Here's how supermarkets get more of your money
The bag of tricks to get shoppers to spend at the supermarket is well-used, but we keep falling for them. Beyond the psychology, though, is a lack of competition that needs to be scrutinised, says Consumer New Zealand. The Commerce Commission conducted a market study into the retail fuel market , and now Consumer NZ wants it to use its powers to investigate supermarkets. Weve got a very, very concentrated market, one of the most concentrated in the world, said Consumer NZ head of research Jessica Wilson. READ MORE: * Countdown to stop selling energy drinks to under-16s * Supermarket duopoly 'perfect target for investigation' * Kiwis love a bargain, but supermarkets are honing their use It hasnt attracted much regulatory scrutiny, so our view is that it is ripe for a really closer look at what is going on with prices and whether were paying above the odds. New Zealand's supermarket industry has two main players, Foodstuffs (which owns New World, Pak n Save and Four Square) and Countdown, and the sector has been long been the subject of political concern . Many people spent a lot of their food budget at the supermarket, Wilson said. Now that the Commerce Commission has those market study powers, we think the supermarket sector should be the next cab off the rank. [It should be] looking at the sector to see how competitive it is, whether we are getting the sharpest prices, or whether concentration in the market means were paying more than we should. A spokesman for Commerce and Consumer Affairs Minister Kris Faafoi said supermarkets had been suggested as a focus for a market study along with other sectors, such as construction. When the Government is ready to make an announcement, it will. Bodo Lang, head of marketing at the University of Auckland's Business School, said supermarkets and other retailers had many ways to get people in store, and keep them there as long as possible. Stores put the most frequently bought goods, such as bread and milk, at the back so shoppers had to pass a lot of items they had not planned to buy. Another common technique was to use a special sign. As soon as something is labelled with a red border or a yellow border or something, immediately it signals this must be special, even though its not at a special price, Lang said. Consumer NZ said promotional flags in stores with phrases such as Countdowns Great Price or New Worlds Everyday Value were used to highlight products that had been the same price for some time. It also warned shoppers to beware temptation at the checkout, with chocolate and other sugary snacks staples at checkout displays. Some checkouts were snack-free, but could take some effort to find. Lang said every purchase should be a tradeoff between quality and price, but instead most people became brand loyal, or relied on shortcuts to make decisions. Shortcuts are a nice way for the designers of supermarkets and grocery retailers to tap into our decision making, using borders, using products at eye-level, using familiar brands, putting products in areas where theres much foot traffic. For example the busiest areas of a supermarket are generally whats called the racetrack, which is basically the outside aisle around the whole supermarket, and normally the middle of the middle aisle is the least-frequented area. The ends of aisles also had high foot traffic and were sought after for product displays. Putting an item next to a category that was being bought frequently also increased sales. For online shopping, the product placed at the top of a category would see a big impact on sales. Shopping online is not quite the same as shopping instore, but one of the things that is the same is what youre exposed to is a large driver of what youll buy, so if youre exposed to the top of the category product they will sell more units than if they werent there. Supermarkets had access to a wide range of data from loyalty cards on which to base their decisions, he said. Retailers did not provide misleading information, but, Lang said: I know theres lots of signals theyre giving me to make it hard for me to make decisions, and so therefore I become lazy as a consumer, and I rely on shortcuts which make me buy stuff I dont need to buy or its not the optimum product. I think most consumers arent particularly analytical, so they just go to the supermarket without thinking about the fact that this is a very expensive country for groceries, and its generally the second-largest household expenditure item that we have, so we should be much more vigilant. Consumers had to be organised if they wanted to keep control of their shopping, he said. They can look at the products, not just the price but whats in them often the cheapest product isnt necessarily the cheapest if you look at whats the key ingredient. For example, water in some canned goods. Having a shopping list, and sticking to it, meant much better decisions. On the other hand, going shopping while hungry, and taking the children could lead to purchases that were not ideal, he said. He also suggested using price comparisons to pick the cheapest supermarket. And people who thought they were immune to advertising and retailers tactics were kidding themselves. Theres lots of research that shows particularly people that think theyre not influenced by it are particularly influenced by it.