A new study from startup Observa says that when it comes to healthy foods or baby products, for example, the Bay Area is actually pretty affordable compared to other cities.
Bay Area residents are used to hearing about how expensive the costs of living here are. Everything from housing and commercial real estate to cocktails seem to have bigger price tags than other parts of the country.
But a new study from retail sales research firm Observa found that when accounting for different income levels, you’ re better off shopping in the Bay Area for some items than in other metro areas. The study found, for example, that it costs 396 percent more to buy healthy groceries in New Orleans than Palo Alto and that for parents shopping for newborns, products cost 215 percent more in Tucson, Arizona, than in San Francisco.
“What we found is there is a discrepancy in cost once we take into account average income, ” said Observa CEO Hugh Holman.
Unlike the U. S. Department of Labor’s Consumer Price Index, which measures pricing for an average set of consumer goods, Observa’s study analyzed more specific baskets of goods, looking at the prices of goods that fit into certain lifestyles such as healthy foods, baby products and items for retirees and older Americans.
The costs of the goods themselves vary among the cities and brands. Certain brands price items the same across the country, while others price them differently according to shipping, distribution or other costs. Some goods are marked up by retailers and not necessarily the brand.
But, by using the median income in each area according to U. S. Census information, Observa created a comparison showing the percentage of the typical paycheck it takes to buy those products.
For example, if a pound of organic bananas is 89 cents in New Orleans and 99 cents in Palo Alto, the difference in price is not tremendously great but cuts into the average household income (which is $36,792 per year in New Orleans and a much higher $136,519 in Palo Alto) much differently.
“Because real estate in the Bay Area is expensive, conversation tends to drift towards all your expenses. But in reality, it can be cheaper for people to eat healthy in a place like San Jose, ” Holman said. “It’s not what I expected to see; I thought it would more expensive (in high-income areas) because the market can bear more expensive goods.”
Demand for healthy (or at least what people perceive as healthy) products is growing in the United States overall. More than 82 percent of people buy organic products on a regular basis, according to the Organic Trade Association. But in New Orleans, the percentage of income required to purchase goods like organic fruit or meats is 11.1 percent, while in Palo Alto, it’s just 2.8 percent and San Francisco, 5.0 percent.
Similarly, the average spending on baby products like diapers, baby powder and bottles requires 8.8 percent of the median income in Tuscon, while that drops to 6.1 percent in Boston and 4.1 percent in San Francisco.
The study also measured goods that older Americans tend to buy, such as vitamins, Ensure drinks and established cereal brands like Raisin Bran, and found that in San Francisco, the amount that people typically spend on those products requires 2.7 percent of the median income, while in Orlando or New Orleans, it requires 5.4 percent.
The report is the first segmented basket of goods study by Observa, which plans to expand the study to more cities and to different lifestyle segments.
The data could help provide an opportunity for brands to expand the market for certain goods and help consumers access products more affordably, say the researchers at Observa. They think that by pricing the products the same across regions, brands are missing an opportunity to differentiate from online retailers.
You can check out the full report from Observa here .
