The Supermarket:
Prime Real Estate
A visit to a large supermarket can be a daunting experience: so
many aisles, so many brands and varieties, so many prices to keep
track of and labels to read, so many choices to make. No wonder.
To repeat: An astonishing 320,000 edible products are for sale in the United
States, and any large supermarket might display as many as 40,000 of
them. You are supposed to feel daunted-bewildered by all the choices
and forced to wander through the aisles in search of the items you came to
buy. The big companies that own most supermarkets want you to do as
much searching as you can tolerate. It is no coincidence that one supermarket
is laid out much like another: breathtaking amounts of research
have gone into designing these places. There are precise reasons why milk
is at the back of the store and the center aisles are so long. You are forced
to go past thousands of other products on your way to get what you need.
Supermarkets say they are in the business of offering “choice.” Perhaps,
but they do everything possible to make the choice theirs, not
yours. Supermarkets are not social service agencies providing food for
the hungry. Their job is to sell food, and more of it. From their perspective,
it is your problem if what you buy makes you eat more food than
you need, and more of the wrong kinds of foods in particular.
And supermarket retailers know more than you could possibly imagine
about how to push your “buy” buttons Half a century ago, Vance
Packard revealed their secrets in his book The Hidden Persuaders. His
most shocking revelation? Corporations
were hiring social scientists to
study unconscious human emotions,
not for the good of humanity but to
help companies manipulate people
into buying products. Packard’s chapter
on supermarket shopping, “Babes
in Consumerland,” is as good a guide
as anything that has been written
since to methods for getting you-and
your children-to “reach out, hypnotically … and grab boxes
of cookies, candies, dog food, and everything else that delights or interests
[you].”
More recent research on consumer behavior not only confirms his
observations but continues to be awe-inspiring in its meticulous attention
to detail. Your local library has entire textbooks and academic journals
devoted to investigations of consumer behavior and ways to use the
results of that research to sell products. Researchers are constantly interviewing
shoppers and listening carefully to what they are told. Because
of scanners, supermarkets can now track your purchases and compare
what you tell researchers to what you actually buy. If you belong to a
supermarket discount “shoppers club,” the store gains your loyalty but
gets to track your personal buying habits in exchange. This research tells
food retailers how to lay out the stores, where to put specific products,
how to position products on shelves, and how to set prices and advertise
products. At the supermarket, you exercise freedom of choice and personal
responsibility every time you put an item in your shopping cart,
but massive efforts have gone into making it more convenient and desirable
for you to choose some products rather than others.
As basic marketing textbooks explain, the object of the game is to
“maximize sales and profit consistent with customer convenience.” Translated,
this means that supermarkets want to expose you to the largest possible
number of items that you can stand to see, without annoying you so
much that you run screaming from the store. This strategy, is based on
research proving that “the rate of exposure is directly related to the rate
of sale of merchandise.” In other words, the more you see, the more you
buy. Supermarkets dearly wish they could expose you to every single
item they carry, every time you shop. Terrific as that might be for your
walking regimen, you are unlikely to endure having to trek through interminable
aisles to find the few items you came in for-and retailers
know it. This conflict creates a serious dilemma for the stores. They have
to figure out how to get you to walk up and down those aisles for as long
as possible, hut not so long that you get frustrated. To resolve the
dilemma, the stores make some compromises-but as few as possible.
Overall, supermarket design follows fundamental roles, all of them based
firmly on extensive research.
* Place the highest-selling food departments in the parts of the store that get
the greatest flow of traffic-the periphery. Perishables-meat, produce,
dairy, and frozen foods-generate the most sales, so put them against the
back and side walls.
* Use the aisle nearest the entrance for items that sell especially well on
impulse or look or smell enticing-produce, flowers, or freshly baked
bread, for example. These must be the first things customers see in front or
immediately to the left or right (the direction, according to researchers,
doesn’t matter).
* Use displays at the ends of aisles for high-profit, heavily advertised items
likely to be bought on impulse.
* Place high-profit, center-aisle food items sixty inches above the floor where
they are easily seen by adults, with or without eyeglasses.
* Devote as much shelf space as possible to brands that generate frequent
sales; the more shelf space they occupy, the better they sell.
* Place store brands immediately to the right of those high-traffic items
(people read from left to right), so that the name brands attract shoppers to
the store brands too.
* Avoid using “islands.” These make people bump into each other and want
to move on. Keep the traffic moving, but slowly.
* Do not create gaps in the aisles that allow customers to cross over to the next
one unless the aisles are so long that shoppers complain. If shoppers can
escape mid-aisle, they will miss seeing half the products along that route.
Additional principles, equally well researched, guide every other aspect
of supermarket design: product selection, placement on shelves, and
display. The guiding principle of supermarket layout is the same: products
seen most sell best. Think of the supermarket as a particularly intense
real estate market in which every product competes fiercely against every
other for precious space. Because you can see products most easily at eye
level, at the ends of aisles, and at the
checkout counters, these areas are prime
real estate. Which products get the prime
space? The obvious answer: the ones
most profitable for the store.
But store profitability is not simply a matter of the price charged for
a product compared to its costs. Stores also collect revenue by “renting”
real estate to the companies whose products they sell. Product placement
depends on a system of “incentives” that sometimes sound suspiciously
like bribes. Food companies pay supermarkets “slotting fees” for
the shelf space they occupy. The rates are highest for premium, high-traffic
space, such as the shelves near cash registers. Supermarkets demand
and get additional sources of revenue from food companies in
“trade allowances,” guarantees that companies will buy local advertising
for the products for which they pay slotting fees. The local advertising,
of course, helps to make sure that products in prime real estate sell
quickly.
This unsavory system puts retail food stores in firm control of the
marketplace. They make the decisions about which products to sell and,
therefore, which products you buy. This system goes beyond a simple
matter of supply and demand. The stores create demand by putting
some products where you cannot miss them. These are often “junk”
foods full of cheap, shelf-stable ingredients like hydrogenated oils and
corn sweeteners, made and promoted by giant food companies that can
afford slotting fees, trade allowances, and advertising. This is why entire
aisles of prime supermarket real estate are devoted to soft drinks, salty
snacks, and sweetened breakfast cereals, and why you can always find
candy next to cash registers. Any new product that comes into a store
must come with guaranteed advertising, coupons, discounts, slotting
fees, and other such incentives.
Slotting fees emerged in the 1980s as a way for stores to cover the
added costs of dealing with new products: shelving, tracking inventory,
and removing products that do not sell. But the system is so corrupt and
so secret that Congress held hearings about it in 1999. The industry people
who testified at those hearings were so afraid of retribution that they
wore hoods and used gadgets to prevent voice recognition. The General
Accounting Office, the congressional watchdog agency (now called the
Government Accountability Office), was asked to do its own investigation
but got nowhere because the retail food industry refused to cooperate.
The defense of the current system by both the retailers who demand
the fees and the companies that agree to pay them comes at a high cost-out
of your pocket. You pay for this system in at least three ways: higher
prices at the supermarket; taxes that in part compensate for business tax
deductions that food companies are allowed to take for slotting fees and
advertising; and the costs of treating illnesses that might result from consuming
more profitable but less healthful food products.
In 20%, supermarkets sold more than $35o billion worth of food in
the United States, but this level of sales does not stop them from complaining
about low after-tax profit margins-just 1 to 3 percent of sales.
One percent of $350 billion is $3.5 billion, of course, but by some corporate
standards that amount is too little to count. In any case, corporations
have to grow to stay viable, so corporate pressures on supermarkets
to increase sales are unrelenting. The best way to expand sales, say researchers,
is to increase the size of the selling area and the number of
items offered. Supermarkets do both. In the last decade, mergers and acquisitions
have turned the top-ranking supermarkets-Kroger, Albertsons,
and Safeway-into companies with annual sales of $56, $40, and
$36 billion, respectively. Small chains, like Whole Foods and Wegmans,
have sales in the range of just $4 billion a year.
But sales brought in by these small chains are peanuts compared to
those of the store that now dominates the entire retail food marketplace:
Wal-Mart. Wal-Mart sold $284 billion worth of goods in 2005. Groceries
accounted for about one-quarter of that amount, but that meant $64 billion,
and rising. Many food companies do a third of their business with
this one retailer. Wal-Mart does not have to demand slotting fees. If a
food company wants its products to be in Wal-Mart, it has to offer rock-bottom
prices. Low prices sound good for people without much money,
but nutritionally, there’s a catch. Low prices encourage everyone to buy
more food in bigger packages. If you buy more, you are quite likely to
eat more. And if you eat more, you are more likely to gain weight and
become less healthy.
Food retailers argue that if you eat too much it is your problem, not
theirs. But they are in the business of encouraging you to buy more food,
not less. Take the matter of package
size and price. I often talk to business
groups about such matters and at a
program for food executives at Cornell
University, I received a barrage of
questions about where personal responsibility
fits into this picture. One
supermarket manager insisted that his
store does not force customers to buy Pepsi in big bottles. He also offers
Pepsi in 8-ounce cans. The sizes and prices are best shown in a Table.
In this store, the 2-liter container and the special-for-members 6-pack
of 24-ounce bottles were less than half the cost of the equivalent volume
in 8-ounce cans. Supermarket managers tell me that this kind of pricing
is not the store’s problem. If you want smaller sizes, you should be willing
to pay more for them. But if you care about how much you get for a
price, you are likely to pick the larger sizes. And if you buy the larger
sizes, you are likely to drink more Pepsi and take in more calories; the
8-ounce cans of Pepsi contain 100 calories each, but the 2-liter bottle
holds 800 calories.
Sodas of any size are cheap because they are mostly water and corn
sweeteners-water is practically free, and your taxes pay to subsidize corn
production. This makes the cost of the ingredients trivial compared to labor
and packaging, so the larger sizes are more profitable to the :manufacturer
and to the stores. The choice is yours, but anyone would have a hard
time choosing a more expensive version of a product when a cheaper one
is right there. Indeed, you have to be strong and courageous to hold out
for healthier choices in the supermarket system as it currently exists.
You could, of course, bring a shopping list, but good luck sticking to
it. Research says that about 70 percent of shoppers bring lists into supermarkets,
but only about 10 percent adhere to them. Even with a list,
most shoppers pick up two additional items for every item on it. The additions
are “in-store decisions,” or impulse buys. Stores directly’ appeal to
your senses to distract you from working about lists. They hope you will:
* Listen to the background music. The slower the beat, the longer you will
tarry.
* Search for the “loss leaders” (the items you always need, like meat, coffee,
or bananas, that are offered at or below their actual cost). The longer you
search, the more products you will see.
* Go to the bakery, prepared foods, and deli sections; the sights and good
smells will keep you lingering and encourage sales.
* Taste the samples that companies are giving away. If you like what you
taste, you are likely to buy it.
* Put your kids in the play areas; the longer they play there, the more time
you have to walk those tempting aisles.
If you find yourself in a supermarket buying on impulse and not
minding it a bit, you are behaving exactly the way store managers want
you to. You will be buying the products they have worked long and hard
to make most attractive and convenient for you-and most profitable for
them.
But, you may ask, what about all those beautiful fruits and vegetables?
Aren’t you supposed to eat more of them? Isn’t the produce section
the one place in the supermarket where the store’s goal to sell more is
exactly the same as the goals of healthy eating? Perhaps, but nothing in
a supermarket is that simple. Collect a shopping cart, turn right or left at
the entrance to the store, and let’s take a look at the produce section.
Chapter Two
Fruits and Vegetables:
The Price of Fresh
A couple of years ago I was spending some time in upstate New
York and went to the Wegmans supermarket in Ithaca. I had
read a Harvard Business School case stud}’ about Wegmans, a
chain of seventy or so stores in the northeast region known for its unusual
attention to quality, responsiveness to customers’ concerns about
health and social issues, and active commitment to “Making a Difference
in Our Community.” Because Wegmans is family owned, privately
held, and not traded on the stock market, the company has more flexibility
than publicly traded chains to offer services that do not immediately
increase sales or profits.
When you enter the Ithaca Wegmans, you find yourself in a huge
produce section, larger than the size of a basketball court. You can easily
imagine that you are in a farmers’ market in the south of France or in
Italy; the only things missing are the hot sun and the sellers at the individual
stalls. You see stacks of gleaming fruits and vegetables. You hear
the spray misting the salad greens. It smells good in there. You want to
sneak tastes of everything you see. And the variety is extraordinary. One
late-spring day 1 counted nine kinds of melons, five kinds of sweet pepby
the time I buy it, and it will be even less so by the time I actually get
around to eating it.
But maintaining the cold chain is not the only factor that affects the
quality of fruits and vegetables. Even “fresh” produce is often subjected
to processing before it reaches a supermarket shelf. To allow them to endure
transportation, bananas and tomatoes are picked while still green,
then chilled, warmed, and treated with gases to make them ripen. Bagged
vegetables and salads have been washed and cut, subjected to “modified-atmosphere
packaging” which changes the proportions of oxygen and
carbon dioxide to delay spoilage), and
sometimes treated with preservatives.
Those raunchy and convenient “baby”
carrots are ordinary carrots which have
been cut into small pieces and shaped to
look like small whole carrots, then bagged
and shipped.
The conclusion: fresh is relative. The Food and Drug Administration
says “fresh” foods have to be raw, never frozen or heated, and with no
added preservatives. But even “fresh” fruits and vegetables are often subjected
to processing before they reach a supermarket shelf. In supermarket
terms, “fresh” refers to foods that spoil faster than others. It does not
mean that foods were picked earlier that day, or even that week.
(Continues…)
Excerpted from What to EAT
by Marion Nestle
Copyright © 2006 by Marion Nestle.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
North Point Press
Copyright © 2006
Marion Nestle
All right reserved.
ISBN: 0-86547-704-3
