KnowThis Blog Postings
- Published on March 18, 2011
- Posted by Paul Christ
Some Grocers Abandon Rebates for Reusable Bags (USA Today)
The highly competitive retail grocery industry is famous for operating on low margins. In populated areas within many U.S. markets, there are many supermarkets, discount stores, club stores and others selling grocery products. In fact, it is not uncommon for shoppers to have a choice between two or three different grocer retailers located at the same intersection. And many shoppers take advantage of this by carefully researching stores looking for the best prices. In such an environment, price competition can be aggressive, leading grocers to operate on margins in the low-to-mid single digits.
One important ramification of customers efforts at price comparison is that shoppers are not particularly loyal to a retailer. Because of this, increasing price to raise margins can be difficult as shoppers can easily shop elsewhere.
So how else can grocery retailers increase margins? One obvious approach is to reduce costs. Grocers are constantly on the lookout for ways to save money. One key strategy is to negotiate better deals with product manufacturers. Another way is to reduce other operating expenses. For example, over the last 20 years the introduction of scanner technology has helped reduce the time it takes for retail clerks to record purchases, thus enabling them to check out more customers in a shorter amount of time.
Other changes intended to cut costs are not quite as obvious. One is to get customers to bag their own products, which also improves the retail clerks productivity (they need only focus on scanning and handling payment). Another, as discussed in this story, is the move to convince customers to use their own bags when carrying products from the store. When this started a few years ago retailers saw potentially large savings in the amount of paper or plastics bags they would need to purchase. They also saw a side benefit of appearing to be supportive of environmental issues. In fact, they liked this idea so much they offered customers incentives in the form of money back discounts to encourage them to use their own bags .
Alas, these incentives may not be enough to motivate customers to use the bags. The problem is not so much that customers are resisting using their own bags nor are shoppers unwilling to spend money to purchase the bags. Rather, customers simply forget about the bags, often leaving them in their car or at home.
Kroger, the nation’s largest supermarket chain, had been giving three- to five-cent rebates or fuel discounts for each reusable bag. But it ended the bonuses this year in some regions. Customer feedback indicates most want to use reusable bags, company officials say; it’s a matter of making it a habit.
Is there any other way grocers can motivate customers to remember to bring their bags?
Image by Project GreenBag