How Supermarkets Boost What We Buy

The big moments in supermarket history include the shopping cart, the bar code, and self-checkout.

While each was supposed to boost what we buy, one has not quite worked out.

Boosting What We Buy

Grocery Carts

In 1916, shoppers were used to giving the grocery clerk a list. Then, item by item, he gathered what you needed and figured out the prices. One store owner, though, decided to experiment with self-service. Stocking his Memphis, Tennessee Piggly Wiggly with more than 1,000 items, he placed the butter in refrigerated cases, pre-bagged the flour, and carried national brands like Campbell’s soup. As for the prices, little hooks held the tags.

The problem though was carrying what you selected. As we might expect, people checked out when their groceries became too heavy, until, 20 years later, another Piggly Wiggly store owner had a solution. The first wheel-around cart was made from two folding chairs in which you could insert two baskets. Immediately doubling per customer volume, purchasing continued to grow.  By 1950, new cart technology led to wider aisles and a checkout that accommodated volume.

A milestone in grocery store history, this was the first cart. You can see that two baskets immediately doubled what a shopper could buy:

Bar Codes

While for decades, people had been trying to figure out a product identification system, the real story appears to have begun on a Miami, Florida beach. Legend says that in 1948, a scientist, thinking about Morse code’s dots and dashes, drew several concentric circles in the sand. By 1952, he had patented his idea:

From here, the next step was a code that said more. The result was a Universal Product Code system (UPC) that took up a tiny amount of package space and could be scanned from any direction. Functioning as far as a foot or more away from the product, the scanner also communicated its identity to a computer that would do the rest. With the new system, they could speed up the checkout lines and generate an ongoing record of sales. That meant they could control inventory more efficiently, monitor promotions, and even time how fast an employee moved the checkout line. In addition, because every item no longer needed a sticker, prices could easily change and individual customers with “loyalty cards” could even be tracked.

By 1980, more than 90% of all grocery products had this kind of a barcode:

Self-Checkout

We could say that self-checkout was the next logical step. Since shoppers had their own carts and products labeled with bar codes, they could do their own checkout. Yes, four self-checkout kiosks could cost $125,000 but the savings were supposed to make up for the expense. With customers doing the work, self-checkout meant the stores needed fewer employees. However, they soon discovered that the machines malfunctioned more than they expected, In addition, they had fewer employees keeping an eye on shrinkage (theft) and stocking shelves. At Costco, with no one monitoring members, they were sharing their cards.

As a result, Walmart has removed self-checkout from some stores and Shoprite added to staff after a customer backlash. At Costco, too, they’ve positioned more staff at checkout.

We can ask at this point whether sunk costs will kick in.

Our Bottom Line: Sunk Costs

When retailers decide whether to keep or modify self-checkout, they might fall into the trap of looking at the past rather than the future. A good example is a queue. When we’ve stood in line (outside a theater or on the phone) for a long time, many of us decide to remain because of the time we’ve already wasted. Instead, we should decide what we sacrifice by continuing our wait.

Similarly, with self-checkout kiosks, the investment could determine whether to keep them. Called a sunk cost, a past investment of time and money is unrecoverable. Although sunk costs are gone, they still tend to influence a future decision.

Economists say the value of sunk costs is a fallacy. Instead, we should focus on future cost and benefit.

My sources and more: Thanks to my Hustle October 20 email for inspiring today’s post. From there, The Atlantic had more of the detail as did The Smithsonian, Progressive Grocer, and this past econlife. (Please note that several of today’s sentences were is a past econlife post.)