Savings Quest 2003

Discussion
Dec 18, 2003
George Anderson

Special Feature by George Anderson


The consumer quest to save has taken on new proportions and, as it turns out, it pays to cherry pick if you’re a retail shopper.


That is the conclusion of professors, Stephen Hoch of the University of Pennsylvania’s Wharton School of Business and Edward Fox of the Cox School of Business at Southern Methodist
University in their research paper, Cherry Picking.


Professors Hoch and Fox’s research focused on the behavior of three designated shopper types: Loyals, Switchers and Pickers.


Store loyals were identified as consumers who shop the same retailer more than 80 percent of the time. Switchers shop at multiple stores, but not on the same day. Cherry pickers
shop at two or more locations on the same day in a given month, although many shop more frequently.


Switchers represent the largest of the three groups with 55 percent of those studied matching this shopper description. Loyals made up 27 percent and cherry pickers 18 percent
of the study group.


After two years and thousands of shopping trips, Professor Hoch says it definitely pays for consumers to cherry pick.


“Cherry picking is worth it because of a combination of factors,” he said. “When people go cherry picking, two things happen: They double the number of discount opportunities
that will be available to them because they go to two stores. And, because stores have deals on more than one item, that expands the opportunities for cherry pickers to save money.
But even this in itself would not necessarily make cherry picking worth the effort of driving to more than one store. The second thing, the thing that really makes cherry picking
worth it, is that these shoppers buy more items than other shoppers. To make cherry picking pay off, you have to buy a lot of stuff. Cherry pickers intuit that they need to increase
economies of scale to take advantage of the discounts available. They plan in advance to buy a lot. They save a lot not only in percentage terms but in dollar terms, which is
what really counts. At the end of the day, you don’t deposit percent savings into your bank account; you deposit dollars.”


One service that helps consumers put the cherry picking philosophy to work in the quest to save dollars is The Grocery Game (www.thegrocerygame.com).


For $10 a month, consumers get a color-coded list of products advising them of the best time to buy specific products in local grocery stores tracked by the service.


Items in black type, such perishable items, like produce, should only be purchased if needed.


Those in blue and green need to be stockpiled for consumers to build their own inventory of products at home at what the site calls “rock bottom prices.”


The consumer desire to save has made The Grocery Game the right service at the right time. According to a report in the NY Times, the site now has 15,000 subscribers up from
only a few thousand nine months ago. It covers stores for consumers in 28 states.


The founder of the service, Terry Gault of Santa Clarita, Calif. said the idea for the service came about because, “I made a list for my local store and when I saw what I could
save I thought, why not put the list online?”


Moderator’s Comment: Will an improving economy cut down on the popularity of cherry picking, or will it continue to develop as a national sport?


In another article on the Wharton site, Thomas Stemberg, founder and executive chairman of the office supply retailer Staples, said he discovered individual
consumers and small businesses were paying more than four-times for a Bic pen than a large corporate customer, Toys R Us.


This was Mr. Stemberg’s response.


“Let’s be real. If you paid too much for advertising, maybe you got better creative. If you paid more for a lawyer, maybe you were getting better counsel.
If you paid too much for Bic pens and paper clips, you were getting ripped off.”


Consumers, even those harried by the lack of time, do not want to feel as though they are paying too much, i.e. being ripped off.


With a still jobless economic recovery and what seems like almost daily reports about good-paying jobs being outsourced to India and elsewhere, the quest
for savings will only grow stronger.
[George
Anderson – Moderator
]

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