Brands Are Finding It Harder To Cater To The Demand For Niche Products
ARI SHAPIRO, HOST:
It used to be the way to make money in grocery retail was to offer a limited range of products, but today grocery shoppers have more choices than they know what to do with. Sally Herships and Cardiff Garcia from our daily economics podcast The Indicator From Planet Money found how technology and innovation in manufacturing have let niche products evolve.
SALLY HERSHIPS, BYLINE: A new study from the University of Chicago's Booth School of Business says that between 2004 and 2016, the number of niche products - varieties at the grocery store - have grown by about 70%. And if you go stand in front of the potato chips section, you can see it. There are so many choices. John Stanton teaches food marketing at Saint Joseph's University. He also wrote a book about niche products. And he says the answer is simple - four letters.
JOHN STANTON: Today's industry is we say ABCD - always be collecting data.
CARDIFF GARCIA, BYLINE: And all of this is coming from increasingly granular data. It's gotten really powerful. Brent Neiman teaches economics at Booth, and he's one of the authors of the new study looking at niche products. He says even that study itself would not have been possible couple of decades ago because they wouldn't have had the data - incredibly rich microdata.
BRENT NEIMAN: Data sets where you can study, you know, literally what items are placed in the shopping cart of tens of thousands of households and process that data.
HERSHIPS: So Brent says we now know that buying niche products is a powerful trend, and it's happening across demographics in a sweeping and enormous way.
GARCIA: So more and more consumers are getting what they want, but expanding product lines so that they include all these varieties represents a huge shift for companies. And there are two big obstacles that they had to overcome. Here's John Stanton again.
STANTON: Companies didn't produce it because it was too expensive to make a smaller quantity. And frankly, if they did, how would they tell people that the product exists and not waste their money and advertise to everybody?
HERSHIPS: Then there's shipping and distribution to the grocery store. John says there may be more varieties, but that doesn't mean stores are getting bigger or that there's more room on store shelves. According to the Food Marketing Institute, a professional association which represents grocery stores, stores are experimenting with smaller spaces, less square footage. But John says this is where, once again, new technology in the form of consumer data swoops in to save the day. Manufacturers know what consumers want. They know what to ship where.
GARCIA: So zoom out of the grocery store for a minute and think a little bit more abstractly about what we're saying here. The stuff we put in our shopping carts and how different all those items are could be saying something interesting about us. Here's Brent, the co-author of the study, again.
NEIMAN: There are a lot of areas of modern life, lot of walks of modern life in which we're increasingly segmenting and separating from the common experience, whether it's polarizing in the kind of news that we read or the places that we visit or live. And I do find it simply interesting that increasingly even our grocery carts look increasingly different from each other.
GARCIA: Would I even recognize you by your grocery cart, Sally?
HERSHIPS: Totally - the rosemary potato chips.
GARCIA: That's the giveaway, right.
HERSHIPS: Sally Herships.
GARCIA: Cardiff Garcia, NPR News. Transcript provided by NPR, Copyright NPR.