In Manhattan Pizza War, Price of Slice Keeps Dropping

http://www.nytimes.com/2012/03/31/nyregion/in-manhattan-pizza-war-price-of-slice-keeps-dropping.html?hp=&pagewanted=all

by asnyder • 14 years ago

91 103 14 years ago

jcampbell13• 14 years ago

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.

klbarry• 14 years ago

I definitely prefer some $1 slices to some expensive slices. I believe there is a strong element of placebo in price.

jrockway2• 14 years ago

I think 2 bros' $1 slice is pretty good. Their sauce has a pretty good flavor.

But really, don't you think you're getting awfully emotional about pizza? Every other storefront in Manhattan sells pizza; the good stuff is not going anywhere. This is like someone who flies paid first class getting upset that Ryanair charges $1 for flights. It's just publicity. Things will be back to normal eventually.

jcampbell13• 14 years ago

No, I think I am rightfully emotional about hating $1 pizza. The shit is fine as a cheap lunch, but getting a real NY slice is part of the reason tourists come to NY. It would be a fucking travesty if they thought they were getting a proper slice at a $1 shop.

Would it be okay if in Maine a bunch kiosks opened up selling $1 lobster rolls that were just fake seafood? Of course not.

Edit: I do think you are right about 2 Bros. Their $1 slice is respectable.

ww520• 14 years ago

Why is 99c pizza is not proper NY slice? That's what NY is. It's part of the NYC culture.

ajpiano• 14 years ago

Part of NYC culture is having strongly held opinions about pizza, so I think it's a perfectly reasonable statement to make. Moreover, I recently had the slice from this very 2 Bros the other day at a meetup, and was vastly underwhelmed. The sauce was meh, the cheese was gummy, but the worst part of the experience was that the slice was just undercooked - the crust simply wasn't crisp. It's super popular, and for 99 cents, a good value and still better pizza than you can get anywhere else in the world, but quality-wise, Abitino's and Famiglia both blow it out of the water, and that's saying nothing of your average independent neighbourhood pizzeria.

matdwyer• 14 years ago

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

fceccon• 14 years ago

When I were in NYC I ate at Grimaldi and I must admit their pizza is better than most you can find in northern Italy, if I remember correctly the owners are from Puglia.

gyardley• 14 years ago

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.

njharman2• 14 years ago

To answer "why?". From other post "a real NY slice is part of the reason tourists come to NY"

It's that attitude, which pervades your post. I'm doubt you will be able to comprehend (if you could you wouldn't write that way) and I won't convey it well. But, something like pig-pigheadedness, ridiculous amount of belief in something so obviously untrue (using that to insult and dictate the "worth" of others), misplaced pride (in NY and it's Pizza, hint no one really gives a shit).

dot• 14 years ago

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

njharman2• 14 years ago

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

zackattack• 14 years ago

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.

Hominem• 14 years ago

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

stephengillie• 14 years ago

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• 14 years ago

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%...

nknight• 14 years ago

I think the story is the comedic insanity that slices of pizza seem to be inducing in New York. Soon there will follow prank wars and unlikely sitcom plots. Eventually something will set off the Great New York City Pizza Riots of 2012. Billy Joel's Miami 2017 is just around the corner... trying to get the melted cheese out of its hair.

ricardobeat• 14 years ago

> We have enough power to wait them out

Always a great way to do business...

tbsdy• 14 years ago

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• 14 years ago

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.

InclinedPlane• 14 years ago

I guess this isn't true anymore then: http://www.observer.com/2010/10/with-subway-fare-upped-to-25...

Someone• 14 years ago

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.

chime• 14 years ago

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• 14 years ago

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.

Fando2• 14 years ago

Idiots! Raise the price but do it together.

visdown• 14 years ago

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.

Fando2• 14 years ago

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.

bitops2• 14 years ago

This is called "price fixing" and is an illegal business practice.

waterlesscloud• 14 years ago

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.

sliverstorm• 14 years ago

On the other hand, the pleasure of eating something very nearly as good for 25% less money has value to me.

res0nat0r• 14 years ago

25% of $1 is really that big of a difference vs. say 25% of $500? .25c is nothing.

Jach2• 14 years ago

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• 14 years ago

How does your body feel about all this?

crazygringo• 14 years ago

I had 2 Bros pizza, at their original location, for the first time last month. It is literally the worst pizza I've ever had -- cardboard with flavorless cheese thrown on top. This was starving at 3am, and I couldn't even finish it. (And I'm not a food snob, give me any of the Ray's Pizza slices any day!)

Keeping this in mind, it lends this whole situation a bit more humor...

lhnn2• 14 years ago

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

potatolicious2• 14 years ago

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

lhnn2• 14 years ago

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

selamattidur• 14 years ago

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...

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.

travisglines2• 14 years ago

"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• 14 years ago

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

olalonde2• 14 years ago

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

larrys2• 14 years ago

Doesn't apply to the circumstances here. And even Walmart is well know for actually putting people out of business with their low prices.

Some States have minimum selling prices for some restricted products (cigarettes for example). Pizza isn't on any list that I know of.

bitops2• 14 years ago

Why is it sickening to you? It can be interpreted many different ways.

travisglines2• 14 years ago

Well it's somewhere between predatory pricing (essentially overcapitalist ... as kalleboo mentioned) and socialistic. This is one of the cases where a larger player is trying to push a smaller player out of the market via taking a loss on lower prices at a certain location. I do realize this can be an anti-competitive tactic ... however, bringing government into the mix is a very scary proposition. It's one of the aspects of a capitalistic society that's always a damned if you do, damned if you don't proposition. There is no perfect solution to the problem and as a whole it's sickening.

ericd3• 14 years ago

The quote from 2 bros "We have enough power to wait them out. They’re not going to make a fool of us." when they have 11 other stores charging a higher rate to make up for the loss of this one that's fighting with another store makes this seem like textbook predatory pricing, which is illegal, for very good reasons.

baddox2• 14 years ago

I assume your "very good reason" is that the law will help an inferior business compete with a superior business.

jim_h2• 14 years ago

"But 2 Bros. has a security camera. Winding back to the night in question, the night of the sudden 21-cent price drop, a manager found frames that showed the front of the two stores. And there it was: Bombay/6 Ave. Pizza’s 79-cent sign when 2 Bros. was at $1. Mr. Patel and Mr. Kumar had made the first move."

Bombay Pizza made the first move to lower price.

yaix2• 14 years ago

Its only if you don't take the time to think about it for a minute. After thinking about it, I may become more reasonable. Especially in food, too cheap prices are not a good idea, because they will cause all kinds of problems, especially with quality, and may cost society a lot of money in the long run. "Free market" might be a nice marketing slogan, but it world "ain't that easy".

lost-theory• 14 years ago

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

firefoxman1• 14 years ago

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

portlander12345• 14 years ago

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

pirateking• 14 years ago

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!

yaix2• 14 years ago

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• 14 years ago

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• 14 years ago

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.

Marwy• 14 years ago

They don't have to, but for sure they can. Higher price doesn't mean anything.

Zirro• 14 years ago

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.

6ren• 14 years ago

* Publicity

beaumartinez• 14 years ago

You wouldn't, but the other 95% of the population would :-)

jim_h2• 14 years ago

Fresh out of the oven is also a factor for choosing a place. Who wants pizza that has been sitting around for a while.

The pizzas at pizza shops like 2 bros pizza are fresh during high volume times. Usually only 0-5 minutes fresh out of the oven until the next pizza is put out and sold..

I may not consider it a nice place for a date, but it's a quick and cheap lunch option once in a while.

hippich• 14 years ago

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.

electromagnetic2• 14 years ago

> 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.

lars512• 14 years ago

Sounds like an iterated prisoner's dilemma.

http://en.wikipedia.org/wiki/Prisoners_dilemma#Strategy_for_...

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• 14 years ago

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

keenerd• 14 years ago

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.

sak842• 14 years ago

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!

kwamenum86• 14 years ago

Thanks for sharing. That actually adds a lot of context to the story.

andyakb• 14 years ago

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.

sak842• 14 years ago

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.

Luyt• 14 years ago

An acquaintance of mine who once worked at a mexican restaurant told me that there was hardly any profit made on the food -- the profit came from the drinks the restaurant sold along with it. The taco as a loss leader ;-)

Same with inkjet printers nowadays.They almost cost nothing ($35), but when you run out of ink, you realize where they get their money from.

ck22• 14 years ago

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.

vaksel2• 14 years ago

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• 14 years ago

And since now the cost of gas is pretty high, they are getting a ton of money

How much of that do they keep?

ck22• 14 years ago

Note I am not talking about the profits for individual stations.

I am talking about the profits for the wholesale suppliers, the major players in the oil industry which are the most profitable business in the history of humankind (yet still get huge tax breaks and even taxpayer funding for their research and development, recently renewed in Congress).

philwelch• 14 years ago

Demand. If they did lower the price somehow (say by executive fiat putting price controls on gasoline), there would be shortages. Nixon learned this the hard way. The price goes up, effectively rationing the gasoline to whoever will pay more for it.

RichardKim• 14 years ago

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.

reubenswartz• 14 years ago

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

In Manhattan Pizza War, Price of Slice Keeps Dropping

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