Consumer Shopping and Spending across Retail Formats

Abstract

Abstract:Grocery retailers increasingly view other retail formats, particularly mass merchandisers, as a competitive threat. We present an empirical study of household shopping and packaged goods spending across retail formats -grocery stores, mass merchandisers, and drug stores. Our study considers competition between these formats and explores how retailer assortment, pricing and promotional policies, as well as household demographics, affect shopping behavior and expenditures in these different formats. This research is made possible by a new panel dataset collected by Information Resources Inc. (IRI) which captures consumer packaged good purchases made at alternative retail outlets. These purchases have previously been missed by panels that use only purchases at supermarkets.We estimate a hierarchical multivariate tobit model which captures consumer decisions about "where to shop" and "how much to buy." We find that shopping and spending vary much more across than within formats, and that the retailer's marketing mix explains more variation in shopping behavior than travel time. Of the marketing mix variables considered, we find that expenditures respond more to varying levels of assortment (in particular grocery stores) and promotion than price. This is surprising in light of the grocery industry's efforts to reduce retail assortments. Price sensitivity is most evident at grocers. Shoppers at drug stores are more sensitive to travel time than other formats, perhaps due to the convenience orientation of drug stores. We also find that households which shop more at mass merchandisers also shop more in all other formats, suggesting that visits to mass merchandisers do not substitute for trips to the grocery store.

Multi-Category Competition and Market Power: A Model of Supermarket Pricing

“…This results in 9 firms (or firm groups) that have a distinct ξ for each k: ASDA, Morrison, Sainsbury, Tesco, M&S, Waitrose, Iceland, Discounters, and Others. 22 The use of a firm dummy with a store size variable to pick up the quality on offer at a store is consistent with the following quotation from CC(2008): "Product range for many retailers is also, in large part, uniform across stores with variations for the most part being a function of store size [...]" (para. 6.33).…”

“…because of a better selection of products), and quarter and year dummies T t , which allow for seasonal and year effects. 22 The remaining terms in (9) are four random taste components (each iid N (0, 1)): a consumer effect ν µ i , a consumer-time effect ν µ it , a categoryspecific effect ν µ ik , and a store-category effect ν µ ijk . These are scaled by parameters (σ 1 , .…”

“…2 We use the term category or product category to refer to a group of similar product lines that are close substitutes, as in these examples. 3 For example, retailers such as Sears and Walmart sometimes rent out space within their stores to independent sellers, in return for a rental payment (see Wall Street Journal Sept. 22,2010). These arrangements are sometimes referred to as "stores within a store" or "in-store concessions".…”

“…The paper also relates to an established literature in quantitative marketing studying store choice (e.g. Bell et al (1998), Fox et al (2004)) and another studying multi-category demand (e.g. Chintagunta and Song (2007), Mehta (2006)) by studying these different aspects of demand in a unified multi-store multi-category utility framework.…”

Examining Consumer Behavior and Travel Choices

“…The customer spending is log-transformed 8 to better fit a normal distribution. Log transformations of consumer spending have been done in past literature to create improved distributions (Fox et al, 2004;Murray et al, 2010). Because of this transformation, the coefficients for independent variables are difficult to interpret.…”