Retailing
MKTG 3346
Consumer Shopping
Behavior
Professor Edward Fox
Cox School of Business/SMU
All Those Decisions…
 Trip
 Buying or browsing?
 Specific need, or inventory replenishment
 Retailer
 Where to shop (order matters)?
 Mall/retail center vs. nearby store
 In-Store




What product categories?
Within each category, which products to consider?
What about “impulse,” or unplanned items?
Buy or defer?
Consumer Shopping Decisions
Store
Choice
Category
Selection
Brand
Choice
Purchase
Quantity
Trip
Purpose(s) of the Trip
 Before determining where to shop, the consumer must
determine the purpose(s) of the trip
 Transaction
 Information
 Entertainment
 Transaction…
 Replenishment
 Which retailer do I prefer?
 Routine
 Specific item
 Where are desired items available?
For transaction-focused shopping, convenience,
price, and assortment are key criteria for store choice
Trip
Purpose(s) of the Trip
 Information…
 Product search
 Assortment is the primary criterion
 Price search
 Expected prices are the key criterion
 Entertainment…
 Retailer advertising
 Retailer reputation
 Mall operators often stage entertainment to create
excitement and draw customer traffic
For information- and entertainment-focused
shopping, proximity of a store to other stores (e.g.,
mall, “restaurant row”) is often a key criterion
Trip
Purpose(s) of the Trip
Purpose
Shopper Classification
Transaction
Buyer
(Goal Directed)
Information
Browser
Entertainment
Consumers browse in apparel and department
stores; not grocery and drug stores
Trip and Retailer
Where to Shop and What to Buy
Store choice
Category Selection
“Where to shop”
“What to buy”
Needed items, or shopping lists, often affect the
choice of store
Trip and Retailer
Where to Shop and What to Buy
 If the purpose is replenishment …
Neighborhood Store
Low-Price Store
24.3%
48.5%
27.2%
Common Replenishment
Extra Replenishment
Stockpiling
Shoppers buy less than half as much on a trip to the
neighborhood store, compared to a low-price stores
Trip and Retailer
Where to Shop and What to Buy
If the purpose is replenishment …
Shoppers engage in two types of trips:
 “Stock up”
 Spend more
 Mainly on the weekend
 “Fill in”
 Driven by specific item(s)
 Random occurrences
Retailer
Store Choice
Consumers report that their choice of store is driven by:
 Convenience
 Proximity to the shopper’s home
 One-stop shopping convenience
 Proximity to other stores (e.g., on the mall)
 Price
 Variety and assortment
 Service
Retailer
Shopper’s Evaluation of Retailer Prices
The general evaluation of a retailer prices is known as price image
 Consumers can’t evaluate all the prices in a store, so price
image depends on:
 Prices of items that the consumer has considered buying
 Are prices usually lower than competitors?
 Consumers can’t easily evaluate how much lower
 Better known brands are thought to have a greater effect on the
retailer’s price image
 Prices of sale items
 Most salient to shoppers
 Often displayed, too
Retailer
Shopper’s Evaluation of Retailer Assortment
 Retailer assortment can be difficult for consumers to
evaluate
 It depends on the differences between products offered,
as well as the number of products offered
 The shopper’s general evaluation of a retailer product
assortment is based on:
 The number of SKUs offered
 Whether preferred or “favorite” brands are available
 Shelf or floor space devoted to the category
Retailer
Multi-Store Shopping
 Selecting a store may mean selecting more than one
 Price or value search – order of store visits matters
 Consumers meet different needs at non-competing
retailers on the same trip
 “Cherry picking”
 The store(s) visited previously may change the
probability of visiting that store tomorrow
 Category-specific store preferences
 Consumers may tradeoff price and convenience differently
from trip to trip
Multi-Store shopping is an important reason for
retailers to locate their stores near other stores
Retailer
Multi-Store Shopping
 Over time, consumers may shop at many stores that sell
similar items
Correlations of Logarithm of Household Packaged Goods Expenditures
HiLo
Grocery
HiLo Grocery
EDLP Grocery
Mass Merchandiser
Drug Store
Warehouse Club
1
0.114
0.852
0.791
0.075
EDLP
Grocery
1
0.215
0.154
0.142
Mass
Merchandiser
1
0.713
0.221
Drug Store
1
0.000
Warehouse
Club
1
Data Source: IRI panel of 189 panelists from Oct 1995 - Oct 1997
In-Store
What to Buy – Shopping List
 Before shopping, customers often prepare a shopping
list of items sought
 On paper
 US (1995) – 55% of grocery shoppers prepare shopping lists
 Europe (1997/8) – 70% of grocery shoppers prepare
shopping lists
 Mental
 In apparel and other non-CPG shopping, fewer items
are sought so shopping lists are primarily mental
In-Store
What to Buy – Shopping List
 Shopping lists may be more or less specific
 Product category
 Brand – Though most customers use shopping lists, only
25% of brands purchased are pre-selected
 Size
Shopping lists, particularly mental lists, usually
include only the product category (not the brand)
In-Store
What to Buy – Factors Influencing Purchase Decisions
 Most purchase decisions are made in-store
 US
 POPAI – 65% in the 1980s; 81% in the 1990s
 Europe
 Retail Marketing Services – 75% in 1997/8
 8% category selected for purchase, but not brand
 4% pre-selected brand was substituted
 64% unplanned purchases
“P-O-P is significant as the ‘last three feet’ of a
brand’s marketing campaign, and serves as the
‘closer’ for in-store purchasing decisions as well as
an influencer for impulse purchases” POPAI, 1995
In-Store
What to Buy – Factors Influencing Purchase Decisions
% Reporting
Promotional Influence
86%
In-Store Ads / Displays
53%
Billboards / Posters
45%
Radio
32%
Television Advertising
30%
Newspaper Advertising
28%
Direct Marketing / Couponing
5%
Magazine Advertising
Source: POPAI, 1995
In-Store
What to Buy – Unplanned Purchases
 Items for which purchase was not anticipated are
considered “unplanned purchases”
 Impulse
 Non-impulse
 Reminder
 Suggestion
 Impulse purchases can be stimulated
 Merchandising around cash-wraps, entrances and other hightraffic areas
 Store atmospherics (e.g., colors and smells)
 Displays
In-Store
What to Buy – Unplanned Purchases
 Purchases which suggested/reminded by retailer are
influenced by:
 Display
 Signage – e.g., shelf tags
 Cross-merchandising
 From the retailer’s perspective, these are “add-on” sales
 The number of unplanned purchases increases with
both variety and assortment offered by the retailer
The bigger the store, the more unplanned purchases
In-Store
What to Buy – Unplanned Purchases
Unplanned purchases may be limited by the shoppers’
budget constraints and time constraints
Browsers make more unplanned purchases
In-Store
Brand/Product Choice – Consideration Sets
 To avoid spending all day in the store, shoppers limit
their consideration to relatively few items
 What – Consideration set is the subset of available
products that is evaluated when making a choice
 Why – limited cognitive resources
 How – screen items unlikely to be of interest before
evaluating them
In-Store
Brand/Product Choice – Consideration Sets
 How/when is the consideration set formed
Need Recognition
Information Search
Consideration Set
Evaluation of Alternatives
Intention to Purchase
Purchase Decision
In-Store
Brand/Product Choice – Evaluation Factors
 Price/value
 Compared with what is on the shelf (in-store)
 Compared with competitors (out of the store)
 Compared with recalled prices
 Quality
 Performance (e.g., fabric weave and weight, cut)
 Conformance (e.g., durability, workmanship)
 Image
 Familiarity / information – Reduces uncertainty of
evaluation
Brand can be a proxy for quality, if quality is unknown
and can be a primary factor in determining the image
associated with a product
In-Store
Brand/Product Choice – Consumer Evaluation
 Retailers can affect consumers’ product evaluations by
 Pricing
 Vs. competitors
 Between items on the shelf
 Assortment
 Number of items
 Quality of items
 Brand(s) of merchandise
 Retailers may try to “up-sell,” or influence shoppers to
purchase a higher-margin product, but they are more
likely to pursue customer loyalty or “add-on” sales
In-Store
Brand/Product Choice – Consumer Evaluation
 Brands are often a key component of the retailer’s
positioning
Barney’s
New York
JCPenney
•Donna Karan
•Arizona
•Dolce & Gabanna
•Lee
•Giorgio Armani
•L.E.I.
•Jil Sander
•Vanity Fair
http://www.barneys.com
http://www.jcpenney.com
In-Store
Brand/Product Choice – Private Label
 Retailers may offer their own brands, known as “private
labels”
 Offer consumers more choice alternatives
 Offer consumers lower-priced alternatives to the
national brand
May appeal to more price-sensitive shoppers
 Offer products that have higher margins than national
brands
 Offer products that are exclusive to the retailer
In-Store
Brand/Product Choice – Private Label
 In general, shoppers prefer national brands to store
brands, though:
 Some retailers offer exclusively private labels
The Gap
Land’s End
 Private label penetration varies by category
64% of egg sales
58% of milk sales
30% of sour cream sales
 Private label has higher penetration in certain countries
Britain
In-Store
Brand/Product Choice – Private Label
 Private label examples
In-Store
Purchase Quantity
 Purchase quantity is driven primarily by promotional
discounts
 The limited time availability leads customers to stockpile
 Specific promotions encourage larger quantity purchases:
 Of individual items
 Buy one; get one free
 3 for the price of two
 Trial size with purchase
 Of goods in the store
 Volume discounts
 Frequent flyer-type programs