What is a Grocery Loss Leader?

Many families are looking for ways to cut costs in a recession by taking a look at all of their expense categories and figuring out what can be cut.

A frequent target of these cuts in the Groceries budget, which although required, is a flexible expense by nature – you don’t spend the same amount every month. In addition, the harder we work at optimizing our grocery spending, the lower we can hope to get that expense.

Understanding loss leaders is just one of the keys to cutting down, but it’s an important one. Others include doubling up coupons, and my list of 13 “lucky” strategies (which, by the way, includes loss leaders).

Defining Loss Leaders

The concept of a loss leader is not unique to the grocery store, but is perhaps its most prominent example. Simply defined, a loss leader is any product that someone sells at a significant discount (usually a loss) in the hopes of attracting customers and selling them other, profitable products.

How does that translate into real-world speak?

Let’s suppose that a grocery store purchases a Cheerios box for $2.00. The regular price is $4.00.

The store then has a huge sale on cereal, offering it for $1.75 per box (a 25-cent loss!). But the store knows that every person that walks through the door will spend about $30 (an arbitrary number), for an $8 total profit (also arbitrary). So it doesn’t care about a 25-cent loss on cereal! In fact, it could give a box of cereal away for free all day long, and still make a killing on everything else.

And that’s precisely what stores do! Especially in saturated markets where competition is strong, grocery stores will go to great lengths to advertise their loss leaders in the hopes that you’ll shop at their store and not the competition’s.

Taking Advantage

As wise and frugal consumers, how can we take the greatest advantage of this phenomenon?

The answer should be pretty evident – if we spot and buy the loss leaders consistently, stocking up where possible, we can hope to significantly reduce our grocery bill by getting our products at the lowest possible price (or close to it). The trick is to not get sucked into buying every other little thing at the store too!

How can you spot the loss leaders?

Chances are, you already have a good intuitive loss leader radar if you’ve been a regular grocery shopper. If a product is suddenly on sale for a price lower than what you’ve seen in a long time, chances are that it’s a loss leader.

A good place to start is the store’s sales circular for that week – most of the loss leaders are placed on the first or last page to immediately catch a shopper’s eye and attract them to the store. Focus on these two pages for maximum effect.

These might include BOGO deals (buy-one-get-one) or deep discounts on staples like milk and meats.

Looking at the Big Picture

While it’s probably not possible to feed your family only with loss leaders, saving regularly on these products is an important component to lowering your grocery costs. Supplementing your loss leader strategy with a ruthless determination to get the best possible prices on your other regular groceries will go a long way.

It might mean that you shop for loss leaders at several stores, while getting your regular groceries at another store (a strategy I regularly use). Whatever you choose, do it within reason and make sure it’s paying off the way it should!

Photo by Lordcolus