econlife - What the Grocery Store Says About Us by Elaine Schwartz

Boris Yeltsin’s visit to a U.S. supermarket could have changed Russian history. Some say it was really the Jell-O Pudding Pops.

The year was 1989. Soon to be the Soviet President, Yeltsin was here to see the Johnson Space Center. After the tour, with 20 minutes to spare, his group stopped at a Randall’s supermarket in Houston. The man was reputedly flummoxed.

He marveled at the variety of goods that were available:

Yeltsin later said in his autobiography that seeing, “those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people.” In the Soviet Union, consumers coped with dour clerks, long lines, and shortages.

Where are we going? To what our grocery stores say about our economy.

The Grocery Store

Store Variety

When you think of the 21st century U.S. grocery store, the big ones could first come to mind. Led by Walmart and Kroger, the top 11 include Amazon’s Whole Foods and Trader Joe’s. Looked at together, we see thousands of stores and huge spending. Alone, each store is a bit different. While Walmart represents bargains, Whole Foods has a pricier organic selection, and Kroger has been called middle market.

In the grocery store list that follows, huge grocery sellers like CVS (drug stores) and Costco (warehouse) were excluded. Out of a list of 50, I copied the top 11 grocers:

Product Variety

As consumers, we support an immense amount of product differentiation. Just choose an aisle. You could see chips that are plain, sea salt, cheese or onion. Who knew there could be so many kinds of yogurt? Even milk now could be almond, 2%, whole, non-fat, supermarket brand.

Our Bottom Line: More than the GDP

In a grocery store, the GDP and subjective well-being reinforce each other. Our GDP reflects the dollar value of the groceries we produce. But our groceries deliver more. Through variety, innovation, and convenience, they boost our subjective well-being.

When we have more to spend, our demand for quality and variety increases. Meanwhile, technological innovation has enabled the retailers to know us better. Keeping track of what we buy, they identify what we want. And here is where time enters the picture, Having access to all we need in one store minimizes the time/food shopping tradeoff. So yes, we  make an average of 1.6 grocery shopping trips a week. But, a working mom and dad can do them quickly in one place, and buy some prepared food as well.

Our visits seem to been diminishing. I wonder if online shopping could be one reason:

Returning to where we began with Boris Yeltsin and ending with 1.6 visits to the 21st century U.S., we can use a grocery store to learn about more than food.

My sources and more: Thanks to Duke professor Mike Munger’s blog for the link to the econlib grocery article. From there, the Washington Post takes an interesting look at Wegman’s while you can get the top fifty list from the Progressive Grocer. After that, for some history, the Houston Chronicle had the story of Yeltsin’s visit. And finally, if you still want more, do read Michael Ruhlman’s Grocery: The Buying and Selling of Food in America.

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 - Six Facts About How Supermarkets Influence What We Buy by Elaine Schwartz

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.

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.