Monday, January 31, 2011

CNBC's Tyler Mathisen Exhibits His Naivete Of The Grocery Sector

CNBC seems to have developed a style of tossing co-anchors a bone in the form of their own subject-specific one-hour specials. They've done programs on airlines, McDonald's, Goldman Sachs, high-end prostitution, growing marijuana, the video porn industry, garbage and, now, Tyler Mathisen's piece on grocery stores.

I will admit at the outset that I have yet to see the entire hour-long program, but I did see most of the second half of it last night.
However, all last week, Mathisen related anecdotes from the program and introduced brief clips.

You don't really need to see the grocery documentary to grasp what struck me about it, or, more specifically, Mathisen. He seems to be incredulous about everything.

Over and over the guy keeps announcing into a camera, horrified, that these food chains are trying to make money! Oh, the shame! The danger! The horror!

He confides a secret- grocery managers place wine next to fish, hoping you'll buy both. Shocking!

Oh, the evils of this sector! Trying to make a profit by selling food to you. Knowing you must eat to live.

From the shape of mayonnaise bottles (svelte rather than bulbous) to the size of shopping carts (larger than in the past, so you won't think twice about buying more items), it's all just a trap to make money on your need to eat.

For all that, however, the average checkout ticket is remarkably small- under $20. Even in this era of food price inflation.

I have two marketing degrees, so I cut my business education teeth on reading marketing research articles about consumer buying behavior and was taught how attention to many details have a major effect on the profitability of grocery stores. They typically operate on sales margins of 1-2%. Not much room for mistakes. Turnover, of course, is, ideally, quite high, if a competitive ROI is to be earned.

What surprised me, though, was that Mathisen is either completely lacking in curiosity, or just really not at all intelligent. He looks to be at least in his 50s, yet it seems that he's gone his entire life unaware of how supermarkets use location and point-of-purchase displays to stimulate consumer buying. Since purchasing food is probably one of the two most basic recurring buying behaviors for most Americans that doesn't involve immediate total consumption- the other I'd guess being gasoline- grocery store marketing has been the subject of countless newspaper articles for decades.

How could Mathisen be so dense as to have learned nothing about the sector during his entire life? The look on his face as he apparently discovers for the first time that people respond to package design is over the top.

On the larger subject of the documentary, I'd have to say it was decidedly underwhelming. As I contended earlier in this piece, anyone who's middle-aged and remotely curious has, by now, learned some of the basics of supermarket marketing. Higher margin items around the outside of the store, frequently-purchased staples (milk, bread and juice) typically in the corner diagonally furthest from the main entrance, less-expensive, lower-margin items (processed foods) typically in the cluttered middle aisles. Shelf facings paradoxically reflect market share or fees paid to the grocer, and eye-level facings are choicest.

It's one thing to learn a lot about fairly hidden business sectors like growing marijuana, video pornography or ultra-high end prostitution/escort services. But you'd have to live under a rock to be surprised by much in Mathisen's supermarket piece.

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