May 2017 Issue
The Retail RD: Food Environments Designed to Sell
By Barbara Ruhs, MS, RDN
Today's Dietitian
Vol. 19, No. 5, P. 20
"Make a shopping list."
"Don't grocery shop when you're hungry."
"Shop the perimeter of the store."
These are just a few pieces of advice dietitians may offer clients to help them avoid making poor nutrition choices or buying more than they want or need while they're food shopping. Today's supermarkets are carefully designed to sell products by using product placement, merchandising techniques, and sensory cues to inspire purchases, so simple advice isn't effective.
The goal of this article is to provide dietitians with further insight into the selling psychology supermarkets use to increase purchases and impact customer buying behavior.
Fierce Competition
The grocery business is fiercely competitive, and supermarkets operate on single-digit margins despite the fact that Americans spend more than $565 billion on groceries each year. In many urban areas, two or more competitors can be found opposite one another at the same intersection. National supermarket chains, including Kroger and Albertson's, traditionally have faced only competition from smaller, regional independent retailers. However, as the retail landscape widens, conventional supermarkets now face additional competition from natural and niche retailers, such as Whole Foods Market, Sprouts, and Trader Joe's, attracting health-conscious consumers. And big-box stores such as Wal-Mart and Target continue to expand their grocery offerings, making it nearly impossible for grocery store chains to compete on price alone. Every retailer has the same goal to make a profit by using a variety of proven selling techniques to inspire customers to spend more money in their stores. The following are some of the most common selling strategies used by supermarkets today.
Store Layout: Appealing to the Five Senses
It's no coincidence that most supermarkets have similar layouts. In most stores, you first enter the produce department, where you encounter a variety of bright colors, scents, and textures. These sensory experiences elevate moods and prime individuals to buy more.1 The produce section sets the tone for freshness for the rest of the store, and buying fresh, wholesome food at the beginning of a shopping trip helps make people feel less guilty, setting them up to buy more throughout the store.2
Bakery and deli departments are placed near the front of the store to take advantage of the purchasing power associated with the sense of smell. The scent of freshly baked bread or a tasty rotisserie chicken wafting in the air is aimed to stimulate shoppers' salivary glands—another strategy that increases sales, according to Martin Lindstrom, author of Brand Sense: Sensory Secrets Behind the Stuff We Buy. It's logical to think that if people are hungry it's likely they're going to buy more food. This is a strategy nearly all food retailers use.
Most stores will take the sensory experience a step further by offering free samples, another proven strategy to up-sell products to customers. In an article titled, "The Psychology Behind Costco's Free Samples," food sampling has been shown to boost sales by as much as 2,000% in some cases.3 The majority of promotional programs food companies offer their retail partners includes a plan and allowance to sample new products. Food sampling can make or break a new product introduction and can have a powerful impact on seasonal items or brands that aren't category leaders. Sampling works and is the reason why food companies invest thousands of dollars to get their products into the mouths of consumers.
Music is another sensory strategy used to impact shoppers. Familiar and soothing, slower music encourages shoppers to linger and spend more time in the store, ultimately leading to increased spending. According to Paco Underhill, CEO of Envirosell and the author of Why We Buy: The Science of Shopping, "Nothing in a store is by accident. Everything is by design." Even the direction of shopping has been studied, and stores are designed to accommodate the natural counterclockwise movement through the store to maximize sales. As most individuals are right handed vs left handed, they drive a shopping cart with their left hand and grab products with their right hand to place them in the cart.
Once a shopper is headed in the preferred direction, retailers and food companies want shoppers to increase their "basket size," and stores are carefully designed to accomplish this goal. In a typical supermarket, the aisles have tall shelves to prevent shoppers from looking elsewhere in the store and keep them focused on buying as many items as possible. Shopping traffic is moving in a designated direction designed to maximize product purchases by forcing shoppers to travel from end-to-end of each aisle. Stores also use merchandising and display fixtures (signs, racks, bins) that serve as speed bumps, to slow down movement in an aisle and bring attention to certain products. Food companies study shopper behavior and know how to impact customer movement and raise product visibility, leading to increased sales. Manufacturers offer grocery stores stand-alone display fixtures (called shippers) as a way to increase displays of their products. In some cases, stand-alone displays enable food companies and retailers to test sales of a new product without increased risk of having to change the retailer's existing shelf displays or revising a store's planogram for a particular category.
Product merchandising and placement in stores is one of the most critical components in selling any product, as increased product visibility translates into sales. Although consumer demand is often thought of as the key driver that determines what's sold in supermarkets, food manufacturers also play an equally if not more important role in what's sold in stores by paying for premium shelf space in stores. Premium display locations are limited and for most conventional supermarkets this typically requires a placement or slotting fee.
Slotting Fees
These placement or slotting fees are one-time payments suppliers make to retailers in the range of $20,000 to $40,000 per stock keeping unit, for the initial shelf placement of a product or for initial access to the retailer's warehouse space.4 With thousands of new products introduced each year, slotting fees are one way retailers can cover some of the risk of introducing new items likely to fail. Products that don't sell well cost retailers profitability and valuable and limited real estate on their shelves.
A September 2016 report published by the Center for Science in the Public Interest, "Rigged: Supermarket Shelves for Sale," discussed slotting, stating that it's the large food companies (sellers of sugar-sweetened beverages, snack items, and candy) that have the largest influence on what's sold in supermarkets and are culpable for many of our public health issues today. In general, the largest food companies that drive the most sales at grocery stores work together with retailers to design planograms (display plans) that assign product position on the shelf and number of facings to maximize sales and velocity of all products in the category.
Dietitian Awareness
Supermarket design is focused on selling products. Dietitians who work in retail or desire to help customers shop smarter can start by noticing the sensory impact and becoming more curious about design elements found in grocery stores. Sight, smell, taste, and sound influence purchase decisions, and merchandising and marketing strategies are powerful tools retailers use to increase sales. Raising awareness of supermarket selling strategies can empower consumers to be more conscious of external cues influencing unhealthful choices and strengthen the role of in-store dietitians to guide healthier shopping behavior. Learning about retail selling strategies can help dietitians be more effective in promoting nutritious and wholesome foods and have a bigger impact on what's sold in today's supermarkets by increasing consumer demand for these products.
— Barbara Ruhs, MS, RDN, is a retail health expert and founding partner of the Oldways Supermarket Dietitian Symposium.
References
1. Underhill P. Why We Buy: The Science of Shopping. New York, NY: Simon & Schuster; 2009:174.
2. The science of shopping: the way the brain buys. The Economist website. http://www.economist.com/node/12792420. Published December 18, 2008.
3. Pinsker J. The psychology behind Costco's free samples. The Atlantic website. https://www.theatlantic.com/business/archive/2014/10/the-psychology-behind-costcos-free-samples/380969/. Published October 1, 2014.
4. Federal Trade Commission. Slotting allowances in the retail grocery industry: selected case studies in five product categories: an FTC staff study. https://www.ftc.gov/sites/default/files/documents/reports/use-slotting-allowances-retail-grocery-industry/slottingallowancerpt031114.pdf. Published November 2003. Accessed March 10, 2017.