Friday assorted links

1. Father knows best infrastructure.

2. Why is milk in the back of the supermarket?

3. Rolling drone delivery is coming to D.C.

4. China and Japan, “In fact, when staying in Japanese hotels, I turn on all the faucets as a way to relieve my anger! But it is of no use! We must do better in all ways! Let’s go!”  Most polled Chinese disapprove, although eight percent expressed a desire to do the exact same thing.

5. Cow dung capitalism.

Comments

My local store put some milk and eggs in a smaller front cooler and they stopped because not a lot of people got their milk there. I look at it simpler, I want to buy my milk last along with my other cold items, and by putting it not just in the back but in the back corner I'm certain to grab it last.

I have to admit that I took the "they make you walk past other stuff" argument rather too gullibly. Obviously yes, it is cheaper to build refrigeration along a wall. And lo, in most markets most walls are used for refrigeration.

A large cost for retailers is handling product, milk is heavy, and volumes are high. So you design for low cost handling.

It's probably a combination. It's both cheaper to have the bulk refrigeration at the back close to the refrigeration plant and to stock a bulky high volume items from the back close to the delivery area.

In most stores, aren't the freezers cases in the middle, rather than along the walls? If it were really just the cost, I would think the walls would be all freezers rather than just refrigerators.

Yes, it is. So maybe the biggest factor is purely stocking convenience for a product that has a restricted temperature range.

Think about re-stocking. Re-stocking heavy liquids from a two sides refrigerator with angled rack is easier.

Frozen food is not that heavy, so do that in the middle.

#2 This is news?? #2 makes me think economists have never worked tight-margin retail, where logistics is a vital consideration.

Logistics is real money; marketing is maybe money.

Note you stock milk from the back, so the older dates which aren't sold yet are in the front.

Why doesn't this apply to frozen? Frozen items are lighter. Frozen items have a longer shelf life that refrigerated items, so controlling sell-by dates is not as key. Not everything can go against the back wall.

Some large grocery stores have experimented with putting convenience-store items (milk, bread, beer, soda, chips) in a sort of mini-store near the front, perhaps to better compete with convenience stores. And (in warmer climates, at least) some offer these items through drive-up windows.

Customers will pay for convenience but, perhaps, only when it's not too obvious? Could a large grocery store get away with selling costly milk through the drive-up, even if they offered less costly milk in the back of the store?

the same at my local grocery store (expect the display is still up. i used it for the first time in about a year earlier this week).

After listening to the Planet Money episode with RR and Pollan, it seems that the most likely explanation is that the milk is in the back of the store because it's always been in the back of the store.

Also, lots of grocery stores have small coolers near the registers that have milk and a few other cold items, like orange juice, in them, which seems to completely disprove Pollan's hypothesis, at least.

Pollan did not appear to be a careful thinker in that episode.

I think it's just status quo bias.

Milk is in the back because of the "cold chain", this has been true for 50+ years. Grocers noted the side benefit of increased impulse buys, so they have little to no incentive to innovate (though some chains obviously are). If your milk sales aren't dropping why solve a problem nobody is asking to be solved? And by nobody I mean, podcast griping aside, they aren't getting a strong enough signal via profit/loss, same store sales, etc. that a change needs to occur.

"Pollan did not appear to be a careful thinker in that episode."

I agree, at one point he completely dodged even acknowledging whether he thought Russ was right or wrong by spouting off some factoid from his book about % of impulse buys in each shopping cart. Retreat to your comfortable world where nobody challenges you Mr. Pollan...

1) You know what is particularly telling, and perversely proving about this claim that "infrastructure is unplanned?" I could see no mention of digital infrastructure, the very kind of infrastructure that has transformed our global society in a few decades.

No, we don't plan infrastructure. And while we complain about cities being unable to rebuild century old bridges fast enough, we endorse bans on city WiFi. Stupid.

Think about all the money that could be made by private companies if we banned municipal delivery of water, and it all had to come in by trucks (or drones)!

Betcha we'd be tremendously more efficient users of water.

Just turning on their faucets and saying "let it be a lesson for you, think harder about your choices" probably would have been cheaper and better for all involved parties than torturing and jailing thousands of Japanese immigrants in Brazil in 1946 was. Well, hindsight is 20/20

Efficiency is good, but spending data and spending energy both expand the economy, progress.

(This is what makes burning coal a trade-off for serious people. It has always done harm, it has brought progress. The serious question is a what point progress can be managed with less of it? The unserious answer is that it should be "brought back" because there are no negatives.)

"The unserious answer is that it should be “brought back” because there are no negatives."

No, the non-serious answer was: "“If somebody wants to build a coal-fired power plant, they can. It’s just that it will bankrupt them,” Obama

The assumption is that rapidly bankrupting an entire industry that provides 40% of the US electric supply won't have any push back or serious economic consequences. The idea that the resulting push back is the "unserious answer" is an attempt to tip the scales in a partisan manner.

Milk is in the back because it is perishable, so the new milk is loaded into the case from the rear. Otherwise it would be annoying to constantly have to rotate when stocking.

Excellent point and one that should have been brought up in the podcast.

All savvy consumers know to pull their milk from the back of the rack to get the freshest stuff.

If they have the same sell by date, and both have been in the cooler the whole time, wouldn't they be the same freshness?

But they don't have the same sell-by date. You don't restock when you are completely out of milk. You restock when you are getting low on milk. The new milk will have a sell-by date that is farther from the present time.

Could there just possibly be more than one reason why milk is in the back?

If all that business about cooling, etc. is the full story, why are frozen goods not also in the back, but rather usually placed along a normal aisle, with some quite near the front?

#2 is well and good, but the placement of goods in stores, especially grocery stores, is a carefully studied subject, and "merchandising" is a very important consideration.

Freakonomics led to this trend where people try to suss out the "one real reason" for everything. Of course most decisions are more complicated than that.

Frozen goods don't require the same careful handling of refrigerated items. They are cooled to 0 F when delivered and can withstand a half hour at room temp during the stocking process without going above 32 F. The "cold chain" keeps milk between 36-40F I believe, a much tighter window with no room for error.

There is only so much wall space, and frozen foods don't need restocking nearly as often as milk.

Refrigerants used in super markets and convenience stores aren't poisonous.

#1 - the Megan McArdle 'interview' of an infrastructure guru was anything but. It was a series of 'leading questions' where the question presumed an answer. Expected for a short "one page" interview but hardly enlightening. You basically learned that the interviewee favors smart roads and/or tolled roads / metered roads for charging for peak usage. Did not get into technical matters like how long does any average 9" or 12" or 15" or whatever reinforced concrete with an asphalt overlay road last in DC under heavy traffic? (I think it's about 20 years, maybe 25, but that kind of detail would have been nice).

How do you interview your father?

"1. Father knows best infrastructure."

"FM: The ASCE has a system bias in favor of portraying the United States as having the infrastructure of a Third World nation. They lobby for the civil engineers who would be employed if we really were upgrading our infrastructure."

+(1 in 9) structurally deficient bridges

+1 DC Metro system where necessary upkeep was ignored in the interest of not spending money.

New projects are way sexier and better PR than boring old maintenance. I suspect that the time and energy spent approving lots of vanity projects could have been invested in getting proper funding for DC Metro upkeep but nobody gets a cool re-election sound bite for that.

Exactly! Spending money on bridges that don't need to be upgraded drains money from the basic maintenance budgets. But ASCE members don't get paid out of the maintenance budgets, they get paid out of the capital budgets.

4. Chinese tourists are wretched everywhere.

Chinese people are still furious at the USA for dropping two atomic bombs on their neighbor in 1945. "Why only two?!" they ask, outraged.

"2. Why is milk in the back of the supermarket?"

It's normal to put common utility systems together to save money on piping. That being said, the biggest reason for placing milk near the back is probably a combination of ease in stocking combined with a common refrigerated cold room. Also, the article seems a little dated, because some of the big grocery chains now have a smaller cooler with milk on the main front aisle for those that just want to grab a gallon of milk, in addition to the large stock on the back wall.

2. Two more reasons I'll add to the list:

- It's not just the milk out on the shelves that needs to be kept cold. Milk in inventory stock has to be kept cold as well. It's probably more efficient to have that stockroom located close to the display shelves so you're not cooling two separate footprints in the store.
- Pallets of milk are super heavy and you are restocking multiple times a day, so you really don't want to move them very far as opposed to, say, the ones full of breakfast cereal.

Source: summer of 2005

yep. path dependence. let's put the milk cooler close to the back stockroom fridge so we don't have to haul all this milk so far repeatedly during the day when all the customers are in the store.

It is not just milk. Grocery stores generally have the high value, high margin items around the outside edge of the stores. Think about meat, fresh vegetables and other perishable items.
The isles in the middle of the store are largely for bulky, low value items like coffee, bread, cereals. cooking oils, etc.

I bet that the arguments about needing to place the refrigerated items in the back to keep the cost of building and maintaining the refrigeration plays a role, but exposing the customer to high value products also plays a major role.

The exceptions are the end of the isle where they tend to place high value, impulse type purchases.

Produce is only high margin because of the nature of the product itself. So yes, your $.99 apple really only cost $.35 cents, but you're also paying for another apple in the back of the store that got thrown away before it made it to the shelves and another apple that will go bad before it is purchased. High gross margins high net margins. Also they have plumbing and refrigeration concerns. The fresh meats and bakery departments are on the edges of the store because the employees need to go to the back rooms to take stuff out of coolers, ovens, etc. Imagine a meat counter in the middle of the store and somebody is constantly running ice chests full of raw meat up to it. Doesn't seem efficient, let alone sanitary.

So again I'm not sure margin has anything to do with it. The only tactic that has concrete evidence behind it is placing things at eye level or at kid height (walk down the juice aisle and look at the $2-3 bottled juices on the 2nd shelf from the bottom). But this applies to middle aisles as much as outer edge of store.

That argument also applies to restaurants but we see specialty situations where someone is running the food to be prepared up to the middle of the dinning room to be cook at the table. I would think there might be a similar opportunity for a butcher or fish prep area for the shopper. Yes, would add some costs but if the show is of interest the product could be marked up a bit more -- but would also probably need to be seen as higher quality as well.

I was under impression milk was not a high margin item, but was often used as a loss leader.

2. "Many people believe that grocery stores keep their milk in the back corner of the store for a nefarious reason." Milk, emails, birth certificates, whatever. Half of Americans are loony tunes.

4. Nationalistic fervor/patriotism/jingoism encourages tourists to "take revenge" on oppressors that are no longer around. Just like the US dropping atomic bombs on Japanese teen-age girls walking to school to make up for the sins of a small samurai cult that directed a global war. Maybe the Pawnees should throw shingle nails on I-80.

"Just like the US dropping atomic bombs on Japanese teen-age girls walking to school to make up for the sins of a small samurai cult that directed a global war."

That war was still going on. The Japanese were still fighting American troops and would not have surrendered short of a full invasion.

Your argument would only make sense if we had used atomic bombs in the 1960s against a peaceful, democratic Japan.

1. Is it not enough that she has 732 comments (at 12:30 eastern time). Seven hundred thirty two. Cowen doesn't have that many to all of his posts at Bloomberg combined. Don't get me wrong. That McArdle has succeeded as an "economics" columnist is nothing short of amazing. That seven hundred thirty two adoring fans obligingly praised her for her grandness is depressing.

#3....No wonder we're obese. How far can that drone realistically deliver? Three blocks?

While I think the argument is fine and probably part of the truth -- I think it's well known that product placement to maximize impulse sales is also a reality (probably something of a necessity in a business with the slim margins supermarkets/grocers have).

That said one question came to mind for me: they look at the cost of moving thing up front but ignore the fact that moving doors around is pretty easy. Granted, there's a lock in for existing stores due to the interior layout and where the parking is but that wouldn't stop new building. I suppose the issue there, which then gets back to the articles view, is that various things might prevent putting the loading and refrigeration/cooling on one side of the building and then entry just around the corner so the milk can be up front.

Of course, if the interest in deciding if these stores are engaging in some type of nefarious product layout, simply pointing out that the location of milk in driven by other factors doesn't lead to a rejection of the hypothesis, we need to change the question and ask about the location of other products in relation to where the milk has to be located.

#4 Yes! I sympathize completely! I feel the same way about being forced into all these penny-wise, pound-foolish conservation measures, like having to deal with limp-axe showers, even when I'm willing to pay 40x the legit environmental cost. Doubly so when hotels give you soap in a format that forces you to waste precious time figuring it out while the shower is running.

Forcing inconvenient water conservation on people barely makes a dent against real water waste: it just aggravates people. We should instead be implementing better policies that fix the incentive structures that lead farmers to grow rice in a desert simply because they have to spend the water on something.

(Don't know if Japan has confused water policies, but it sounds like they do, if they actually care about guests wasting water, rather than not-caring and billing them for usage.)

I stocked in a grocery when I was younger. Milk was one of the items that was always being refreshed throughout the day due to high volumes. It was pretty handy to have the milk case in the back next to the stockroom refrigerator (seperated only by the swinging doors to the stockroom). As I think about it, it seems very logical to have both the display case for milk and stockroom fridge closely situated.

As I think about it, it seems very logical to have both the display case for milk and stockroom fridge closely situated.

But why along the back, and not the side?

What does the location of stockroom fridge have to do with how the aisles are laid out, which is after all what determines where the "back" is from the customer's point of view?

While I think Russ Roberts point about the logistical and engineering issues are correct , his writing is a pathetic attempt to inject irrelevant dogma into the issue . There are plenty of cases of companies sacrificing customer convenience to make marketing more effective. For example when the cable companies offer low intro rates, try finding what your bill will be after the intro period. Or when I take a flight some airlines slow the check-in process to get to sell me upgrades.

On milk, Roberts writes,

how can I argue that customers actually want the milk near the back? That seems crazy. Do customers want to be lured to the back of the store? Do they want to be forced to pass all the other enticing offerings? Is it for the exercise?

Well, something has to be in the back, doesn't it? It makes perfect sense to make it less convenient for customers to go to the back to get necessities, rather than impulse buys or luxury items.

If customers wanted the milk near the front of the store, then groceries stores would offer that convenience. Or someone could come along and create a new grocery store built on making customers happy rather than exploiting them. They’d make a killing.

Oh really? Again, something has to be in the back. There is no doubt some customers would like it in the front - those who just want to rush in, grab some milk, and go. Grocery stores don't survive on those customers. They survive on customers who buy prepared foods and other high-margin goods, and who spend a lot, often impulsively.

All the business about engineering and design makes sense, except for one thing. Freestanding stores, and some that the end of a strip mall, can satisfy all that by piutting milk along the side. There's no rule that the "back" - which is determined by the layout of the aisles after all, is the only place you can use space for cooling systems and the like.

But what is hard to see is that competition forces that profit-making urge in the direction of helping customers rather than exploiting them.

Maybe because it is not such a universal truth as Roberts imagines. Lets ask Wells Fargo.

1. Bad roads allow oligopolies to exist, and therefore, the competition has a smaller radius.

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