Market and Product Diversification: The Evidence From Retailing

This study explored the number of international regions in which retailers operate, the assortment of product categories they offer their customers, and the effects of these market and product category diversification strategies on retail sales volumes. The analysis used sales data about 246 global large-scale retail stores from diverse industries and countries of origin. We found that both strategies have positive effects on retail sales volumes. The two strategies interact such that the positive effect of market expansion on retail sales volumes is larger for retailers who also follow a strategy of greater product category diversity.     

Should retailers adjust their micro-marketing strategies to type of outlet? An application to location-based store space allocation in limited and full-service grocery stores

Many retailers today operate strategically different types of sites: ‘limited-service’ stores—that offer all core products/services but only a shallow assortment of non-core services—and ‘full-service’ sites with deep lines of both core and non-core services. An important question for these retailers is whether and how to adopt a micro-marketing strategy in each of these formats. In a micro-marketing strategy, retailers tailor their marketing mix to the characteristics of the local market in which each store outlet operates—a central issue being whether the allocation of store space across product categories should be location-specific. This paper (i) examines the conditions for such micro-marketing to be beneficial, and (ii) in particular—how these benefits depend on store format. It also (iii) indicates how the pattern of space adjustments to local conditions should differ between formats. The propositions are tested in a grocery retail setting, for a retail chain operating limited-service supermarkets and full-service hypermarkets. Our results suggest that micro-marketing is beneficial in both types of format. Yet, the appropriate way of localizing space allocation patterns is format-specific. While supermarkets should primarily adjust the space shares of food (core) categories, hypermarkets should primarily adapt the space shares of non-food (non-core) categories to local market conditions. The outcomes of the study have conceptual as well as managerial relevance and may prove useful for multi-format retailers in a wide range of settings.     

Price competition in retailing: The importance of the price density function

Focusing on two determinant aspects of retail competition, prices and catchment area, this paper aims to specifically investigate the importance of the relative price density function. We answer such questions as whether it pays for a store to offer more low-priced items in a given category than its close competitors and whether a retailer should have a consistent assortment in terms of price tier frequency across all categories. To tackle these issues, we use a store-level panel database provided by IRI covering 34 categories and 150 stores in one province.     

Retail buyer segmentation based on the use of assortment decision factors

The purpose of this study is to provide detailed information about apparel retail buyers' buying behaviors based on their use of assortment decision factors. After interviews with five retail buyers and merchandisers, surveys were conducted in Seoul, South Korea for this exploratory study. Apparel retail buyers, merchandisers, and retail store owners, who are involved in assortment planning and buying, participated in the survey (N=378). Results of factor analysis created seven assortment decision factor groups. Based on the factor groups, four cluster groups were the best cluster result: (1) Least Factor Use Buyers, (2) Traditional Factor Use Buyers, (3) Consumer-Oriented Buyers, and (4) Most Factor Use Buyers. Because this study used convenience and snowball sampling methods in one country, the findings cannot be generalized to the general population of apparel retail buyers and merchandisers. However, the study provides researchers with planning factors and cluster information for retail buying behavior. The results offer insight to buyers for their decision-making by organizing assortment decision factors from the most to the least important, especially for younger buyers, who need guidance about assortment planning. Although assortment planning and trade-off decisions are known to be extremely important to retail success (e.g., Kok et al., 2008), no previous study identified a typology of retail buyers on the basis of their consideration of assortment decision factors. This study adds new information and confirms the application of traditional assortment decision factors from 1980s and 1990s to post-2008 era.     

零售业态均衡与创新的要素分析——基于零售业态价格梯度模型的研究

文章提出了一个业态价格梯度模型,该模型将价格梯度与业态竞争分布相联系,通过引入"消费者偏好"概念,较好地刻画了零售业态中服务、价格、成本三者之间关系,在此基础上验证并发展了"技术边界线"理论,提出业态取得竞争优势的关键因素是技术进步、满足消费者偏好以及管理创新带来的成本下降,我国家电零售业态历史发展变化情况也在一定程度上验证了模型的有效性。模型为今后同类研究提供量化分析工具的同时,也为进一步完善业态进化理论提供了新的研究视角。     

A comparative analysis of differential consumer response across supermarket and specialty store in the candy category

Retailing industry has undergone tremendous change in its complexity and sophistication over the past few years. Globally we are witnessing the evolution of retailing industry from traditionally micro-managed small retail formats like mom and pop store to modern corporate-managed large retail formats like supermarkets. Consumers are also shopping across these various store formats even for the products in similar categories. In this research, we posit that consumer purchases in the similar categories may very well be characterized by differential responses to marketing mix across different store formats. The proposed model accounts for the influences that these diverse response parameters and preferences have on one another as well as consumer heterogeneity. Our results show that sensitivities to marketing mix as well as correlations in preferences do indeed vary across formats for consumer purchases in similar categories.     

LOGISTICS AND ASSORTMENT DEPTH IN THE RETAIL SUPPLY CHAIN: EVIDENCE FROM GROCERY CATEGORIES

Managing the logistical issues resulting from changes in assortment depth in the retail supply chain is challenging, involving various complex tradeoffs. While increasing assortment depth can increase sales, it also increases inventory‐holding costs and reduces the amount of space for other items. As space is taken from existing items to increase assortment depth, it reduces the inventory‐holding capacity of existing items on the shelf, increasing expected annual cost of lost sales. The paper presents a conceptual model of the relationships between assortment depth, category gross margins, and the logistical concerns resulting from inventory costs and out‐of‐stocks. Evidence for the significance of depth and resulting costs are provided in an examination of 100 product categories from a case study of a retail grocery chain.     

The impact of retail store format on the satisfaction-loyalty link: An empirical investigation

Maintaining and improving customer loyalty is an important strategic goal for businesses as competition has intensified in almost all sectors of the economy. Retailers, in particular, feel the need to invest in customer loyalty more than ever before as channels and store format alternatives available for consumers to shop at have proliferated. However, current research in marketing provides little guidance to retail managers about developing and sustaining shopper loyalty across different store formats. Toward filling this gap, the present research examines the shopper satisfaction-loyalty link in two different store formats (supermarkets and hypermarkets). Using data from surveys of 505 Spanish shoppers at both types of retail formats, we examined how shoppers' attitudinal and behavioral loyalty develop differently. Our results reveal important differences and offer directions for the pursuit of different strategies by supermarkets and hypermarkets. The specific strategies, and the implications of this research for theory and practice are discussed.     

基于多维度视角的零售业态变迁分析——以中国和日本为例

文章认为以前的零售业态的变化规律理论都不能很好地解释零售业态在中国的发展变化规律。提出多维度视角解释零售业态发展变化的规律,认为消费者满足是根本;社会发展环境是背景;技术革新是基础;精细化管理是关键。并以此解释日本和中国各阶段的零售业态发展变化规律及中日之间的差别。据此并借鉴日本的发展经验,对我国今后的零售业态发展趋势做出预测。     

Retail store formats,competition and shopper behavior: A Systematic review

This study presents a systematic review of literature covering 178 articles relating to physical store-based grocery retail formats. The research questions for the review were based on drivers of consumer choice and response to marketing activities across store formats, competitive effects and conduct in the context of format evolution, and the interplay of retail formats with societal stakeholders and environmental context over time. The review reveals substantial evidence on drivers of shopper choice among formats including intrinsic household characteristics, time value factors, shopping goals and motivations, and actionable retailer factors such as location, assortment, pricing, promotion. The evidence is scarcer where such marketing activities are difficult to vary. There is limited consensus that inter-format competition is more intense than intra-format. The modernization of formats globally was found to change the way they compete and how consumers behave toward them. There is evidence of substantial impact of entry of new formats, but less guidance for incumbent retailers on how they should respond. Several gaps were identified, and research directions included a typology for format types, the role of technology, a call for more causal evidence, and deepening the empirical base for intra- versus inter-format competition and drivers of format choice.     

Going Online for Groceries: Drivers of Category-Level Share of Wallet Expansion

Some grocery product categories may be more successful than others in terms of stimulating consumers to increase their share of wallet (SoW) when they start buying through the online channel of a grocery chain. This study explores the circumstances in which online and multichannel marketing mix instruments determine the extent of category-level SoW expansion. To do so, the authors use U.K. household scanner panel data, covering online and offline purchases by 3,311 households in 59 categories of four multichannel retail chains. The results indicate that the effectiveness of online and multichannel marketing mix instruments for stimulating expansion is moderated by category characteristics, such that a selective approach to making decisions about the online price, online assortment breadth, online/offline assortment integration, and online national brand proliferation, tuned to account for category differences, can increase category-level SoW for the online-visited chain.     

The fight between store brands and national brands—What's the score?

In the Western world market shares for store brands have increased across all product categories. The competitive position of store brands compared to national brands may depend on the product category and a retail chain's overall brand assortment strategy. In order to investigate these possible chain and category effects we have selected five chains with different store brand strategies and three product categories that differ with respect to the number of strong national brands in a category. The results we report focus on the competitive position of store brands compared to national brands from a consumer point of view. We find that store brands are in a weak competitive position compared to national brands independent of category and retail chain brand assortment strategy.     

Exploring the effect of retail sector and firm characteristics on retail price promotion strategy

This study examines why retail price promotion strategies vary across retail sectors and across firms within sectors. Using hierarchical linear modeling and a sample of 38 firms from 11 retail sectors, the authors investigate how two sector-level characteristics, related to product assortment perishability and heterogeneity, and three firm-level characteristics, related to retailer differentiation, number of stores, and average store size, influence price promotion decisions. The results indicate that assortment heterogeneity moderates the positive influence of perishability on price promotion activity; scale and scope also have significant effects. These results offer fresh insight into the ongoing debate surrounding stable versus promotional pricing, suggesting that the benefits of a particular strategy are driven largely by a complex interaction between sector-level characteristics as well as firm-level cost advantages.     

Cross-category sales promotion effects

We introduce a multivariate binomial logit model measuring cross-category dependence and sales promotion effects of a retail assortment. This model requires as data both the market baskets of individual shoppers and the categories currently promoted in a retail outlet. A special section describes the stepwise procedure used to estimate parameters of this model. Its application is demonstrated analyzing 6147 purchases that were acquired in a medium-sized supermarket. We finally discuss the managerial relevance of this model for sales promotion decisions of retail firms.     

The dimensions of assortment: A proposed hierarchy of assortment decision making

Abstract

The merchandise assortment plays a fundamental role in retailing; it conveys the positioning of the retailer, and is a key determinant of image and patronage. However, existing literature covering a 50-year period is somewhat fragmented. A key problem with the literature is that it does not distinguish between different levels and dimensions of assortment, causing potential ambiguity in their interpretation in the modern retailing context. The lack of standardised terminology could potentially inhibit future assortment research in, for example, assortment measurement. In reviewing the literature, the critical dimensions of assortment are clarified with conceptual definitions and a hierarchical classification of assortment being proposed. Further, the assortment research is examined, identifying an imbalance between operational and strategic assortment research. As retail assortments expand and saturate, the need for assortment measurement research is argued with associated implications for retail management.     

Intermediate Supermarkets in China

Abstract

Intermediate supermarket formats share characteristics of traditional food stores and of the modern supermarket. Because they represent steps on the evolutionary path towards the “complete” supermarket they offer an alternative to the dominant food retail modernization route involving the transplantation of the supermarket model.

The paper reports the findings of a study of these intermediate formats in Shanghai. We discuss the origins, structure and operation of these stores and evaluate their contribution to the food retail modernization process. Surprisingly, few of the operators of these stores were traditional food retailers. Most were state-owned companies and private entrepreneurs from outside the retail sector.

Lack of managerial and financial resources and inexperience led many to open these formats rather than the “complete” supermarket. The weakness of this subsector means that the main vehicle for food retail modernization in Shanghai will continue to be the supermarket chains. But because of limitations on the chain's expansion, they may enter into franchising arrangements with the best among these intermediate supermarkets. Finally, it is suggested that intermediate formats are likely to play a more important role in secondary cities, in towns and in rural areas in China.     

Organizing Products with Complements versus Substitutes: Effects on Store Preferences as a Function of Effort and Assortment Perceptions

Retailers often organize at least part of their assortment by displaying complementary products from different product categories together (e.g., a pair of pants with a shirt) rather than grouping items by product type (e.g., a pair of pants with other pants). However, little is known about how retailers should choose between complement-based and substitute-based organizations. The present paper shows that consumers’ preferences for such store organizations are a function of the effort and assortment perceptions cued by these organizational formats. Holding the underlying assortment constant, complement-based organizations are always more effortful than substitute-based organizations. This difference in effort can create downward pressure on complement-based store choice. Moreover, the effects of organization format on assortment perception depend on whether consumers hold a hedonic or utilitarian focus. When consumers have a highly hedonic focus, complement-based based stores create more positive assortment perceptions than substitute-based stores. Such positive assortment perceptions can, in turn, raise complement-based store choice. However, as consumers’ utilitarian focus increases, substitute-based assortments are seen as both easier and more attractive, leading to a strong advantage in store choice. Our findings provide actionable guidance for retailers considering various store organizations and suggest opportunities for future research.     

Evolution of retail formats: Past,present, and future

In this paper, the authors review current literature on retail formats and propose a new customer-centric framework for retailers to focus on as they continue to innovate and evolve. Specifically, they review the literature on how formats compare in their attributes and compete with each other; the role of customer behavior in format choice; and developments in multichannel and omnichannel retailing. They propose a framework for retail formats suggesting two paths – either reduce friction in the customer journey or enhance customer experience. They discuss the challenges faced by offline (physical store-first) and online (digital-first) retailers and elaborate on strategies each type of retailer is pursuing to address these challenges. Finally, they offer directions for future research in this domain. They conclude by calling for newer digital-first and physical-first players to continue coming up with different customer-centric formats, which they predict will slowly morph into integrated retailers, leaving space for newer players to enter the market and hence keep the wheel of retailing spinning.     

Heterogeneous consumers,search and retail formats

This paper proposes a model featuring the heterogeneity of consumer preferences and analyzes the multiple equilibrium of retail formats by building a map of the relationships between consumer heterogeneity and retail formats. The key questions analyzed in this paper are how the retailer adjusts its combination of marketing elements through repositioning and how innovation in retail formats is implemented to match consumers’ heterogeneous preferences in a market with consumer search costs. Unlike recent research, our model, by taking different consumer preference structures into account, introduces consumer psychological costs into the Ehrlich-Fisher model and deduces the existence of different retail formats and their multiple equilibriums. We find that consumer heterogeneity, retailers’ diversified transfer costs and economies of scale are endogenous drivers of prosperous retail formats. Accordingly, diversified retail formats with complementary functions and differentiated services can be described as the horizontal extensions and interface changes of the retailing industry.     

An Investigation of Consumer Brand Choice Behavior Across Different Retail Formats

There has been a blurring with respect to the retail formats because of competition and proliferation of different types of formats. In this research, we use a unique scanner panel dataset to investigate how brand choice behavior varies for the same consumer shopping for the same brand across different retail formats. We develop hypotheses pertaining to promotion sensitivity, price sensitivity, package size preference, and effects of demographic and shopping variables on consumer brand choice behavior and test them using a multi-format probit choice model that allows for the estimation of the cross-format differences with respect to the above. We find that consumers exhibit different promotion and price sensitivities in brand choice behavior between the mass merchandise format and supermarkets. Discussions and insights are provided.