaurants make up the discount and stay profitable through selling higher
margins products in conjunction with the coupon (alcohol for instance is 100%
margin product) -- so then at spas, I would hypothesize that the upsell
potential to be much lower than restaurants so they're just f'd. But to say
that we can last longer than the other vendor is completely moronic and naive
view of their customer base - why don't they ask abercrombie and fitch and
every other u.s. retailer what happens when they turned promotional in 2008
and now they've tried to curb heavy promoting. Price Stickiness is very hard
to get rid of for the consumer especially on the value end of the spectrum.

Regardless of all these pricing wars, one can't imply that all pizzeria's
margins are toast or all restaurants are toast. Jean George has no problems
filling his seats at his michelin star rated restaurants offering no groupon
just like Artichoke Basil, a late night pizzeria, in NY doesn't have any
problems selling great artisan pizza at an overpriced price to clubbers coming
out of the Avenue and 1-oak (2 super-exclusive bottle service only high-end
nightclub in NYC) at 2am. That's just smart business and superior product ->
turning a commodity business into a sought after premium charged product. If
you're spending $500 for 1 bottle of grey goose to get into a club, you're
completely fine coming out drunk and spending $10-$12 for a small pan pizza as
long as it looks like high-end.

------
lhnn
That Indian's indignant attitude and desire to have a law to protect him is
infuriating.

~~~
potatolicious
Is there a good reason why you pointed out the "Indian" part? It doesn't seem
relevant to the rest of the sentence.

~~~
lhnn
Because there was one Indian in the story and I forgot his restaurant's name.
Was it unclear who I was talking about?

------
Fando
Idiots! Raise the price but do it together.

~~~
visdown
My guess is that this would cause customers to move to altogether different
pizza shops that have focused on (or maintained) higher quality under a more
reasonable price constraint.

~~~
Fando
My initial comment was made with an implied *wink, which apparently should not
have been so thoughtlessly omitted, given the unfair amount of insight it then
required of readers to detect my humorous intentions. After all, if both pizza
vendors would simply raise the price to a reasonable $1.00 or $1.25 or w/e,
they could both "afford the rent" and thus coexist happily instead of shooting
themselves in the foot. Not realizing this of course, is why I called them
idiots, not in a cynical, but a face-palming type of way. Comprendes? It may
also be worthy to note that this reply was compelled by the presumptuousness
with which my intelligence was addressed.

------
jcampbell1
This shit has to stop. In my current neighborhood, their are a dozen 99c shops
(midtown), and no proper slice-a-rias. $1 pizza is a slap in the face to new
yorkers. The shit is disrespectful to the city and its residents. It offends
me to the core. I do respect the need for people to get a cheap lunch, so I
undersand these businesses, but they should be relegated to alleyways. The
thought that some tourist may buy a slice at a 99c joint and think it is a
proper NY slice just breaks my heart.

Edit: Holy christ, this is my most hated comment ever. I am personally an
offensive human being, but I'd love to know why this comment was so hated.

~~~
matdwyer
As an outsider, I prefer the $1 slice to Grimaldi's, not sure if that's one of
the better places but it was the only other pizza I've had in NYC

~~~
gyardley
To a fan of New York-style pizza this statement is pretty close to sacrilege -
close enough that I half-suspect you're intentionally trying to troll
jcampbell1.

Grimaldi's isn't the absolute best pizza in the city, but it's a very good
example of a thin-crust coal-fired New York pie.

But to each their own. I still have a soft spot in my heart for doughy-crust
over-cheesed death-on-a-plate small-town Canada pizza since that's what I grew
up with.

