Store Choice and Shopping Behavior: How Price Format Works

Abstract

This article presents a perceived shopping utility framework for analyzing the impact of retail price format on store choice. This, in turn, determines three key performance metrics: number of shoppers; number of trips; and average spending per trip. When choosing a store, consumers evaluate both the fixed and variable utilities of shopping. The fixed utility does not vary from trip to trip whereas the variable utility depends on the size and composition of the shopping list. This article summarizes prior findings on store choice, analyzes how retailers can improve their performance, and interprets the practices of leading retailers. It presents a framework that can accommodate situations where retailers face multiple segments of buyers who have different sensitivities to fixed and variable utilities.