The illusion and unhealthy paradox of choice

Dec. 26, 2013 @ 02:24 PM

Fifty years ago, when I first went to work in grocery store as a teenager in the Pacific Northwest, on average they stocked around 4,000 items.  Today’s supermarkets stock an average of 50,000 items.

Yet the top selling 1,000 items generate half of the sales revenue.  Further, the average household buys only 150-200 items regularly and about 400 distinct items a year.  Dropping 25,000 items would decrease sales only 5 percent.

Conventional consumer theory is that breadth of choice trumps, but research shows that too much choice suppresses sales.  Many suppliers such as Procter & Gamble have increased sales 10 percent by cutting choice in half.

What’s more important is that much of the “choice” to which we seem drawn as consumers, especially when it comes to groceries, is increasingly concentrated in the hands of a very few suppliers.  The cost of all of this choice is climate change.

On average, conventional food products travel 1,500 miles before we see them on the shelves.  It takes nine calories of fossil fuels to produce each calory of the food in supermarkets, or about 232,000 a week for the average American.

Adding to the toll of hidden costs, 26 cents of every food dollar is spent on packaging.  Some reports estimate the industrial food system is responsible for a third of greenhouse gases.

For example, just one quarter-pound hamburger patty requires 6.7 pounds of grain and forage, 53 gallons of water, 74.5 square feet of land and 1,036 BTUs of fossil fuel energy to bring to market.  According to an NPR report, that doesn’t count greenhouse emissions from animal waste.

But a new report entitled “Grocery Goliaths” shows that while Americans now spend $603 billion on grocery products each year, half (53.6 percent) is spent in just four chains: Wal-Mart, Kroger, Target and Safeway.  Most types of grocery products are also dominated by three or four suppliers.

Rapid supermarket consolidation began when Wal-Mart, which now controls nearly 30 percent of overall supermarket spending, entered the grocery business in the 1990s, Its share is more than the entire top four retailers controlled in 1997 (20.8 percent.)

But independent grocery stores and local and regional chains have been fighting off consolidation since the 1920s, when thousands banded together in cooperatives such as IGA to share the costs of distribution and marketing..

There are still 1,750 IGA stores across the nation including one in Durham.  A few are over 10,000 square feet, about a third the size of the average supermarket.  Most IGAs are 7,000-12,000 and many are convenience-store size.

There is still a vibrant, neighborhood Red & White food store in Durham, a remnant of another co-op of independent stores with distribution based out of Chicago.  They were established in the 1920s and thrived after World War II, but independent grocery stores like these seem all but extinct.

Independent grocery stores were squeezed from both ends beginning in the 1930s.  At one end, convenience stores began to chip away at their business until the concept really took off in the 1970s when they were fused with gas stations.

At the other end, supermarkets also grew out of the 1930s and tracked with the growth of the automobile.  The supermarket chains really took off after World War II as an unintended consequence of the interstate highway system, which made long-haul distribution more efficient.

The profit margin for grocery stores was a penny on the dollar when I worked in the grocery business in the mid-1960s.  Today, it is still only 1.3 percent. 

In 231 metro areas such as the one centered on Durham,  just four big grocery retailers make up more than 80 percent of sales.  Wal-Mart alone now makes up half of all grocery sales in 35 metros, according to the report.

Today, we have bigger and bigger stores owned by fewer and fewer companies carrying product categories produced by a handful of suppliers creating the illusion of choice.  Soon they will be supplanted by online stores such as Amazon Fresh.

In the meantime, the hidden costs to consumers and the planet are immense, and in the United States, we still have 1.4 million households in poverty including 2.8 million children surviving on $2 or less a day in a given month.

Reyn Bowman is the retired CEO of the Durham Convention and Vistors Bureau and a 40-year veteran of community-destination marketing.  This originally appeared on his blog, http://www.bullcitymutterings.com/.