The Customer Who Seems Active but Quietly Erodes Your Margin

There is a type of customer who appears in every sales report as “active.” They shop frequently, generate transactions, and contribute volume.

And yet, they cost the retailer money.

These are the bargain hunters known as cherry pickers. And they know exactly what they are doing.

“Cherry picking provides customers with access to a larger share of the consumer surplus—more than 5% of the highest market price per item. Compared with supermarket net margins of 1.5% to 2%, cherry picking has tangible effects on customer profitability.”— Fox & Hoch, Wharton School

Who They Are and How They Operate

The study by Fox and Hoch, one of the most cited pieces of research on shopper behavior in retail, identified three types of consumers: store-loyal shoppers (27% of the sample), occasional store switchers (55%), and cherry pickers (18%).

The last group visits two or more stores on the same day at least once a month. They buy exactly what is on promotion in each store—and then leave.

In monetary terms, cherry pickers saved an average of $22.90 compared with the highest prices available during a single shopping trip. Those savings come directly out of the retailer’s margin.

The Math Nobody Wants to Do

In many Latin American retail chains, where the average basket barely reaches $20, each transaction generates less than $0.60 in net profit.

Less than the cost of a phone call.

Now add the cost of the loss leader product that attracted the customer in the first place—often sold below cost to drive traffic. Add the operational cost of the transaction: cashiers, energy, infrastructure. Add the proportional share of the marketing investment used to promote the offer.

In many cases, the result is negative.

“Loss leaders only make sense if the customer who comes in to buy the promoted item also purchases other products with healthy margins. If they buy only the discounted item and leave, the strategy fails.”

The Trap of Using Promotions to Clear Inventory

There is a legitimate use for loss leaders: clearing slow-moving inventory.

Products nearing expiration, discontinued models, or categories with excess stock can justify selling at a loss. In those situations, recovering part of the investment is better than losing it entirely.

The problem begins when that liquidation logic becomes the company’s standard commercial strategy.

When promotions stop being the exception and become the primary mechanism for generating traffic.

At that point, the retailer is no longer using discounts to move obsolete inventory—it is subsidizing cherry-picker behavior with its own margin.

Week after week. Flyer after flyer.

Without measuring how much each transaction from a promotion-driven customer actually costs.

Inventory gets cleared.

Margins do too.

The Customers Who Actually Sustain the Business

Across Latin America, seven out of ten customers spend less than $100 per month with a retail chain.

Yet the top 10% of customers spend more than $250 per month.

With a net margin of 2%, that high-value customer generates approximately $5 in monthly profit—more than twelve times the contribution generated by an average transaction.

And if that customer increases spending by 20%—which is exactly what we achieve through a Best Customer Marketing strategy—their profit contribution grows by the same proportion.

No loss leaders required.

No cherry pickers attracted.

No margin erosion.

“The challenge for retailers is to find ways to encourage cross-selling—so that when customers come in for the promoted item, they also purchase other products.”— Fox & Hoch

The Question That Changes the Conversation

How much of your commercial budget is dedicated to attracting customers who only come for promotions—and how much is invested in deepening relationships with the 10% of customers who already sustain your business?

The challenge is that this top 10% is often difficult to see.

When most customers spend less than $100 per month, averages flatten everything. Management ends up making decisions for the typical customer—who is often the least profitable customer.

Your best customers, the ones who spend four times more than average, rarely make noise.

They do not chase promotions.

They do not show up in the sales spikes created by weekly flyers.

But they are the customers who support the business month after month, quietly and consistently.

Identifying them, understanding them, and investing in them is not simply a marketing exercise.

It is a financial decision.

In our experience implementing loyalty and customer growth programs across 14 countries in Latin America, the retailers that ask this question—and act on the answer—not only grow faster.

They grow more profitably.

If you would like to explore how to identify and activate the customers who generate the greatest value for your business, let's talk.

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Sources

• Fox, E.J. & Hoch, S.J. Cherry Picking: The Weapon of Choice for Price-Conscious Consumers. Wharton School, University of Pennsylvania. Published in the Journal of Marketing.

• Sintec Consulting. Cost-to-Serve: Its Contribution to Customer Segmentation.

• FasterCapital. Loss Leader Pricing: How to Use Low-Priced Products to Attract Customers and Increase Sales.

• Abasto. Four Secrets to Using Loss Leaders Effectively. Analysis of the use and limitations of loss leader strategies in retail.

• Business Plan Templates. Is a Supermarket Profitable? Industry net margin benchmarks and profitability analysis.

• Retailogic proprietary data: Average basket size and customer segmentation analysis across 14 Latin American markets.