Satisfaction with the local grocery store mix: A consumer perspective Harmen Oppewal (Monash University) Ian Clarke (University of Edinburgh) Malcolm Kirkup.

Satisfaction with the local grocery store mix: A consumer perspectiveSatisfaction with the local grocery store mix: A consumer perspective

Harmen Oppewal (Monash University)

Ian Clarke (University of Edinburgh)

Malcolm Kirkup (University of Exeter)

Supermarket Power in Australia Symposium,

Melbourne, 1 August 2013

Department of Marketing

UK grocery sector issues similar but further UK grocery sector issues similar but further developed and more debated than in Australiadeveloped and more debated than in Australia

– Concerns over increasing concentration

– Supply chain issues & accusations of abuse of power

– Town centre v out of town locations

– Role of the small store & supermarkets moving into the convenience sector

– Homogenisation of high street

– Food deserts debate

– Overseas entrants incl ALDI and Walmart

– Private labels

– Loyalty cards

– Unit pricing

– Organic and local products

– Online channel

– Consumer concern and activism

Aim and approach of this researchAim and approach of this research

● Aim

– Explore what it means to have variety in the retail setting, what influences it, and how it affects consumer perceptions of choice

– Assess how concentration, format diversity and proximity to stores influence satisfaction with the local store mix

● Approach

– Consumer satisfaction survey among consumers from different neigbourhoods, across different cities

– Respondents rated their current neighbourhood’s provision and then completed a set of ‘stated preference’ tasks.

Some relevant literatureSome relevant literature

● Consumer perceptions of local choice

– Quality of consumers’ lives affected by neighbourhoods in which they live, including retail provision

– Clarke et al., 2006; Jackson et al., 2006

● Perception of assortments within stores

– Effects of assortment reductions and extensions– Botti & Iyengar, 2006; Broniarczyk et al, 1998; Iyengar & Lepper, 1999;

Oppewal & Koelemeijer, 2005

● Access and disadvantage– Benefits of co-location

– Arentze et al., 2005; Dellaert et al., 1998, Oppewal et al, 1997

– Role of location and distance– Dawson et al 2008; Talukdar 2008; Wrigley et al 2003

Stated preference study Stated preference study (Clarke et al 2012)(Clarke et al 2012)

● Personal interviews across the population in one ‘average’ town in Mid England (Worcester) (n=288)

● Respondents evaluate hypothetical store mixes for their local area

– Local parade of shops within 5 minutes– Location at 15 minutes but near the town centre– Location at 15 minutes towards the edge of town

● Presence/absence of 8 individual stores varied across the three locations– Tesco (3x); Sainsbury; ASDA; Morrison; Somerfield– Tesco Express; Independent small retailer

● Satisfaction with store mix – 1=very unsatisfied, .., 5 = very satisfied

Stated preference taskStated preference task

● “Imagine your neighbourhood has a completely different range of food store available…”

● “How satisfied or dissatisfied would you be with this mix of stores” (1= very dissatisfied, 5 = very satisfied)

Store presence effects Store presence effects (regression parameters)(regression parameters)

FindingsFindings

● Supermarkets at 5 minutes have largest contribution

– Tesco more than Sainsbury

– If both present then joint effect is reduced

● Only minimal contribution of small stores

– Small effect for independent, does not depend on presence of other retailers; mainly reduces dissatisfaction

– No effect for Tesco Express at 15 minutes

● Effects at 15 minutes vary by brand and location

– ASDA and Morrison larger effects than (second) Tesco

– If Tesco at 5 minutes then smaller effects of ASDA/Morrison

Main findingsMain findings

1. Consumers are more satisfied if they have more grocery stores available

2. Consumers are more satisfied if they have a greater variety of brands and formats available

Published as:

Clarke I., M. Kirkup and H. Oppewal (2012), “Consumer satisfaction with local retail diversity in the UK: effects of supermarket access, brand variety, and social deprivation” Environment and Planning A, 44: 1896- 1911

Extension Extension (similar approach, separate sample)(similar approach, separate sample)

● Role of online shopping

– Extra condition varied presence of online channel

– No significant effect: online is no substitute for brick and mortar store access

● Role of discounters

– ALDI adds significant benefit, but only if a main supermarket is also present

● Role of premium stores

– Waitrose adds only modest amount

Store presence effects Store presence effects (study 2)(study 2)

Next steps in the researchNext steps in the research

● Real neighbourhood evaluations

● Effect of actual store mix and access levels

● Comparison across two towns

– With different levels of concentration

Study Areas

Milton Keynes

Telford

Retail supply in the two townsRetail supply in the two towns

● Town A = Telford:

– Low level of concentration of main supermarket brands (HHI<1500) and a Tesco market share of only 17%,

● Town B = Milton Keynes:

– High level of concentration (Herfindahl-Hirschman Index >3000) and a high Tesco market share of 52% (at time of surveying)

● Approximately 20 supermarkets and 50 small local supermarkets and convenience stores in each town

– All main competitors present

– Similar presence of discounters and of high end luxury supermarkets

MethodologyMethodology

● Careful selection of nine local areas in each town

● 60 face to face interviews in each area to collect consumer evaluations of the retail supply

● Location data for all supermarkets combined with travel time data for all area postcodes.

● Resulted in each respondent’s available set of stores, including their brands and travel times.

● Selected nearest six supermarkets for each respondent

Descriptive statisticsDescriptive statistics

Analysis: mixed linear regression Analysis: mixed linear regression (18 groups; 1129 respondents)(18 groups; 1129 respondents)

Results (1)Results (1)

● Distance to nearest supermarket: no effect

– But negative effect of distance to next nearest

– So it is the access to multiple supermarkets in the vicinity that is important

● Variety: Presence of a discount store increases satisfaction

– No effect of the presence of a high end store

– So the effect is due to discounter availability, not mere variety

Results (2)Results (2)

● Proportion of Tesco’s negatively affects satisfaction

– Consumers are more satisfied when there is more brand variety among the main supermarkets

● Respondents in Low Concentration town more satisfied than those in HC town

– The High Concentration town also included more Tesco branded convenience stores

● Higher satisfaction if car available

– No interaction with distance variables

ConclusionsConclusions

● Consumers in the town less dominated by Tesco significantly more satisfied with their local mix

● Satisfaction does not depend on distance to the nearest supermarket; instead it depends on the combined distances to the set of nearest stores

● Consumers value brand variety and discounter

● Policy makers should focus on variety, not just on providing ‘minimal’ access levels

– But there may be vulnerable subgroups who need access

– No indication that online can provide a substitute

Do these findings transfer to the Do these findings transfer to the Australian context?Australian context?

● Yes, in principle, –

● But differences to note

– Number of competitors

– Regulatory environment

– …

● Still an open research question

– Research pending

– Partnering (Monash):

[email protected]

Thank you!Thank you!Thank you!Thank you!

● Questions & discussion● Questions & discussion

Satisfaction with the local grocery store mix: A consumer perspectiveSatisfaction with the local grocery store mix: A consumer perspective

Harmen Oppewal (Monash University)

Ian Clarke (University of Edinburgh)

Malcolm Kirkup (University of Exeter)

Supermarket Power in Australia Symposium,

Melbourne, 1 August 2013

Department of Marketing