Our Weekly Economic News Roundup: From Walkable Cities to Cashless Countries
December 1, 2018
Beer Cans and Aluminum Tariffs
December 3, 2018
Like me, have you ever raced into your local market to get some milk and passed through produce and other aisles, grabbing some items you never realized you needed? One supermarket executive called it “building the basket” when they lure us to the rear of the store. (It is also true that if they didn’t move the milk from the truck to a back cooler, they would diminish refrigeration time and increase labor expense.)
But still, the store did nudge me to spend more money.
Six Facts About How Supermarkets Influence Us
1. Supermarket bars and restaurants affect our spending.
Yes, supermarkets are adding bars. Called a “superbarket” in Vox, grocery stores are inviting us to drink while we shop. For them, it’s a win-win. Groceries are low margin purchases but not booze. And after a drink or two, maybe, as we careen through the grocery aisle, we buy more. Whole Foods started it all in 2009. Then others copied. Similarly, Eater said we now have the “grocerant” where we can eat dinner too.
2. Music can impact how much we spend.
In one classic 1982 study, researchers observed the response to no music, slow tempo music, and fast tempo music. Keeping track of pace also, they hypothesized that the slower movements that responded to calmer music were accompanied by more shopping.
Taking the next step at a wine store, psychologists looked at whether the type of music made a difference. Discovering it did, they found that French music was correlated with French wine sales, And yes, German music increased the German wine purchases.
3. The size of our supermarket cart affects our purchases
Carts have gotten bigger. The supermarket cart was first invented (1937) by a retailer who wanted us to buy more than we could carry. More recently, stores have larger aisles, women working away from home who can visit the market less frequently, and stores like Costco that encourage bulk purchases. Whatever the reasons, journalists say that carts have tripled in size from 1975 to 2000. Others claim that Whole Foods doubled cart size between 2009 and 2011. However, the one statistic that seems most reliable indicates that when a researcher doubled cart size, customers bought 19% more.
4. Shelf layout influences our decisions.
Supermarkets have to decide who can occupy their prime “property.” Like beachfront homes, the supermarket checkout area is a coveted location. For the same reason, a separate display at the end of an aisle is a desirable spot. And, in a typical cooler, we would mostly see products from large multinationals. For example, Dreyer’s, Skinny Cow, Edy’s and Häagen-Daz are actually all Nestlé. Similarly Magnum, Ben & Jerry’s, Breyer’s, Klondike and Talenti are from Unilever. If the aisle had 24 doors, only two might lead to the generics and niche brands.
5. Product descriptions affect what we think we should buy.
At Trader Joe’s, a smaller U.S. grocery chain (owned by Germany-based Aldi), they care about their adjectives. Catering to a niche market of shoppers who want bargains and healthy food, they mostly name and sell their own brands. The label on some nuts could say Sea-salt-and-turbinado sugar-chocolate almonds while a chicken dish is spatchcocked lemon-rosemary chicken. That turbinado just refers to a certain type of sugar cane. But it sounds good.
6. Finally, it’s the choice dilemma.
Some stores like Trader Joe’s believe less is more. Typically they have only 3,000 or so SKUs–stock-keeping units–the number of items in a store. A normal supermarket has more than 35,000 SKUs.
According to Columbia professor Sheena Iyengar, less of a choice generates higher sales. However, the bigger chains give us much more.
Our Bottom Line: Nudges
Nobel Laureate Richard Thaler and his co-author Cass Sunstein tell us that we go through life influenced by nudges that shape our behavior. A behavioral economist calls the phenomenon choice architecture. Indeed, through sound, transport, language, choice, and placement, the “architecture” of the supermarket affects how much money we spend.
My sources and more: If you just listen to one podcast about supermarket behavior, I recommend this Freakonomics episode on Trader Joe’s. However, to read onward, you can look at Consumerist for cart size, this classic study for music, and Businessinsider for the wine study. Then Vox and Eater told me about grocery store bars and restaurants while NPR explained why the milk is in the back of the store.
