BrainTrust Query: CNBC’s Skewed View of ‘Supermarkets Inc.’

Discussion
Feb 04, 2011
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“Wonder
why you go to the supermarket for a quart of milk and leave with $30 worth
of other stuff? It’s no accident. The secrets behind sneaky
merchandising are found.” This blurb in my Sacramento Bee entertainment
section for CNBC’s airing of “Supermarkets Inc., Inside a $500 Billion
Money Machine” got my attention. I’m a supermarket guy, so I checked
it out.

Some might find the program’s tone condescending, but it accurately
explains various behind-the-scenes functions in grocery stores and the tight
margins throughout the industry. I saw nothing that would even remotely qualify
as “sneaky.” However, CNBC’s business editor and host Tyler
Mathisen did his best to be provocative.

“You are part of the largest and longest-running psychological experiment
in history — you are a supermarket shopper,” said Mr. Mathisen. “You’re
being watched, trailed, and analyzed in ways you’d never imagine. Today’s
best stores blast you with sounds and scents, the aroma of fresh-baked bread,
rotisserie chickens spinning over the flame, all designed to entice you to
buy.”

Spooky. Please, don’t take me there.

Most shoppers are probably unfamiliar
with the topics presented in the report including electronic shopping aids,
food prep, banana ripening rooms, shelf placement, slotting fees, etc.

Interviews
with industry insiders regarding store design, store electronics, impulse buying,
profit margins, and price optimization were a little off-putting.

Martin Lindstrom
of Buyology Inc., a Dane who said he “knows more about
American shoppers than they do about themselves,” told Mr. Mathisen that
research shows consumers buy 40 percent more with larger shopping carts. When
asked why more stores do not have larger carts, he replied, “Because
they’re
stupid.”

American consumers weren’t viewed any more favorably than retailers
by Mr. Lindstrom. When asked if Americans were great shoppers, he said, “Absolutely
not. And do you know what’s so interesting? They’re getting worse
and worse. Smart supermarkets can make you think you’re getting a good
deal even if you’re not.”

Jaw-dropping, shopper-savvy revelations
aside — such as dairy
positioned at the back of the store to increase exposure to other items as
the shopper treks back there, positioning key products at eye level, and store
designs that “want
to draw you back as far as they can so that they have more chance to sell you
stuff” — many of the topics covered were fresh and informative.

Most
interesting was a segment devoted to 100-year-old Kaune’s Neighborhood
Market (“Connie’s”), a 7,500-square-foot store in Santa Fe
owned and operated by former trial attorney Cheryl Pick Sommer. It compellingly
contrasted the business practices of huge chains with those of single-store
operators. Supplied by an Amarillo co-op and local suppliers, Kaune’s
doesn’t
have eggs on the shelf if local hens aren’t laying due to a cold snap.

When
asked if her business could “hold on,” Ms. Sommer said it
would “because
our neighborhood and our clientele need us to.” No invasive electronic “lures” there,
just old-fashioned friendly service.

Discussion Questions: How much better are supermarkets today at influencing consumers to buy products than in the past? Where are the greatest opportunities for stores to influence purchases?

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22 Comments on "BrainTrust Query: CNBC’s Skewed View of ‘Supermarkets Inc.’"


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Dr. Stephen Needel
Guest
10 years 3 months ago

Over the past 50 years, supermarkets have clearly gotten better at influence, but so have the manufacturers. What CNBC presented as ground-breaking was stuff I would expect all of our readers to know – milk in bakery, smells count, and so forth. The partnerships between retailers and manufacturers, however loose, driven by category management, are definitely influencing purchase decisions via layout and assortment. We would expect this to continue under the shopper marketing label.

And I agree with Mike’s characterization of the show – the host tried hard to be provocative but mostly it was a good explanation of how a supermarket works.

Ryan Mathews
Guest
10 years 3 months ago

Based on sales data indicating a 30 -40 year decline in market share of food dollars by the supermarket channel I guess you’d have to say they are worse at attracting shoppers than they used to be. All these bells and whistles and share is still slipping?

Maybe the bells and whistles can’t trump changes in lifestyle and demographics.

There’s no question supermarketers are more data and analytically driven that at any time in the industry’s history but, in the end, that seems to be an exercise in slowing erosion not turning the tide.

As to the show itself, it was naively silly and failed to address the real heart of the industry.

Steve Montgomery
Guest
10 years 3 months ago

Supermarkets are better at influencing purchases today as they continue to gather and analyze consumer purchase data. Determining what specific items, price points, shelf position, etc. influence the consumers to increase the size of their market basket only became possible with the advent of scanning and then the development of analytical tools to mine insights from the mounds of data collected.

As Mr. Mathews points out, this only helps them with the customers they have and not those shopping at other stores – who are using the same tools to increase the size of their market baskets.

David Livingston
Guest
10 years 3 months ago

I’ve noticed what highly successful, high sales per square foot stores have in common. For one they they do not do anything the way the plain vanilla chain stores do. Woodmans, Stew Leonards, Trader Joes, Aldi, and Walmart all try to keep it simple. No annoying loyalty cards. No games and gimmicks. No coupon clipping. No buy one get one frees. No minimum purchases. No games with gas discounts. Consumers are wising up and are learning this is nonsense. Look what’s happening to Supervalu, Safeway, Roundys, A&P, Winn Dixie, Ahold, Delhaize, and the dozens that have perished in the past few years. There is a reason why these companies continue to show negative comps. They are still relying on pre-Walmart pre-Amazon.com and pre-Whole Foods business models. How good are stores in getting customers in the store? Depends on what store. The 21st century stores are doing a good job. All those chains stuck in 1985 mode are not.

Carol Spieckerman
Guest
10 years 3 months ago

I’ve been saying for a while that despite all of the talk about the customer being in charge, retailers’ guiding principle is no longer “You want it, you got it” but instead, “What you see is what you’ll want.” Thus shopper marketing, rationalization, brand distortion and all manner of in-store shenanigans!

I think supermarkets, and retailers in general, are doing a great job of shaping shopper preference in the store, and they will only get better at it once they get their heads around unstructured data – but that’s another subject.

Just don’t call it “responding” to the shopper.

Derek Smith
Guest
Derek Smith
10 years 3 months ago

Shopper centricity, consumer demand modeling, price optimization – these are all ways in which supermarkets are working to align their offers to shoppers’ preferences. As consumers, we are free to make decisions about what we buy and how much of it we buy based on our own needs and preferences. Supermarkets are applying analytics to better understand our preferences so that they can better meet our needs. The goal of the supermarket, of course, is to make their shoppers happier, more loyal, and more likely to fulfill their purchase requirements in that store. As a consumer and as a member of the industry, I appreciate and admire these efforts.

Gordon Arnold
Guest
10 years 3 months ago

It has been my pleasure to entertain family and friends from overseas since the early 1980s. Without exception, they all want to visit big-box stores and without exception, the supermarket visit amazes them by the widest of margins. The most heard comment from my guests is “America is very lucky to have all of this.”

The desire to live in The United States grows faster and faster while TV and radio network news and editorial media ratings continue to nose dive. The retail industry in the US is evolving to address the opportunities for retail in the electronic social media using hand-helds as well as the internet in general. These efforts will no doubt pay off in time and make those companies willing to invest in themselves bigger and better.

As for developing and enhancing a methods to encourage selection and purchase of inventory, well that is the biggest part of our jobs. It is also known as merchandising in a free market.

Michael Tesler
Guest
Michael Tesler
10 years 3 months ago

“Jaw-dropping, shopper-savvy revelations aside”…excuse me, but we naive U.S. retailers and shoppers were reading about and many of us were responding to these specific points 15 years ago when Paco Underhill (and others) instituted new, insightful methods that studied and measured and communicated shopper behaviors.

Also, I disagree about the author’s conclusion regarding Kaune’s in Sante Fe. Yes, we love local stores and great service but my bet is that they are coming in to buy fresh, unique, and special items like those eggs and that their customers are sick of the big-brand and slotting-fee-ruled supermarkets and respond to a store that puts all its efforts to into getting the right stuff for its customers. So, it is about the product and the service…because you cannot do business on service alone (and you can on product alone…how about the”Soup Nazi”?).

Cathy Hotka
Guest
10 years 3 months ago

David Livingston is right. And despite CNBC’s breathless prose, your supermarket doesn’t know a thing about you. They gather that information to sell it, not to put it to meaningful use. Chains that eschew the sleight of hand and instead focus on unique products and a happy shopper experience (there’s never a line at a Trader Joe’s) are the ones gaining market share.

Paula Rosenblum
Guest
10 years 3 months ago

Am I the only one here who finds “mainstream” retail reportage like this offensive?

The sensationalist tone of this article reeks. It reminds me a bit of the Wall Street Journal’s series “What they know.”

The scariest part is articles like this make certain shoppers more paranoid, and also think they know all there is to know about retail.

I wish we wouldn’t even pass this kind of stuff along. It demeans us all to even acknowledge it.

Ben Sprecher
Guest
Ben Sprecher
10 years 3 months ago

David Livingston makes a great point about the new wave of what I’ll call “branded stores” (Whole Foods, Trader Joe’s, Aldi, etc.) outperforming the old guard of traditional-format grocery stores.

The big exception to this trend is, of course, Kroger. And in looking at Kroger’s success, one notices that a critical opportunity for the traditional grocer lies in one of the “annoyances” that David mentioned – the loyalty card. By tracking shopper behavior, and by re-orienting their entire company around their core, high-value shoppers, Kroger has become the standout leader among traditional grocery chains.

For supermarkets other than Kroger, the decision has become a stark one: either (a) use the loyalty assets you have to become a shopper-centric chain through-and-through; (b) radically redesign your stores to become a branded shopping experience through-and-through; or, (c) slowly lose share to those who do.

Dan Frechtling
Guest
10 years 3 months ago
I agree with Ryan. Look no further than the declining share of dollars they capture to see that traditional supermarkets are less effective at influencing consumers. In 2001, Walmart became the largest food seller. More recently, other big-box, club, dollar, and convenience stores have dramatically grown their portion of food purchases. However, supermarkets can and do grow their influence by better harnessing pre-store and in-store marketing opportunities. Why pre-store? IRI asserts 80%+ of shoppers now decide before the store which CPG products they’ll buy. 70% of shoppers research grocery products online, according to research cited by marketing agency G2. And a recent report from the GMA/Booz showed how digital, which provides more agility for retail marketers, has eclipsed FSIs in influencing shoppers before their trips. Why in-store? Manufacturers and retailers agree in-store marketing provides higher ROI than online, print, TV and all other media, according to research from the GMA and Deloitte. But in-store activities need to be measured. ICC/Decision Services found that more than 3 in 10 of in-store sampling programs didn’t meet simple… Read more »
Rich Gilmartin
Guest
Rich Gilmartin
10 years 3 months ago

Supermarkets are the 8th wonder of the world. Consumers get to choose not only the food they eat, but a wide variety of related household goods. Foods from around the world, fresh produce…regardless of the season for your table, in most places, 24 hours a day 7 days a week from coast to coast.

Ben Ball
Guest
10 years 3 months ago

There is little argument that some retailers are better merchants than others–and that is what this is all about at its core; being a better merchant. That supermarkets are losing share of grocery sales is not evidence that they haven’t improved, but it is evidence that alternative formats with different merchandising techniques have emerged and successfully invaded the supermarket space.

As for the character of the CNN reporting, it is perhaps worth noting what the media is in business to do–attract viewers. And the more viewers they attract, the higher the rates marketers and retailers are willing to pay for their commercial time. So are we surprised that they sensationalize the headlines to give us more of that which we reward them for? As Mark Twain so famously quipped, “man bites dog–now there’s a story!”

James Tenser
Guest
10 years 3 months ago

“Supermarkets Inc.” can take its place alongside similar expo-says of the past several decades that purport to discover nefarious tactics at America’s food stores. This lineage goes all the way back to Vance Packard’s 1957 bestseller, “The Hidden Persuaders.” There’s nothing new here for us RW-ers, and we pretty much constitute the entire viewing market for a program of this kind. The rest of the country was watching American Idol or $#!% My Dad Says.

Of course supermarkets take active steps to persuade shoppers to buy more. But sophisticated methods are not automatically deceptive ones.

Pseudo-data points, like the size of the cart example cited above, only make me sigh. I’m pretty certain the author quoted has his causal arrow backwards. Q. Why don’t supermarkets use bigger carts? (a) They already do where appropriate; (b) In some instances their aisles are too narrow; (c) They’re all “too stupid.” CNBC airs answer (c) for reason (c).

Gene Hoffman
Guest
Gene Hoffman
10 years 3 months ago
It’s interesting that 52% of today’s respondents say that supermarkets are doing a better job of influencing consumers to buy products in the past, yet most comments above do not give kudos to supermarkets as many are not producing greater like-store sales than last year and before. Of the established food chains, Kroger, HEB and Wegmans are staying in today’s food retailing game because they merchandise to the contemporary rhythms in the marketplace. The rest of the established chains are a bit tone deaf and thus lagging a bit in reaching today’s younger and emerging consumers. People are responding to the differentiation and some food retailers offer that such as Trader Joe’s, Whole Foods, Stew Leonards, Woodman’s and even Aldi. Target seems to be finding its rhythm after a long struggle. Walmart has won over most price-oriented consumers who go to the big box stores and want to believe they are always getting the best price–but are they? If there is a bottom line it is this: The new breed of food retailers are proving… Read more »
Joan Treistman
Guest
10 years 3 months ago

I’ve been approached to have my company in a documentary to show how eye tracking is used to manipulate consumers in the store. What? Thanks, but no thanks.

We’re all in the business of trying to understand consumers and meet their needs. I am offended by “thought leaders” who want to show they are smarter than consumers and can rewire them.

At the same time retailers have to pay attention to what makes consumers tick and buy. In turn the grocers and manufacturers can turn on their creative juices to maximize sales and profits. Am I wearing rose colored glasses? I don’t think so.

We often refer to the difference between perception and reality. Both are at play for retailers as they are for consumers. Knowing the point of intersection helps us all to plan and implement a strategy that will be successful. At the end of the day we’re all trying to be smarter…marketers and consumers alike.

Herb Sorensen
Guest
10 years 3 months ago
The commentary here has adequately and appropriately trashed the media coverage. I’m afraid I would have to extend that to Martin Lindstrom’s take, also. Although I certainly understand describing some retailer behavior as “stupid.” However, I find calling anything stupid as dangerous to my own thinking. Of course, it is an accepted article of faith that supermarkets put milk in the far corner of the store in order to force/entice shoppers to traverse more of the store, thereby increasing sales along the way. In reality, milk is put back there because it is right by the back door where milk arrives regularly and in cumbersome amounts. So it is much easier to manage there. This illustrates a lot of things that are done in the store that are perfectly “rational” and make a lot of sense from a management/operational point of view. The fact that they objectively are NOT shopper friendly does not make them stupid. If there is any rational slippage here, it is in management convincing themselves that they are shopper-centric, solely because… Read more »
Justin Time
Guest
10 years 3 months ago

Talk about free publicity. Giant Eagle’s Market District got at least fifteen minutes of air time dispersed throughout the Supermarkets, Inc telecast. CNBC has already aired it a half dozen times.

Kaune’s is one of many local grocery stores across America that tries to stem the tidal wave of competition from the big boys. The key, as repeated on the broadcast, is offering quality and service. Customers like that, and will pledge their loyalty with patronage. For example, McGinnis Sisters in suburban Pittsburgh fills this niche by giving its customers locally grown produce, local meats, and local, fresh dairy along with personalized service. Something the big boys can’t do.

Mark Burr
Guest
10 years 3 months ago
Oh, the emails came in for days! Scanner, you have to watch. Did you see that CNBC is going to be doing a great story on your industry? Doc Banks is correct. The piece was condescending. It certainly wasn’t compelling. As another supermarket guy, I expected compelling. What I got was something less than captivating and well below an expose’. I kept clicking away from it. I kept clicking the remote back thinking I might find something to convince me to stay. I felt like a kid in school being told to pay attention as I gazed out the window unable to focus. Bored. From the discussion here, I keep coming back to the premise that ‘supermarket’ isn’t the right word anymore. The premise from top to bottom of ‘food retailers’ is way too broad to lump them together. It just doesn’t seem to fit. Worse, it’s old–it’s really old. The fact is there is way to broad of a spectrum to lump all types in to one. We do. We seem unable to get… Read more »
George Whalin
Guest
George Whalin
10 years 3 months ago

I truly do not understand why CNBC always seems to want to put American businesses in a bad light. Why can’t they find the good in an industry that’s so important to the economy and the millions of people who work in the industry? And who appointed CNBC the arbiter of what is good and bad about grocery retailing? I watched the program because I honestly hoped this time they would portray an industry that feeds America better.

Great retailing IS NOT trickery but serving the needs of American consumers. A visit to a Wegmans Market, Trader Joe’s, or an H-E-B would show just how much shoppers love grocery stores.

Eliott Olson
Guest
Eliott Olson
10 years 3 months ago

Most of the new high performance stores are skimming the market and have large trade areas reinforced by locations in heavily tracked areas. While they are extremely profitable they do not command the extreme market shares of the traditional dominant chain. Woodman’s goes against the grain with extreme variety which can be supported by a high volume mega sized store. Cub used to have extreme variety before the loss of volume by store due to cannibalization. As store volume dropped so did their ability to carry extreme variety.

Much of the sales information is poorly utilized and the way it is analyzed does not lead to true consumer insights. It tends to drive the downward spiraling store into reduced variety causing customers to shop elsewhere.

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