The secrets of supermarketing

This discussion paper from the UK-based Food Research Collaboration presents an alternative interpretation of supermarkets’ business models. Instead of offering low prices purely through economies of scale, the report suggests, supermarkets are running a finely balanced model with very low profit margins and large sale volumes. To keep prices low, supermarkets both persuade customers to buy additional items (which may ultimately go to waste) and charge fees to suppliers in return for marketing and selling their products. Without these supplier fees, supermarkets in the UK would be running at or near a loss.