Using Transaction Utility Approach for Retail Format Decision

Transaction Utility theory was propounded by Thaler to explain that the value derived by a customer from an exchange consists of two drivers: Acquisition Utilities and Transaction utilities. Acquisition utility represents the economic gain or loss from the transaction. Where as transaction utility is associated with purchase or (sale) and represents the pleasure (or displeasure) of the financial deal per se and is a function of the difference between the selling price and the reference price. Choice of a format has been studied from several dimensions including the cost and effort as well as the non-monetary values. However, the studies that present the complete picture and combine the aspects of the tangible as well as intangible values derived out of the shopping process are limited. Most of the studies, all of them from the developed economies, have focussed on the selection of a store. They represent a scenario where formats have stabilised. However, in Indian scenario formats have been found to be influencing the choice of store as well as orientation of the shoppers. Also, retailers are experimenting with alternate format with differing success rates. The author has also not found a study that has applied this theory. It is felt that the Transactional Utility Theory may provide a suitable approach for making format decisions.

THE FOOD SERVICE INDUSTRY: TRENDS AND CHANGING STRUCTURE IN THE NEW MILLENNIUM

By 2010, foodservice establishments are projected to capture 53 percent of consumers' food expenditures, whereas in 1980, foodservice captured less than 40 percent. The foodservice industry accounts for approximately 4 percent of the Gross Domestic Product and about 11 million jobs. It has been rapidly changing due to economic factors, technological advances, and labor matters.1 This overview covers many of the issues and trends affecting the different segments of the foodservice supply chain including the foodservice operators, distributors and food manufacturers. Changing customer demographics are a driving force in the evolution of the foodservice industry. As the baby boomers reach middle age, they do not seem to have time to cook and their children and grandchildren do not seem to have the interest, or talent. The U.S. population in 2000 had over double ($6,500) the per capita discretionary income that it had in 1975 ($3,109) 2 and, with a high value for recreation and pleasure they are pulled out of the kitchen and into the restaurants. An ever-shrinking world also brings variety to menus as cultures and cuisines converge, introducing new flavors and textures. A tight labor market has affected the foodservice industry from top to bottom leading to a derived demand for convenience products from manufacturers. At all links in the chain, companies are experiencing mergers and acquisitions. Operators, manufacturers, and distributors are all fighting for a share of the profits as competition continues to intensify. This review of the foodservice industry incorporates interviews with industry professionals, current information from leading foodservice associations, and predictions from the top industry research firms and consultants.Agribusiness, Industrial Organization,

How Do National Brands and Store Brands Compete?:Centre for Competition Policy Working Paper 14-7

This paper considers the nature of competition between national brands and store brands (otherwise known as private label or own label goods). We expound an analytical framework that allows for both price and non-price (quality) competition and use this to see how these different forms of rivalry interact in a setting where a leading retailer offering a store brand acts as both a customer and competitor to a national brand producer. This relationship thus entails both vertical and horizontal competition. We show that generally the retailer will seek to position its store brand as closely as possible to the national brand, by seeking to minimise the quality gap, but price the two goods very differently, with a wide price gap, as a means to segment consumers. Store brand introduction can lead to overall higher prices, so be against consumers’ interest, unless there is intense head-to-head rivalry for value-conscious consumers. Intense rivalry is more likely to happen if the national brand producer can exercise some control over its own product’s retail price (e.g. by being allowed to use maximum resale price maintenance) and has protection against copycat (lookalike) store brands ensuring a degree of differentiation between the competing products. Accordingly, we suggest that there are horizontal competition benefits on top of the usual vertical (alleviating double marginalisation) and intellectual property (to encourage brand investments) reasons to support respectively a more lenient policy stance towards RPM and a tougher stance against parasitic copycatting. The mix of horizontal and vertical aspects has important implications for undertaking market definition analysis in CPG markets, and specifically testing whether store brands and national brands are in the same product market. We highlight the considerable care needed in applying and interpreting the usual price and demand elasticity analysis used in market definition tests because of how segmentation and item-by-item retail pricing can distort demand and sales patterns

group project

This paper studies the viability of Renova’s internationalization to India. Its initial chapters include an analysis of the country, the Tissue & Hygiene industry and the company, as well as a section dedicated to the entry mode, in which an entry mode framework was created. Based on this tool, it was discovered that Renova should enter in India by direct export. Moreover, from the chapter on marketing strategy it was concluded that Renova should first export toilet paper, facial tissues, and napkins from its Red Label line, pursuing a premium positioning in the market. The products should be distributed first in Mumbai, through More’s retail chain and the wholesalers Metro and Walmart. Finally, despite India’s inherent risks and the industry’s challenges, a financial analysis suggests that this internationalization is viable (NPV = 215.565,66€) and worth to be followed

Shelf life -new furniture concept

CEM

How to increase brand value expanding the category and brand presence to the main meal occasion for Sumol- Compal

Having registered negative retail value growth of 4% in Portugal in 2014, the juice category is set to decline further by 5,5% until 2019. Manufacturers of juices and nectars are therefore increasingly looking for new categories in order to balance this negative forecast in their home territory. One apparent growth opportunity for Compal, the leading producer of juices and nectars, is to expand its commercial reach to new occasions of consumption. This report carefully analyzes the opportunities related to an expansion to the main meal occasion and introduces a complete marketing and communications plan for a possible new main meal juice, Compal à Mesa. The product concept represents a rather premium positioning for the main meal occasion, including new flavor mixes that are targeted at different occasions of meals. The justification of the introduced concept includes a discussion of the primary and secondary research that was performe

Strategic Assortment Reduction by a Dominant Retailer Strategic Assortment Reduction by a Dominant Retailer

In certain product categories, large discount retailers are known to offer shallower assortments than traditional retailers. In this paper, we investigate the competitive incentives for such assortment decisions and the implications for manufacturers’ distribution strategies. Our results show that if one retailer has the channel power to determine its assortment first, then it can strategically reduce its assortment by carrying only the popular variety while simultaneously inducing the rival retailer to carry both the specialty and popular varieties. The rival retailer then bears higher assortment costs, which leads to relaxed price competition for the commonly carried popular variety. We also show that when the manufacturer has relative channel power, it chooses alternatively to distribute both product varieties through both retailers. Our analysis suggests, therefore, that when a retailer becomes dominant in the distribution channel, it facilitates retail segmentation into discount shops, carrying limited product lines, and specialty shops carrying wider assortments. We also illustrate how retailer power leading to strategic assortment reduction can lead to lower consumer surplus.channels of distribution; channel power; assortment; retailing; game theory