Major Retail Research Articles

The Detrimental Effect of Customer Demotion on Customer Profitability in Hierarchical Loyalty Programs

Firms employing hierarchical loyalty programs (HLPs) periodically demote customers from higher to lower status level to divest from unprofitable customers and boost profitability. However, existing literature lacks objective evidence on how customer demotion affects demoted customers’ future purchase behaviors and ultimately profitability for the firm. Moreover, customers in the HLP’s higher position may respond to customer demotion differently from those in the HLP’s lower position. Drawing upon emotions and equity theories, this study quantifies how the profits that customers contribute to the firm change after customer demotion, and compares demoted customers’ behavioral reactions from top-tier with those from bottom-tier based on customers’ actual behavior data from a major retail bank in South Korea. The findings show that withdrawing customer status actually deteriorates customer profitability, and customers with top-tier status decrease their profitability more dramatically than those with bottom-tier status after demotion. The results contribute to previous literature on customer demotion and relationship marketing, and provide specific guidelines into how firms should design and implement customer demotion in HLPs.

The Detrimental Effect of Customer Demotion on Customer Profitability in Hierarchical Loyalty Programs

Firms employing hierarchical loyalty programs (HLPs) periodically demote customers from higher to lower status level to divest from unprofitable customers and boost profitability. However, existing literature lacks objective evidence on how customer demotion affects demoted customers’ future purchase behaviors and ultimately profitability for the firm. Moreover, customers in the HLP’s higher position may respond to customer demotion differently from those in the HLP’s lower position. Drawing upon emotions and equity theories, this study quantifies how the profits that customers contribute to the firm change after customer demotion, and compares demoted customers’ behavioral reactions from top-tier with those from bottom-tier based on customers’ actual behavior data from a major retail bank in South Korea. The findings show that withdrawing customer status actually deteriorates customer profitability, and customers with top-tier status decrease their profitability more dramatically than those with bottom-tier status after demotion. The results contribute to previous literature on customer demotion and relationship marketing, and provide specific guidelines into how firms should design and implement customer demotion in HLPs.

Unlevelling the Playing Field: The Investment Value and Capital Market Consequences of Alternative Data

We use the introduction of satellite coverage of major retailers to study the capital market implications of unequal access to alternative data. We find that satellite data allowed sophisticated investors to formulate profitable strategies, especially by targeting the quarterly reports of retailers with bad news. Using a difference-in-differences design, we also find that the release of satellite data led to more informed short selling activity, less informed individual trading, and lower stock liquidity around the earnings announcements of retailers with satellite coverage. Overall, our paper provides new evidence that unequal access to alternative data can increase information asymmetry among market participants.

Blockchain-based event processing in supply chains—A case study at IKEA

Abstract One of the major areas of interest for deployment of blockchains is in the supply chain sector where decentralisation combined with immutability is expected to enhance the transparency and robustness of transaction processing drastically. In this work we contribute to a feasibility study for permissioned blockchains in the context of a major international retail company. First, we characterise the types, relationships, and volumes of events that are created in the life cycle of a product from creation to ownership transfer. We use the created event model and the data from the company operations to identify the load that such an event processing system would have to manage. Then we create a prototype based on Quorum that deals with a significant subset of the events and expose the blockchain-based prototype to variations in load to identify the maximum throughput and average transaction processing time. This system can then form the basis of understanding the bottlenecks, configuration settings and platform choices needed in future potential deployment.

Retailing Trends and Developments - Challenges and Opportunities

The retail environment is changing rapidly. The competition is getting tougher. Some of the developments taking place include tighter consumer spending; new retail forms; shortening retail life cycles and retail convergence; rise of megaretailers; growth of direct, online, mobile, and social media retailing; necessity of omni-channel retailing; importance of retail technology; green retailing; and global expansion of major retailers. Retailers adopt a number of measures to be successful in the short run and in the long run. The article will sensitize retailers about the requirements to be successful in the competitive retail environment. All the strategies will help retailers to develop customer relationships and grow in the competition.

How does location based marketing affect mobile retail revenues? The complex interplay of delivery tactic, interface mobility and user privacy

Location Based Marketing (LBM) increases relevance of placed advertisements by increasing awareness of product offers and availability in the consumer’s proximity. However, depending on how it is executed, such advertising can be perceived as intrusive, irritating, or a violation of consumer’s privacy. Existing research does not offer clear directions for retailers, who are keen to know of LBM’s effectiveness on sales. In this paper, authors investigate the effects of LBM on application (app) driven revenues of 116 major mobile retailers from around the globe. In particular, we examine the contingency effects of the roles of device as well as privacy needs of the brand audience. Findings reveal that effects of LBM on app-based revenues vary by delivery tactic (inbound vs. outbound), interface mobility (Low: Tablet vs. High: Phone), and user privacy needs (Privacy-seeking Android users vs. Privacy-oblivious Apple users). Overall, this research identifies critical factors for retailers to consider in order to best monetize their location based efforts. Contributions of the analysis and managerial implications are discussed.

E-commerce mercantilism-practices and causes

Purpose This paper aims to highlight in particular one commercially influential but subtle constituent of China’s mercantilist stratagem – asymmetrical internet access. The wider aim of the paper is to provide a solid basis of real-world facts and knowledge to the e-commerce discussions at the World Trade Organization and the ongoing plurilateral e-commerce negotiations. Design/methodology/approach This paper uses an empirical approach to reflect the general experiences of consumers connecting from China to e-commerce platform websites in other countries and vice versa consumers connecting from other countries to China’s e-commerce platform. Findings The empirical data show that Chinese potential customers trying to connect to the websites of foreign internet retailers in 17 other sample countries are faced with prohibitively long waiting times. In contrast, the average waiting time that it takes for customers in those other 17 countries to link up to China’s major internet retail platforms is much shorter. Practical implications The hard evidence presented here serves to strengthen the arguments that such internet censorship is used by China to establish unfair e-commerce advantage. This paper further argues that the General Agreement on Trade in Services is restrained from providing systemic solutions to the digital mercantilism problem. It is essential, therefore, that the ongoing plurilateral e-commerce negotiations address this issue. Originality/value This paper is the first to publish detailed results of a systematic survey designed to analyze the impact of asymmetrical internet access in China. It is also the first to examine the extent and effect of differing internet connection speeds in the context of international trade. The outcome of the survey provides a factual base for future rule-making at the multilateral level.

Sustainable reverse supply chains and circular economy in multichannel retail returns

AbstractThe percentage of products being returned in multichannel retail are high and further increasing, yet many retailers and manufacturers are unaware of the importance and scale of this issue. They consider dealing with returns as a cost of doing business and are oblivious of the potential for conflicts between their corporate social responsibility commitments and their returns practices. This article investigates how far sustainable practices and circular economy concepts have been implemented in retail returns systems; it identifies vulnerabilities, barriers, and challenges to the implementation of sustainable, circular practices and suggests ways to overcome them, as sustainability, loss prevention, and profit optimisation can go hand in hand with the right approach to the organisation of the reverse supply chain. Implications of this research on strategic management are outlined. The research was conducted using in‐depth interviews and observations with four major retailers in the United Kingdom, 17 structured interviews, 100 retailer website reviews, and three retail community workshops, all with British and other European retailers.

Organizational buying behaviour for perishable‐food packaging in grocery retail

AbstractThis qualitative study investigates the structure of the buying centre, the buying process, and the factors that influence buying decisions for perishable‐products packaging. This empirical investigation is based on the case study of a major Quebec food retailer. We show that the purchase of packaging changes significantly depending on whether the product is considered more or less strategic for the organization, which determines the required level of packaging customization. Buying centre structure becomes more complex as packaging customization increases. Given the multi‐functionality and the interdisciplinarity of packaging, we propose a multi‐criteria analysis grid to improve buying decision efficiency and to streamline communication between the various levels of the buying centre.

A cross-country exploratory study to investigate the labelling, energy, carbohydrate and sugar content of formula milk products marketed for infants.

Aims The first aim was to describe the energy, carbohydrate and sugar contents of formula milk products in eleven countries. The second was to assess the labelling methods used. Based on the findings, approaches to facilitate the selection of infant-appropriate formula milk products were proposed.Background Consumption of excess sugar during infancy can increase the risk of non-communicable diseases (NCDs) including obesity, diabetes and dental caries. Reduction of sugar consumption has been high on the global public health agenda. Although most infants are fed formula milk products in addition to, or instead of, breastmilk (with only 38% exclusively breastfed), the sugar content of these products is often not included in sugar reduction strategies.Methods An exploratory study was conducted to describe the labelling and nutritional composition of a sample of infant formula products available in 11 countries. The sample, which was collected between May and August 2019, included commercially available formula products (n = 257) targeted at infants aged <3 years of age. The products were sold in supermarkets and by other major retailers across the sample countries. Primary data were obtained from labels on the packaging of the formula products.Results Findings suggest that the majority of products sampled were higher in total carbohydrate and carbohydrates of which sugar and lactose, than breastmilk, supporting previous research. The nutrition information presented on the products was often unclear and was inconsistent across the 11 counties sampled. None of the products had front-of-pack (FOP) nutritional information.Conclusion Findings suggest that globally, infant formula products are higher in carbohydrates, sugar and lactose than breastmilk. Labelling is unclear and inconsistent across brands and between countries. Based on the findings of this study, mandatory regulation of sugar content in formula products is needed with clear FOP nutrition information to help consumers choose the healthy option for their infants.

Employees’ turnover intention and behavioral outcomes: The role of work engagement

We examined the mediating role of work engagement in predicting organizational citizenship behavior and counterproductive work behavior. The 227 participants were employees of 2 major retail banks in China, who completed a survey. The results showed that both turnover intention and work engagement were significantly correlated with organizational citizenship behavior and counterproductive work behavior. Results of structural equation modeling indicated that work engagement partially mediated both the turnover intention–organizational citizenship behavior relationship and the turnover intention–counterproductive work behavior relationship. These results extend prior findings and shed light on how turnover intention affects organizational citizenship behavior and counterproductive work behavior. Theoretical and practical implications are discussed.

Do We Exploit All Information for Counterfactual Analysis? Benefits of Factor Models and Idiosyncratic Correction

Optimal pricing, i.e., determining the price level that maximizes profit or revenue of a given product, is a vital task for the retail industry. To select such a quantity, one needs first to estimate the price elasticity from the product demand. Regression methods usually fail to recover such elasticities due to confounding effects and price endogeneity. Therefore, randomized experiments are typically required. However, elasticities can be highly heterogeneous depending on the location of stores, for example. As the randomization frequently occurs at the municipal level, standard difference-in-differences methods may also fail. Possible solutions are based on methodologies to measure the effects of treatments on a single (or just a few) treated unit(s) based on counterfactuals constructed from artificial controls. For example, for each city in the treatment group, a counterfactual may be constructed from the untreated locations. In this paper, we apply a novel high-dimensional statistical method to measure the effects of price changes on daily sales from a major retailer in Brazil. The proposed methodology combines principal components (factors) and sparse regressions, resulting in a method called Factor-Adjusted Regularized Method for Treatment evaluation (\texttt{FarmTreat}). The data consist of daily sales and prices of five different products over more than 400 municipalities. The products considered belong to the \emph{sweet and candies} category and experiments have been conducted over the years of 2016 and 2017. Our results confirm the hypothesis of a high degree of heterogeneity yielding very different pricing strategies over distinct municipalities.

Survey to assess management of abdominal pain and cramping in South African pharmacy chains

Background: Most consumers with abdominal cramps and pain choose to treat them with over-the-counter (OTC) medication. Currently there are no data evaluating the approach of South African pharmacy staff to abdominal cramps and pain. The purpose of this survey was to evaluate the approach of pharmacy healthcare providers (HCPs) to abdominal pain and cramping and attitudes towards Buscopan (hyoscine butyl bromide) for treatment of abdominal cramps. Method: An online and face-to-face survey was conducted with 142 pharmacists and 82 pharmacist’s assistants from two major retail pharmacy chains. The study was commissioned by an independent research company. Results: Pharmacists and pharmacist’s assistants reported providing advice to an average of 13 patients with abdominal cramps weekly. The majority of HCPs recommended treatment based on symptoms, potential for drug interactions and safety. Only approximately half of consumers always followed the advice of the HCP. HCPs commonly saw patients who had taken inappropriate medication for their abdominal pain and cramping, including nonsteroidal anti-inflammatory drugs (NSAIDs), paracetamol and codeine-containing preparations. Overall, 85% of pharmacists recommended Buscopan for the treatment of abdominal pain and cramping, based on perceptions of efficacy, tolerability and improvement in quality of life. Conclusions: Consumers don’t always select an appropriate medication for abdominal pain and cramping, and require advice from a pharmacy HCP. Fostering trust and confidence is essential to ensure that the patient follows the advice given. Most South African pharmacy HCPs within these two major retail chain pharmacies recommend Buscopan as first line for treatment of abdominal cramps.

A Unified Framework for Personalizing Product Rankings

We study the extent to which consumers benefit from personalized product suggestions offered by online retailers. Using data from a large-scale randomized experiment conducted by a major online retailer, we show that personalized product rankings induce users to purchase a greater variety of items relative to non-personalized bestseller-based rankings. To study whether users benefit from this shift in demand, we estimate an empirical choice model and use it to measure the effect of personalization on consumer surplus. Our model captures flexible taste heterogeneity by combining a standard consideration model with a latent factorization approach from computer science. This combination enables us to estimate users' tastes from data on both search histories and personalized rankings, while also recognizing that user histories are confounded by the prominence of displayed items. We estimate users' tastes and show that personalized rankings increase consumer surplus by 30% for the average user. This effect arises primarily because personalization makes users with niche tastes more likely to discover relevant niche items. Without personalization, the retailer would only offer 25% of its current assortment because most of these niche items would never find their audience.

Beyond Showrooming: Category Expansion from Offline Stores

Many online-first retailers have adopted omnichannel strategies to expand their territories from online to offline. In this paper, we seek to understand the function of offline showroom for multi-category online retailing platforms, which is relatively understudied. Using detailed transaction-level data along with in-store product scanning information from a major online retailing platform in China that introduced its first offline showroom during the data period, we identify a positive category expansion effect for the existing customers who visit the offline showroom using difference-in-differences approach. That is, a customer tends to purchase products from new categories that otherwise not purchased in the online environment, after visiting the offline showroom. Furthermore, we find evidence that (1) in addition to the physical display of the products in the showroom, sales people working onsite contribute to half the category expansion effect; (2) the effect is not a mere frenzy of impulsive purchase, and the showroom helps to better match customer needs with products; (3) the effect is smaller among experienced customers. Practical implications are discussed.

Data-Driven Simulation Modeling of the Checkout Process in Supermarkets: Insights for Decision Support in Retail Operations

We build a realistic agent-based model for simulating customer decisions of picking a checkout line at a supermarket that is calibrated to actual point of sale (POS) data from a major European retail chain. It is implemented on the open-access NetLogo simulation platform and is freely available to academics and practitioners interested in testing how different checkout zone layouts, as well as queue management and feedback strategies impact the overall efficiency of the checkout process. In particular, we show that when customers pick a line by minimizing the expected waiting time, not only is this choice beneficial for the customers themselves, as it leads to shorter waiting times in queues, but also for the supermarket management, since it yields shorter working times of the cashiers. As such, we provide guidance as to the feedback that could be provided to customers entering the checkout zone.

Trends in Free Sugar Content of Slovenian Pre-Packaged Foods and Non-Alcoholic Beverages

AbstractIn 2015, World Health Organization (WHO) has issued guidelines to reduce the consumption of free sugars to no more than 10% of the total daily energy intake, with additional health benefits achieved when aiming to less than 5%. For the general population, following these recommendations has proven difficult due to the massive amount of free sugar available in pre-packed products on the market. In Slovenia, a series of actions have been undertaken to reduce the availability and consumption of foods high in free sugar, including food industry responsibility pledges from soft drink and dairy industry (in 2015 and 2017, respectively).To monitor the efficacy of those actions as well as general trends in free sugar content on the Slovenian food market, the cross-sectional study from 2015 was repeated in 2017. Data from 21,115 pre-packed food items were systematically collected from major retailer shops in Ljubljana, Slovenia. All products were photographed and their European/International Article (EAN) codes scanned to assemble an online database. The products were later assigned to one of the 49 pre-defined food categories, matching those from 2015. The categories that contributed to free sugar consumption in 2015 the most were re-analysed in 2017.Results showed that in the category of Chocolate and sweets, which in 2015 contributed one third of all free sugar sold on Slovenian market, mean free sugar content increased by 4.7 %. Among Soft drinks, which followed shortly after, free sugar content dropped by 8 %. The decrease was also observed among Jellies (10.7 %) Yogurt products (5.7 %), Breakfast cereals (1.7 %), Biscuits (0.9 %), as well as Fruit and vegetable juices (0.9 %). On the other hand, large increase was observed among Ice creams and edible ices (31.3 %) and in the category of Jam and spreads, in which mean free sugar content increased by 20.3 %.The data showed some favourable trends in free sugar content in many food categories that contribute an important share to an overall free sugar consumption. However, free sugar in certain food categories such as Chocolate and sweets is still on the rise, exposing the need for additional actions that would encourage industry to reformulate products with a lesser amount of free sugar. Moreover, industry self-regulation may be one of, but not the only measure to efficiently reduce free sugar consumption among general population.

The CARES Act: Are the Tax and Financial Relief Provisions Sufficient in a Time of Economic Crisis?

The impact of the COVID-19 Pandemic has been staggering for the entire US economic system. Entire industries have been thwarted from operating on any sustainable level. In response, Wall Street reacted with a resounding CRASH… and so… the need for federal intervention became a stark reality for the US economic system’s survival. As major retailers collapse into bankruptcy, the need for continued federal financial support is tantamount to survival for a wide array of fledgling companies. Will the CARES legislation be sufficient to prevent a United States’ economic freefall?

The relationship between accessibility and price – The case of Swedish food stores

Food accessibility has been an important issue for as long as there has been human civilisation. Today, food, at least in the wealthier parts of the world, is accessible to most people. However, there are concerns regarding the market power of major retailers and the availability of affordable food among certain population groups. In this paper, I investigate how well accessibility, the ease with which individuals can reach various destinations, explains food prices in Swedish food stores. I have done this by combining price information on a large number of Swedish food stores from 2010 to 2014 with a state-of-the-art accessibility measure from the Swedish national transport model. I have found a quadratic relationship between accessibility and price, in which prices in the least and most accessible parts of Sweden are 2–3 per cent higher than in the least expensive parts, which are towns and villages around larger cities. The relationship remains significant when adding controls and accessibility is better at explaining price than measures of market structure previously used in the literature.

Staple Food Purchase in Small Cities in India: A Managerial Implication

Purpose – This study investigates the effects of socio economic characteristics on store format preferences and perceptions about organized retail store attributes for the purchase of staple food in small cities in India. Design/methodology/approach – This study used a mixed-method approach. A survey was developed based on the results of a focus group discussion and six in-depth interviews. Multinomial logit was used to ascertain consumer preferences for store format, and an ordered probit was used to analyse differences in perceptions about organised retail store attributes across consumer segments. Findings – Education and income were found to be important determinants of consumer preference for a particular store format. Product availability, price satisfaction given the quality of the products, sales promotions, and selected convenience factors were found to contribute significantly to the growth of organised retail stores and overall satisfaction of consumers. Research limitations – This study concerned only staple food items and urban consumers in the eastern part of India. Practical implications – Funded by foreign direct investment, major retailers in the food and grocery sector compete for shares of the more than trillion-dollar grocery market in India. The findings can be used by these firms for targeted marketing, operational strategies, and building competitive advantage. Originality/value – This study reveals that preferences for store format and store attributes vary across the segments. The findings give insights for managerial planning, attracting and retaining changing consumers, who still have traditional needs for quality of life.