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Analysis: Shoppers pay big box store costs

By
STEVE SAILER, UPI National Correspondent

LOS ANGELES, Jan. 26 (UPI) -- Few retail store formats have proven more popular with Americans than the "big box" store where consumers pushing shopping carts load up on bulk purchases at low prices.

Led by for years by Wal-Mart, which recorded $33.7 billion in sales in December alone, big boxes with their rock-bottom prices have been shouldering aside mom-and-pop outlets, department stores, boutiques, and supermarkets. There's no disputing the unprecedented efficiency of the top chains, yet some of the price reductions have been accomplished by handing hidden costs off to consumers.

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Since the long-gone days of the 1920s, when the corner store would take an order over the phone and send a delivery boy around with a crate of groceries, the U.S. retail industry has striven mightily to drive down sticker prices. They've accomplished this in part by passing on an increasing fraction of the costs of the distribution process.

The odd thing about this trend is that retailers have become extremely efficient in recent decades at managing the supply chain, while consumers remain amateurs. Just about every task shoppers can do, stores can do cheaper: selecting the best brands, transporting and storing goods, manhandling big crates, avoiding spoilage, and borrowing money cheaply to finance the inventory investment.

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For example, large stores that stock a huge diversity of brands put the responsibility for choosing wisely on the consumer, who is seldom an expert on the merits of offerings in more than a few categories. A new book by Swarthmore psychologist Barry Schwartz called "The Tyranny of Choice" documents the mental stress many shoppers suffer trying to pick among dozen of competing items.

One competitive advantage emphasized by Costco, which grew at a 14-percent annual rate in its last quarter, is fewer options. The warehouse club chain tries hard to pick good quality products for its members so they don't have to become experts.

Last month at a focus group run by Costco, almost all the shoppers praised the chain for limiting the varieties on sale.

Bigger stores mean fewer stores of each type, and that means longer drives, with larger parking lots and longer aisles to trudge through.

Checkout lines are often particularly long in big box stores. Costco, for example, doesn't have express lanes because, according to one Costco store manager, "We don't cater to that type of consumer. We only want people who buy lots of bulk." Increasing the minimum time a trip to Costco takes encourages shoppers, once they're there, to spend a few extra minutes checking each aisle in the store for bargains.

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At big box stores, consumers are frequently expected to unload their own shopping carts, then lug their purchases home. The rise of warehouse stores has coincided with the rise of in popularity of sport utility vehicles, which, although they are much more expensive than sedans, have more volume for hauling home bulk purchases.

One Southern California family found an extra expense after buying a 3.5-ton Ford Expedition SUV: they had to install a sturdier driveway.

Consumers are more likely than retailers to unwittingly buy more food than they can actually consume before it goes bad.

"It's amazing what you find out will spoil," a Los Angeles homemaker told United Press International. "Like when my father bought a case of a dozen gallon jugs of salsa at Wal-Mart's Sam's Club. It seemed like a terrific deal, but who knew something that spicy would go rank before you could eat it? Of course, it didn't help that everybody in the family was heartily sick of salsa long before they could finish all 12 gallons."

Once home with their seemingly low-priced loot, shoppers must then take on the costs of storing it all.

Finding space around the house just to warehouse cases of products that won't be consumed for months is not cheap. The separate pantry off the kitchen is coming back in fashion. In expensive regions where a 2,000-square-foot home costs $400,000, the cost of a 10-foot-by-10-foot storage area would equate to $20,000.

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According to the Census Bureau, the percentage of new homes bigger than 2,400 square feet has grown from 9 percent in 1971 to 37 percent in 2002.

A Seattle-based marketing research executive told UPI, "I don't think bulk purchasing is driving the expensive investments in SUVs and big houses, but I think it is a factor in the demographic profile of the warehouse club shopper, which has the most upscale profile of any channel."

She noted, "Though you might think that the low price bulk could appeal to large, middle-class households, the channel skews older and quite upscale."

This research veteran suggested the reasons: "There's a large expense per transaction, which is not achievable for 'paycheck-to-paycheck' folks. And buying in bulk means significant storage space is needed, which is more available in larger homes.

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