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Consumer Choice and Multi-Store Shopping: an Empirical Investigation

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A Correction to this article was published on 09 December 2020

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Abstract

The effectiveness of category pricing and promotions on store choice has been studied in prior literature. Although in theory all category promotions should attract consumers from competing stores, empirical support for this claim has been mixed. We propose that it is a subset of categories, called power categories, that drive cross-store traffic and that these are idiosyncratic to a retailer in its competitive set. Using scanner panel data, we investigate the consumer response to category pricing at competing stores via a random effects, multivariate probit model of store visits. We find that power categories tend to be high penetration categories. However, different stores have different power categories. Overall, our study recommends how retailers can find their power categories and identify segments of consumers who differ in their sensitivities to category prices.

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Change history

  • 09 December 2020

    A Correction to this paper has been published: <ExternalRef><RefSource>https://doi.org/10.1007/s40547-020-00113-6</RefSource><RefTarget Address="10.1007/s40547-020-00113-6" TargetType="DOI"/></ExternalRef>

Notes

  1. We include 12 category prices for each competing store. We drop frozen pizza because prices for two stores B and C are highly correlated and lack of variation in prices for store A.

  2. Due to high-dimensional estimation and restrictions on size of heterogeneity matrix, we include prices of all high-penetration, high-frequency (i.e., HH) categories. Among HL and LH categories, we include laundry detergent, toilet tissue, and yogurt as these are top contributing categories towards store sales. We do not include low-penetration, low-frequency (i.e., LL) categories.

  3. Based on ACV—all commodity volume. This reflects an estimate of annualized sales in millions for the store across all categories. The chain name/number is not available;

  4. Manchanda et al.[24] find no directional differences between this operationalization and others such as using the price paid when purchase occurs and weighted average otherwise.

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Acknowledgments

The authors thank Qin Zhang and seminar participants at the International Choice Modelling Conference in Sydney for their helpful comments.

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Authors and Affiliations

  1. Anderson Graduate School of Management, University of California, Riverside, Riverside, CA, 92521, USA

    Ashutosh Prasad

  2. Jindal School of Management, The University of Texas at Dallas, Richardson, TX, 75080, USA

    Brian T. Ratchford

  3. University of Technology, Sydney, PO Box 123 Broadway, Sydney, NSW, 2007, Australia

    Sonika Singh

Authors
  1. Ashutosh Prasad
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  2. Brian T. Ratchford
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  3. Sonika Singh
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Correspondence to Ashutosh Prasad.

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Prasad, A., Ratchford, B.T. & Singh, S. Consumer Choice and Multi-Store Shopping: an Empirical Investigation. Cust. Need. and Solut. 7, 74–89 (2020). https://doi.org/10.1007/s40547-020-00106-5

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