Because everybody needs food to survive, retailers and manufacturers are willing to try every pricing strategy known to man. The grocery store is where all facets of this new era of pricing come together, where attempts to squeeze more from shoppers are tested, analyzed, and put into action.
It started with traditional marketing like coupons and loyalty programs, hooking consumers by giving them a reason to come back. But more insidious schemes lurk inside the grocery store: price-fixing, product shrinkage, electronic shelf tags that change on a whim, and skirmishes between grocers and food producers, or even grocers and other grocers.
This cutthroat dynamic has accelerated consolidation across the food and retail supply chain. It has also kept grocery prices noticeably higher since the pandemic than other goods in the economy. Since the beginning of 2020, grocery prices have risen 25 percent, significantly higher than wages. Consumers experience the most reverberating effects, particularly low-income consumers who spend more of their paychecks on groceries. But food suppliers must also navigate the anti-competitive landscape and pay tolls just to get noticed. Meanwhile, independent supermarkets struggle to survive.
The story of how these towers of nutritional delight turned into rent-seeking alligator pits involves new technologies and fewer competitors for the grocery dollar at all levels. But every economic era has contained opportunities for food monopolists. Today’s difference lies in markets realizing the amplifying effects of this era’s more powerful, more granular, more invasive schemes to profit.
The final, surprising result could be a near future where grocery store consumers become the product.
BEFORE AMAZON AND WALMART’S LEGENDARY logistics operations were even conceived, there was another everything store: the Great Atlantic & Pacific Tea Company, otherwise known as A&P.
The first grocery stores looked more like the average New Yorker’s bodega. They had basic goods like coffee and tea supplied in bulk, and your grocer would ladle them out. Quality from place to place was a dice roll. And if you wanted meat or bread, you had to go to the butcher and the baker.
A&P wanted to put all of a customer’s needs under one roof. The definitive book on A&P’s rise and fall, written by Marc Levinson, describes how A&P saw the rebuilding efforts in Chicago after the Great Fire of 1871 as an expansion opportunity into the Midwest. The company grew from 70 stores across 16 cities in 1878 to nearly 200 stores by 1900.
To get suppliers and producers to converge at one company’s locations was a logistical feat. But the speed at which A&P took over the manufacturing processes themselves—a vertical integration play—immediately drew critics.