Shygirl, it really seems like you're just looking for validation at this point, and I don't know that you're going to find it. Many posters, including quite a few that either have toddlers currently, or who have already raised their children, are telling you that you and your son's shopping behavior is both counterproductive and impolite.
Actually, I asked if I was rude to yell "watch out". (And I wouldn't really say I'm yelling, but it is with a raised voice.)
I think most people have said it might be rude, or it might not be rude, depending on how I do it. My original question wasn't about whether it was counterproductive or impolite to let him walk in the grocery store next to me or ahead of me. Definitely wasn't asking about whether it's counterproductive to let him eat french fries while shopping.
I think people's point is though, the "watch out" is not rude if its part of a bigger plan to teach your son to be more mindful and behave appropriately, etc.
If its the only thing you are doing, only saying "watch out" occasionally while otherwise letting him wander/not learn, then it can be problem. Because ultimately the goal should be for him to always be watching, not only watching when alerted to a potentially harming situation (harmful to either him or the other person).
So people are commenting on the big picture, not the one detail.
I think it's unfair to suggest that the OP is not teaching her son to behave appropriately. I'm sure it could be argued that if she forced him to sit in the cart with a book every time they are out in public, she wouldn't be teaching him how to behave appropriately, because he'd never get the chance to try.
Yes, kids in public can be a hassle and an inconvenience. It totally sucks when someone else's kid gets in my way. I don't like it. But, it's not just kids who don't always pay attention. And paying attention to kids doesn't guarantee that an accident won't occur. I was in a grocery store once, turned a corner and ran into another cart coming my way. It was neither of our faults. The aisles were small, we couldn't see around the corner, and even trying to be careful, we still had an accident.
Having to watch out for others (of any age/size) is just something that we have to do because we share the world with other people. The inconvenience of it doesn't make it rude. Whether or not a parent chooses to let their kid walk and in what circumstances, is a parenting issue, not an etiquette one.
To me, the basic question in this post is "Is it rude to yell 'watch out' when I see a collision about to occur" or more so "Will the person who is not at fault for potential collision be offended because someone yells 'watch out'." And my thought is...that's a pretty benign thing to get all up in arms about.