econlife - Why Online Grocery Shopping Is Good for Us by Elaine Schwartz

In many places, at most times, within two hours, an Amazon Prime member can have a Whole Foods grocery order in his fridge.

It sounds good. But not necessarily.

The Stores

The delivery people are changing the shopping experience. Some regular shoppers complain that they are getting elbowed out of where they are going by a harried person filling an order. Deli counter customers report that service is slower because of the larger orders the professional shoppers have to fill. Others say hard-to-get items like wild salmon run out by midmorning because of the online demand.

An Instacart professional shopper:

But most of us still go to the grocery store.

Online Grocery Shopping

What we buy at the store though is different from when we order online. According to a recent study, online, we tend to order healthier foods. We get more dairy, fruits, and vegetables and fewer sweets and snacks. Perhaps because we are distracted less and we get the groceries sooner, we have more self-control. It’s also possible that pictures of snacks are less compelling than the real thing.

In addition, one economist suggests that online ordering could help us lose weight. She observed that households purchase fewer calories when shopping online. At two calories less per ounce, we consume 53 calories fewer calories a day. Just from shopping online, we could lose five pounds a year! (But do we gain the weight from staying at home rather than running around the store?)

Our Bottom Line: Behavioral Economics

Behavioral economists tell us that we tend to make healthy plans for the future rather than for now. The best example is the sports club membership that we never use. It’s the New Year’s diet that we sincerely expect to follow.

When buying our groceries online, we are also contemplating the future.  Online, we activate our long-term selves. In the store, it’s the short term version. Ordering from home, we tend to select the “shoulds.” In the store, we can grab our “wants.”

So maybe it’s okay that those Prime shoppers are destroying our in-store experience. We might be healthier ordering from home.

My sources and more: WSJ started me thinking about the impact of online grocery shopping. Then, for the home side, this paper said all you could want to know about the online grocery shopper.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The iPod, Starbucks, and Richard Thaler’s Behavioral Economics by Elaine Schwartz

Discussing the iPod he designed, Tony Fadell expressed his frustration with products that said “charge before use.”

He remembered arriving home excited about a newly purchased gadget. But then his emotional momentum would hit a wall when he discovered he could not immediately play with it. So Tony Fadell and Steve Jobs created a fully charged iPod that was ready to use.

Fadell and Jobs were not the only ones concerned with emotional momentum.

 

The Starbucks Consumer

Starbucks founder Howard Schulz also targets consumer emotion. When he developed the Starbucks concept during the 1970s, he said they were a “third place,” a home away from home. Now though, with a Starbucks on every street, the allure has diminished.

Globally, you could select among more than 25,000 Starbucks for a cup of coffee:

Realizing there was a niche where he could re-invent himself, Howard Schultz left his CEO position to focus on the chain’s roastery stores. The result so far is more than 30 coffee bars that sell high-end beans and Starbucks regular brews. The chain also projects opening larger roasteries with “rare and exotic” coffees. Resembling a wine bar, these upscale coffee stores will offer small-batch roastings that encourage consumers to spend $5 to $10 and more for a cup.

As was true for the original Starbucks, the experience matters as much as the product.

 

Our Bottom Line: Behavioral Economics

Asked how he was going to spend his 2017 Nobel Economics Prize, Richard Thaler said, “irrationally.” Dr. Thaler explained that (like all of us) he does a mental accounting of his consumption decisions that divides purchases into categories. In the slot reserved for extravagances, he was planning to use the Nobel prize money.

Dr. Thaler’s mental accounting lets us understand consumer spending that will not neatly fit into the logic of traditional economics. In the Thaler model, demand and quantity demanded do not necessarily decrease as prices rise. One reason is his “extravagance slot.”

Through behavioral economics, we can explain our spending on Apple’s products and a $7 cup of coffee (that is mostly water) by recalling the need for emotional momentum.

My sources and more: Sitting here in a typical suburban U.S. Starbucks, I wondered how they could create a better experience and found this Bloomberg article. But then I remembered Tony Fadell’s TED talk and (happily) realized it all fit together. To complete the puzzle, you might also enjoy this summary of Richard Thaler’s work as the father of behavioral economics.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.