Exploring the choice between in-store versus online grocery shopping through an application of Semi-Compensatory Independent Availability Logit (SCIAL) model with latent variables

Abstract

This paper examines individuals' choice of in-store and online grocery shopping channels using stated preference (SP) choice experiments. The study uses 1,391 records from a stated preference choice experiment in the Greater Toronto Area (GTA), Canada. It applies a Semi-Compensatory Independent Availability Logit (SCIAL) Model with latent variables. The methodology accounts for semi-compensatory choice behaviour through probabilistic choice set formation considering effects from socioeconomic and psychological variables. This study demonstrates the advantage of considering probabilistic choice set formation and semi-compensatory behaviour in modelling the adoption of innovative products. Empirical results reveal that shoppers demonstrated similar myopic behaviours once they firmly considered in-store grocery and subscribed free delivery services in their choice sets. They are equally likely to choose both channels without careful comparison to alternative channels once they firmly consider both channels in the choice set. However, considering the latter in choice sets is much costlier than in-store shopping. Therefore, in-store grocery shopping will still dominate the grocery shopping channel unless all home delivery services become free. Moreover, grocery shoppers value same-day delivery service. For typical delivery services charged between $4 and $20 in the GTA, Canada, grocery shoppers are willing to pay between $3.91 and $8.44 for same-day delivery. The latent variable describing shoppers’ perceived pandemic fear significantly contributes to the choice set inclusion probability of in-store grocery pick-up services, but the effect is not significant for other home delivery channels. This highlights heterogeneity in grocery shoppers' choice behaviour within the online channel.