Store Choice Decisions Research Articles

Rural grocery shoppers: do their attitudes reflect their actions?

Using a longitudinal research methodology, this research investigated the grocery shopping habits of residents in rural communities in Western Stirlingshire, Scotland. In particular, it attempted to uncover the factors and attitudes that influence customers’ store choice decisions and their attitudes towards their local shops. Findings revealed that although respondents held a positive overall view of their local shops, less than one‐third purchased a high proportion of their food shopping in local shops. While it is unlikely that local traders will reverse outshoppers’ shopping behaviours, with a re‐evaluation of their overall offer, they may be able to establish themselves as a reliable supplementary or secondary choice option, thereby maintaining the local shop as a viable function. Recommendations based on offer, service and environment are made to differentiate local shops from the major multiples.

The Influence of Multiple Store Environment Cues on Perceived Merchandise Value and Patronage Intentions

Research on how store environment cues influence consumers' store choice decision criteria, such as perceived merchandise value and shopping experience costs, is sparse. Especially absent is research on the simultaneous impact of multiple store environment cues. The authors propose a comprehensive store choice model that includes (1) three types of store environment cues (social, design, and ambient) as exogenous constructs, (2) various store choice criteria (including shopping experience costs that heretofore have not been included in store choice models) as mediating constructs, and (3) store patronage intentions as the endogenous construct. They then empirically examine the extent to which environmental cues influence consumers' assessments of a store on various store choice criteria and how those assessments, in turn, influence patronage intentions. The results of two different studies provide support for the model. The authors conclude by discussing the results to develop an agenda for additional research and explore managerial implications.

Understanding Supermarket Competition Using Choice Maps

In this paper we propose a model which combines the spatial interaction models with the latest developments in internal market structure analysis and allows us to infer supermarket competition from revealed preference data. Using a nested logit formulation we model consumers' store choice decisions to be a two stage process in which consumers choose first the suburb and then the store from which to buy groceries. Hence, our method allows retail managers not only to understand the advantage (or disadvantage) of having their store chain in a particular area but also assess the competition within that area. Comparisons to Factor Analytic Choice Map is made.

Product perishability and multistore grocery shopping

Perishability, a largely unconsidered characteristic of consumer goods, is shown to play an important role in planned multistore shopping behavior. We present a model of consumers as cost minimizing inventory managers, who choose between two stores differentiated on location and price, and who purchase perishable and nonperishable goods. We show that the interaction between perishability of goods and price differences of stores can be an important driving force for planned multistore shopping. This rationale leads to a set of propositions. One unexpected result is that as the known price difference on a basket of identical goods increases between two stores, shoppers making store choice decisions on the basis of the basket price are more likely to shop regularly at both stores. We present survey results supporting our model’s predictions.

Accounting Profits Versus Marketing Profits: A Relevant Metric for Category Management

Retailers have long recognized that some categories are more important than others in consumers' store choice decisions. The overall profitability of a store requires careful category-level merchandising decisions to draw the most desirable consumers into the store. However, the traditional accounting measure of category profits offers imperfect help making these decisions since it does not take into account the effect of merchandising one category on the profits of other categories in the store. A profit measure which takes into account these important cross-effects is the most relevant performance metric for category management. We call this new construct marketing profits, as it focuses on consumers and their store choice behavior, and is particularly pertinent to the calculus of marketing decision making. Despite its practical importance, the total impact of merchandising a specific product category on a store's profitability is difficult to measure, and in practice managers can only rely on intuitive calibration of marketing profits in making many retailing decisions. The difficulty arises from the fact that to directly observe the marketing profits of a category, one has to know how consumer store shopping behavior would change and hence what a store's profit would be if the category were to disappear from the consumers' store choice decision. Furthermore, it is difficult to devise a demand structure that is rich enough to capture bundled purchases on the part of consumers in a reasonable manner, but is simple enough to allow estimation on the basis of commonly observed variables. These two technical difficulties explain the conspicuous lack of research that systematically examines how to quantify what we call marketing profits. This paper builds a formal model of marketing profits. We start by formalizing shopper types, and then establish the implied relationship between accounting profits and marketing profits by examining shelf space allocations by a retailer. On the consumer side, we assume that some consumers pay attention to the assortments offered by different retailers when making their store choice decisions. This assumption allows us to establish the demand-side linkage between accounting profits and marketing profits. Consumer store choice decisions put pressure on the retailer to carry wide assortments in categories which are particularly critical to the store choice decisions of the most desirable consumers. Thus, the allocation of shelf space gives rise to the supply-side linkage between accounting profits and marketing profits. By examining the outcome of the supermarket's shelf space decision, we can merge these two linkages and determine the exact relationship between the accounting and marketing profits. Central to our theoretical structure is our assumption on retailers' shelf space allocation decisions. Because of the well-documented pressure that retailers face in making shelf space allocation decisions, we assume that they are acting in a reasonably close-to-optimal fashion by using either an automated planogram or simply by trial-and-error. Optimization requires that returns on shelf space allocated to any category in the store must be identical on the margin and equate to the shadow price of shelf space. It is this outcome of shelf-space allocation that allows us to uncover the implied relationship between accounting and marketing profits. This theoretical structure allows us to construct a measure of marketing profits which can be estimated with data commonly available to retailers. We demonstrate this measurement technique by using publicly available data, provided by Marsh Supermarkets, and show how marketing profits can improve merchandising decisions. In our particular application, we find many categories where the marketing profits of a category are very different from the traditional accounting profits. Further, we find that using this new marketing profits metric to make category-level feature advertising space decisions significantly improves the profitability of the retailer. The paper concludes by discussing how our measure of marketing profits might be improved by additional research, particularly if the researcher has data across many stores.

Accounting Profits Versus Marketing Profits

Retailers have long recognized that some categories are more important than others in consumers' store choice decisions. The overall profitability of a store requires careful category-level merchan...

Shopping Behavior and Consumer Preference for Store Price Format: Why “Large Basket” Shoppers Prefer EDLP

In recent years, the supermarket industry has become increasingly competitive. One outcome has been the proliferation of a variety of pricing formats, and considerable debate among academics and practitioners about how these formats affect consumers' store choice behavior. This paper advances the idea that consumer shopping behavior (as defined by average size of the shopping basket and the frequency of store visits) is an important determinant of the store choice decision when stores offer different price formats. A recent Wall Street Journal article that summarized the result of Bruno's management switching the chain from EDLP to HILO illustrates the importance of this issue: “The company's price-conscious customers, used to shopping for a fixed basket of goods, stayed away in droves.” Thus, the audience for this paper includes practitioners and academics who wish to understand store choices or predict how a change in price format might affect store profitability and the mix of clientele that shop there. This paper attempts to understand the relationship between grocery shopping behavior, retail price format, and store choice by posing and answering the following questions. First, after controlling for other factors (e.g., distance to the store, prior experience in the store, advertised specials), do consumer expectations about prices for a basket of grocery products (“expected basket attractiveness”) influence the store choice decision? This is a fairly straightforward test of the effect of price expectations on store choice. Second, are different pricing formats (EDLP or HILO) more or less attractive to different types of shoppers? To adequately answer the second question, we must link consumers' category purchase decisions, which collectively define the market basket, and the store choice decision. We study the research questions using two complementary approaches. First, we develop a stylized theory of consumer shopping behavior under price uncertainty. The principal features and results from the stylized model can be summarized as follows. Shoppers are defined (in a relative sense) as either large or small basket shoppers. Thus, we abstract from the vicissitudes of individual shopping trips and focus on meaningful differences across shoppers in terms of the expected basket size per trip. The shoppers make category purchase incidence decisions and can choose to shop in either an EDLP or a HILO store. Large basket shoppers are shoppers who have a relatively high probability of purchase for any given category, and as such they are more captive to prices across many different categories. The first two propositions summarize the price responsiveness of shoppers. In particular, the large basket shoppers are less responsive to price in their individual category purchase incidence decisions; this makes them more responsive to the expected basket price in their store choice decisions. This key structural implication of the model highlights an asymmetry between response at the category level and response at the store level. The result is quite intuitive; a (large basket) shopper with less ability to respond to prices in individual product categories will be more sensitive to the expected cost of the overall portfolio (the market basket) when choosing a store. The final proposition derives the price at which a given shopper will be indifferent between an EDLP and a HILO store. The key insight is that as a shopper increases his or her tendency to become a large basket shopper, the EDLP store can increase its (constant) price closer and closer to the average price in the HILO store. Conversely, as the shopper becomes more of small basket shopper, the EDLP store must lower its price closer to the deal price in the HILO store. Thus, we have the interesting result that small basket shoppers prefer HILO stores, even at higher average prices. The empirical testing mirrors the development of the consumer theory. We test the implications of the propositions using a market basket scanner panel database. The database includes two years of shopping data for 1,042 households in two separate market areas. We first use household-level grocery expenditures to model the probability that a household is a large or small basket shopper. Subsequently, we estimate purchase incidence and store choice models. We find that after controlling for important factors such as household distance to the store, previous experience in the store, and advertised specials, price expectations for the basket influence store choice. Furthermore, EDLP stores get a greater than expected share of business from large basket shoppers; HILO stores get a greater than expected share from small basket shoppers. Consistent with the implications of the propositions, large basket shoppers are relatively price inelastic in their category purchase incidence decisions and price elastic in their store choice decisions.

Exploring the boundaries of the framing effect: The moderating roles of disparate expected values and perceived costs of judgmental errors

Framing effects on retail store choice decisions were investigated in four experiments. Subjects preferred the store that guaranteed (a “sure” option) good prices (experiment 1), product availability (experiment 2), or a rebate (experiment 3) when consequences were framed in terms of gains; subjects preferred the risky option when consequences were framed in terms of losses. Consistent with fuzzy-trace theory, framing effects were reduced when the expected values of options were disparate in a direction that disfavored sure gain or probabilistic loss options (experiment 2) and when the perceived costs of committing a judgmental error were high (experiment 3). Experiment 4 shows that the moderating effects of disparate expected values and costs of judgment errors generalize to within-subject designs.

How Stores are Recalled

Store names are perhaps the most visible aspect of the store entity, and are one of the main features used by consumers to specify and identify a store. Also, store names are often used as clues for consumers' store choice decisions. It is, therefore, not surprising that store names are a most frequently used item in store advertisements and that many stores regard achieving consumers' familiarity with their names as one of the most desired objectives of their store promotion programmes. Do consumers actually use store names as their main clue for the identification of stores ? The results of a study reported in this article indicate that the issue is not as simple as it seems. When consumers are asked to recall and identify the stores where, say, they have made their most recent furniture purchase, they do indeed recall many of these stores by their names. In a sizeable proportion of the cases, store names cannot, however, be remembered and stores are identified in “area” type terms‐the street or general area where they are located. The focus of the present article is the store recall issue. The magnitude of the phenomenon of stores recalled in “area” type terms is first studied, the importance of this phenomenon is demonstrated and some possible explanations for it are suggested. These explanations are then empirically tested and, finally, the implications of the analysis for store promotion strategy are discussed.