Wednesday, March 12, 2008

Why Do People Spend More at Supermarkets?

It is an observed fact that when people go to Supermarkets they are spending much more per visit now than 10,20 or 30 years ago. Why do people spend more on their weekly shop than ever before?

The reason people are spending more on their weekly shop has received many different explanations.

1. Better Marketing. Arguably supermarkets have got better at sales techniques to make us buy more. For example, special offers such as: buy 4 for the price of 3. Supermarkets are geared towards increasing the average spend. This is why there are many offers for buying more than one. Another example is placing complementary foods next to each other. But, can marketing really make us want to eat more?

2. Rising Incomes. If incomes increase demand for goods usually increase. However, we would expect demand for food to be very income inelastic. If your income goes up, you don’t think – great now I will buy 2 loaves of bread rather than one. This is appropriate only for people who are very poor.

3. Convenience shopping is more expensive. Nevertheless, some foods are income elastic, e.g. ready prepared meals. The cost of the ingredients would be much lower. But, with higher incomes, we would rather spend £3 to save the time of preparation.

4. People are Busier. Because people are busier we go to the supermarket less often and therefore when we do go, we need to buy more.

5. Comfort eating. When I googled ‘Why are people spending more’ there were many results suggesting people spend more when they are sad. People spend more when sad Maybe the increased size of our shopping trolleys is just indicative of the fundamental existentialist nihilism inherent in the core of our consumerist, materialistic society (or words to that effect)

6. Out of Town Shopping Centres. More supermarkets are being built away from the town centres. Therefore, it takes longer to travel and so we do go shopping we should spend more per visit, to maximise the economies of scale in bulkbuying.

7. More goods on sale. Tesco doesn’t just sell bread and milk. These days you can come back with some new underwear, garden fertiliser and DVD player, and still have change from a £20 note.

8. Credit Cards. If you have to buy with cash, you feel more reluctant about passing over your hard won money, therefore, you spend less. The argument is that with increased use of credit cards you can buy now and pay later. This is consistent with a falling savings ratio.

9. Online Shopping. This is the reason I spend more. If I spend £70 at Sainsbury’s I get delivery for £2.50 rather than £5.00. Therefore, I will happily buy 36 toilet rolls or something just to get my purchase over £70. My house is full of piles of things like bottled water, which I have tried to use to get cheaper delivery.

10. Bigger Shopping Trolleys. In fact it is argued by some that the reason people are buying more is that supermarkets have increased the average size of shopping trolleys. With more space in the trolley, it's easier to spend more. Or is it the other way around? People buy more so supermarkets respond by offering bigger supermarkets?

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1 comment:

Francisco said...

I totally agree with your points. I myself have realized that I am spending more nowadays than a few months ago.

I would say Better Marketing & Pay rise are the hook for spending more not only at supermarkets but other shops too.

Regards