Scout out your grocery options
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Unless you live in a very small town, there is more than one store competing for your grocery dollars. In my area, the big three are Wal-Mart, WinCo, and Albertsons. Obviously this will vary depending on where you live, but chances are you have a similar assortment: cheap groceries (Wal-Mart and WinCo), and a more upscale store (Albertsons). It’s a bit easier to just pick one store and shop there faithfully, but you will be missing out on some great deals if you do. Here’s why.
Your local upcale grocery store needs customers just as much as the cheap stores do, and they get them in various ways. Some of them have nothing to do with price: good lighting, wide aisles, attractive signage, basically a less industrial look. However, they know when people are looking at the Sunday newspaper ads, they aren’t looking at all of these beautiful in-store features; people are looking at prices. As a result, they will often offer a favorite food (usually meat of some sort) at a significantly lower price than you will find it at your “main” store. This is called a “loss leader.”
I’m not sure that they actually take a loss on the item, but they definitely make less profit on it than they ordinarily would. Usually there will be several loss leaders (typically the front page of the advertisement); the stores know it has to be appealing to lure people in. Of course, their (justified) expectation is that once you’re in the store, you’ll pick up other, regular-priced (expensive) items. Don’t give in! These stores can be part of a great overall strategy, but only if you shop sensibly. If you’re planning on including your “main” cheap store in your shopping trip, it will be less tempting to buy convenient things for a premium price.
You’ll notice I mentioned looking at the Sunday newspaper ads. This is a great way to quickly spot loss leaders (in conjunction with a pricebook, which will be explained in detail in a post later this week). A great alternative to the newspaper (if you don’t subscribe, like me, or just prefer your computer) is the online version of the weekly circular. Many stores are starting to offer this service, and it can be a very handy way to evaluate your grocery options.
Bottom line: pick a “main” grocery store that sells most items at good prices. Do most of your shopping there, but watch the premium store(s) for excellent bargains and stock up.
This post is part of the “Smart grocery shopping” series.
although i agree that there is a lot of money to be saved by careful grocery shopping i would also like to point out that it is an industry that doesn’t have a lot of profit to spare. grocery stores operate on a very low net profit margin–meaning they have to sell large quantities to make an appreciable profit.
See yahoo finance on the grocery sector. see variety discount stores for wal-mart. (winco is employee owned so not reported in either place.) then compare the net profit margin to the chemical industry (where i have some investments that are doing well) or suppliers to the grocery store like the beverage companies or personal products. this shows me that the brand of the product you buy can have more of an impact on price than where you buy it.
further, it is important to me to buy somewhat ethically in that i still want people to be paid for delivering goods and services to me. many argue that wal-mart is not ethical store to buy from in that case, but i’ll leave that open for each person’s judgement. so while the grocery stores are selling some items at a loss, is it ethical to buy just those items knowing that they aren’t paying for the person who stocked them let alone the checker. this may seem to be a trivial thing, but i liken it to cutting a trail. if only one person or a few people do it, it doesn’t cause erosion, but if everyone or even just a quarter of the people do it, then the whole hill suffers. i grew up in a town that was dominated by one grocer. there was very little compitition and that hurt prices even with the “loss leaders” that were still offered.
jennifer, I definitely see your point. Some people won’t want to shop at Wal-Mart at all, and definitely product brand makes a huge difference, price-wise.
However, when it comes to loss leaders, I take a more free market philosophy: they wouldn’t offer them if they didn’t make money overall because of them, and if the loss leaders no longer accomplish that purpose, a savvy business would stop offering them. I don’t feel bad “taking advantage” of businesses; they are the ones who make the terms, and as long as I play by the rules, they should be sensible enough to make money. Considering that they make the rules (and no one is forcing them to run loss leaders—the cheaper grocery stores hardly ever run loss leaders) and control all the information (ads, consumer buying habits, etc.), I have no ethical concerns.
Even as I write an article like this, I’m aware that many of my readers will not go to the effort I’m suggesting (I don’t even do it a lot of the time… I get lazy)—and my readers are people who are seeking out money saving ideas. How much less likely is it that the average grocery shopper will behave this frugally? I don’t think the grocery stores will ever truly lose on loss leaders unless the whole mentality of the western world shifts dramatically.
However, I’m often accused of being naive and idealistic, so this could very well be one of those times. I could be totally wrong on this one, and I’m very curious to hear what others think. In any case, I really do appreciate your comment and the reminder that I need to stay on my toes.