Ever think that the British Government’s ambition to collect data on its citizens with an ID card scheme is an evolution of what private companies are already doing with the loyalty card schemes and the like? John Williams argues that supermarkets have succeeded where communism failed, in an article for the Financial Times. Karl Marx would be proud.
Supermarkets are packed with a greater rang of items than ever to tempt the consumer, from soap to televisions. Yet the choice for many types of product is shrinking. If you want to buy a particular type of shampoo this weekend, for example, your local store may have taken it off the shelves to make more room for the half-dozen most popular brands.
The market in most consumer markets is polarising between one or two dominant producers and the rest, which include retailers’ own-labels and niche manufacturers. Soft drinks are a good example: Coca-cola and Pepsi-Cola command much of the shelf space, squeezing out minor brands.
But another reason for the reduced selection is that retailers want to offer consumers fewer choices. Selling lots of different brands with many variations just confuses shoppers.
Take detergents: in most countries Unilever and Procter & Gamble are locked in a soap war; the arsenal includes powders, tablets, liquids, concentrated versions, low-temperature varieties and products for delicate fabrics — all in a range of sizes. Yet most consumers always buy the same product: a big box of standard powder or a bottle of liquid detergent, say. Surveys show they find proliferation irritating, especially when stores run out of their favoured product because they have to stock all the variants.
Culling minor brands and slow-selling products also reduces costs for both manufacturer and retailer. “Cutting out complexity” is the supply chain mantra — fewer products means higher profits and more to spend on marketing “power” brands. This involves intensive analysis of sales data to find what sells and what does not, and sharing of information between retailer and manufacturer to deliver the goods when and where shoppers want them.
It is made possible by the power of modern computers, which lets retailers analyse hundreds of millions of transactions and match them with data about individual preferences from loyalty cards. These big consumer companies know a lot more about you than you may think — about your fondness for alcohol, for example, or
weakness for cream cakes. If you have a regular assignation with a lover, they will know you buy flowers and a bottle of champagne at around 4pm every Tuesday at a store that is not the nearest to your home.
They also know that sales of chocolate ice cream increase in the summer until the temperature tops 20 degrees Celsius, when iced lollipop sales start to rise almost exponentially. In fact they have a good idea about what consumers want, with only the unpredictability of rivals’ new product launches and health scares to disrupt calculations.
In practice, much of the week’s grocery bill ends up with the dozen or so large manufacturers that produce the most popular brands. Like the central planners of the former communist countries, supermarkets seek to match supply and demand by forecasting the population’s needs and planning production to meet them.
Some of those seduced by Marxism in the 20th century lost their faith when Ludwig von Mises, the Austrian economist, demonstrated the impossibility — as it was at that time — of collecting sufficient data about individual preferences to make central planning work. Yet that is exactly what the processing power of computers has made possible — though it may mean you can no longer buy your favourite shampoo at the local supermarket.