How grocery stores get shoppers in the door, entice them to spend more

As you step into the grocery store for a quick post-work shopping spree, the tempting allure of discounted items strategically placed throughout the aisles may lead you to spend more than you initially planned. This isn't a coincidence but rather a well-thought-out strategy employed by grocery chains to get customers through their doors and encourage additional spending.

Known in the industry as "loss leaders," these discounted products are carefully selected to appeal to customers' desire for savings and convenience while enticing them to explore other items in the store. Even if these loss leaders are sold below cost, the overall strategy aims to compensate for the loss through higher margins and increased sales of other products.

Andreas Boecker, chair of the University of Guelph's food, agricultural, and resource economics department, explains that these bargains can alter customers' shopping behavior once they enter the store. The initial savings on a loss leader may make customers less price-sensitive towards other items, driving them to explore additional aisles.

One well-known example of a loss leader is Costco's $7.99 pre-cooked rotisserie chicken. Different grocery chains may prioritize discounts on staples like dairy or bread. Subscription membership programs associated with various chains also play a role by offering deal pricing or points on specific items tailored to consumer purchasing trends.

The strategic placement of these loss leaders is crucial, strategically guiding shoppers through the store to maximize exposure to various aisles. Boecker emphasizes the importance of choosing perishable items as loss leaders, as non-perishable items could lead to significant losses if customers decide to stock up.

However, not all products make effective loss leaders. JoAndrea Hoegg, a marketing and behavioral science professor at the University of British Columbia's Sauder School of Business, notes that staples may not be as effective, as customers need to purchase them regardless. Instead, items like rotisserie chicken, considered a "nice-to-have," can be more enticing for customers looking for a treat rather than a weekly necessity.

A 2014 study published in the journal Economic Letters delves into the psychology behind loss leaders, explaining how discounted basic products may tempt shoppers to opt for a higher quality, more expensive version of the item.

While larger chains can absorb the financial hit on certain products, this strategy may not be as sustainable for smaller stores in the long run. The convenience factor also plays a significant role, as shoppers are often willing to spend a little extra for the convenience of obtaining needed items in one place.

Despite the allure of a good deal, shoppers are advised to approach these discounts with a level of skepticism. Hoegg emphasizes the importance of questioning why a product is on sale and avoiding unnecessary spending. It's a reminder that, while the strategy may benefit grocery chains, savvy consumers should be mindful not to get caught up in an unplanned shopping spree.