Consumer Shopping and Spending across Retail Formats

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 industrys efforts to reduce retail assortments. Price sensitivity is most evident at grocers. Shoppers at drug