What is ‘loss leader?’ How grocery stores lure shoppers into spending more
You’ve arrived at the store for a quick post-work grocery run, hoping to pick up a cheap, ready-made meal for dinner.
After finding a discounted pre-cooked chicken, you toss a bag of rice and veggies in your shopping cart too, even though neither were on your list.
Oh, and a six-pack of tissue boxes, since you notice they’re on sale.
That behaviour plays into a strategy that grocery chains have long relied on to get customers through their doors, even if it means selling a certain popular item below cost, experts say. And with food prices continuing to rise even as overall inflation has slowed, shoppers could be even more vulnerable to overspending after finding a good deal.
Known in the industry as “loss leaders,” those bargains are designed to appeal to the customer’s desire for savings and convenience, while simultaneously piquing their interest in other products.
“It can entice a large number of customers to change their shopping behaviour once they’ve entered the store. With that saving in mind, they might be less price sensitive towards other items,” said Andreas Boecker, who chairs the University of Guelph’s food, agricultural and resource economics department.
“The overall strategy behind the loss leader is that the loss … is more than compensated by the higher margins and the sales of the other products that are generated by attracting the customer to the store.”
At $7.99, Costco’s pre-cooked rotisserie chicken serves as one of the more recognizable loss leaders at grocery stores in Canada, while other chains often prioritize discounts on dairy or bread.
Subscription membership programs associated with various chains also increasingly offer deal pricing or points on certain items tailored to the consumer’s
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