In Search of a Theory of Shopping Value: The Case of Rural Consumers

Abstract

Although the challenges facing rural retailers have been attributed to competition and decreasing population, this paper defines the problem from rural consumers' perspective. It argues that consumers select shopping location on its shopping value, determined by its attractiveness and accessibility. The results indicate that locations closest to the consumer's residence offer the highest shopping value for groceries and other low-order goods. They also show that increasing gasoline prices favor local retailers. Rural retailers may use these results to implement differentiating strategies that increase their attractiveness, accessibility, and consequently their competitiveness. Declining number of rural retail stores across the United States is creating policy concerns about maintaining access to services for rural residents. Many researchers have shown that when the local population falls below a particular threshold, marginal revenue from retail activities falls below marginal cost, leading to closures (Mulligan, Wallace, and Plane; Bresnahan and Reise; Shonkwiler and Harris). Additionally, it has been shown that the arrival of large retailers such as Wal-Mart stores in towns relatively close to small towns and rural communities often accelerate the demise of retailers in these communities (Goetz and Swaminathan; Artz and Stone; Parr and Denike). These perspectives attempt to explain the problem from the supply side, assuming the consumer as a given. This paper attempts to explain the challenges facing small town and rural retailers from consumers' perspective, arguing that consumers' decisions about shopping locations are defined by their search for value from the shopping experience. Therefore, the paper extends central place theory and gravitational law of retailing research by focusing not on why retailers locate in particular locations but on the factors that motivate consumers to shop at particular locations. By focusing on the demand side of the retail exchange, the paper seeks to develop a theory of shopping value that would help local policy makers and retailers