Retailers boost profits while improving eating habits of clientele
Convenience stores can help customers improve their eating habits while at the same time boosting both their own sales and profits. It’s as simple as offering customers the choice between healthy snacks and pastries as a low-cost add-on to their cup of coffee, according to a new study out of Â鶹Çř.
The finding is based partly on research carried out as an in-store experiment in a convenience store in the centre of a large North American city (with approximately 2,000 customers a day) over a five-month period in early 2022. This was followed by an online survey of 3,000 people across the continent.
During the experiment, customers who bought a cup of coffee at the convenience store could pay an extra dollar and were offered two different types of add-on items.
For the first period, which established the baseline level for the profit margins of the various bundles, clients were able to add a freshly baked pastry for the extra dollar. During the second phase, a range of healthy snacks were made available. In the final phase of the experiment, again for an extra dollar, customers were offered the choice between buying a healthy snack or a pastry to go with their coffee.
“We found that offering healthy snacks as part of an add-on bundle significantly increased healthy purchases and decreased unhealthy ones compared to before the study,” says Nymisha Bandi, a PhD candidate in the Desautels Faculty of Management, and the first author on the paper that was published recently in the journal .
“We also found that more than half of the customers continued to purchase the healthy bundle even when they were offered the choice between healthy and unhealthy snacks. Unfortunately, these improved eating habits didn’t stick once the healthy snacks were no longer offered as a bundle. Since their cost was higher than the unhealthy snacks, people went back to their old habits of eating pastries simply because it was cheaper.”
No matter whether customers chose the bundle involving healthy snacks or the one that allowed them the choice between healthy and unhealthy treats, the retailers saw a significant increase in their profits compared to the baseline bundle of coffee and pastry.
Profits increased by almost 24 per cent when customers were offered the bundle allowing the choice between healthy and unhealthy snacks. When only healthy snacks were bundled, profits remained stable, demonstrating that strategic bundling can allow retailers to promote healthier products without sacrificing profits.
“For retailers, offering the choice bundle is beneficial,” explains Bandi, who, in some ways was not surprised by the choices the customers made. “Gen Z are very conscious about what they eat, they want healthier options and aren’t just grabbing whatever’s on the shelf. Even convenience store owners are picking up on this, bringing in more nutritious choices to connect with a generation that’s all about mindful eating and healthier lifestyles.”
The researchers believe their study can help counter some of the prejudices on the part of retailers who may feel that offering healthy snacks involves too much of a risk in terms of food loss for a relatively limited profit.
The paper
“Incentivizing Healthy Food Choices Using Add-On Bundling: A Field Experiment” by Nymisha Bandi, Maxime C. Cohen, Saibal Ray was published in
Funding
This research was supported by the James Â鶹Çř Scholar Award Fund, the Scale AI Chair Program, IVADO (Institut de valorisation des donnĂ©es) Fundamental Research Project Grant, and two Discovery Grants from the Natural Sciences and Engineering Research Council of Canada.
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