Grocery Retailer Pricing Behavior for California Avocados with Implications for Industry Promotion Strategies

Rising concentration and consolidation of sales among large supermarket chains in the U.S. and other countries, due in part to a recent wave of mergers in food retailing, have made retailers' role in the food industry a topical issue. Using a unique micro dataset, this paper investigates retailer pricing issues for avocados, a key California specialty commodity, and analyzes the implications of retailer pricing behavior for the effectiveness of avocado industry advertising programs. The methodologies developed and the results achieved in this study should have broad applications across the produce sector, the food industry, and the grocery retail market. We find that retail prices for avocados are highly dispersed both spatially and temporarily. The analysis also illustrates the existence of a "regular" retail price for avocados. Downward deviations from the "regular" price dominated changes in retail prices, in particular, temporary price reductions accounted for 27 percent of retail price variations. The study examines the effects of fundamental cost and demand factors on determination of retail prices. We conclude that costs are not a primary factor in setting retail prices for avocados. Retailers' sales strategies, which reflect decreases in retail margins rather than decreases in costs, explained much of the observed temporary price reductions for avocados. Retail prices for avocados also exhibited countercyclical movements over seasonal demand cycles. The findings provide support for Lal and Matutes' (1994) hypothesis that retailers reduce prices or margins during a product's high-demand periods. We investigate how retailers respond to industry promotions and, in turn, how retailer response enhances or vitiates the effectiveness of industry promotions. The approach of "Difference-in-Difference" is employed to evaluate the effects of the California Avocado Commission's (CAC) promotion programs on retail pricing and sales. The analysis demonstrates that the radio campaign and outdoor advertisements were successful in raising avocado sales. There is no evidence that retailers charged higher prices during the CAC's promotions. Nonetheless, the CAC's promotion programs could be enhanced if retailers were better informed about the advertising campaigns. Other noteworthy results include the fact that retail margins increased significantly as shipment volumes increased, indicating the presence of retailer oligopsony power. Also notable was the rather strong evidence that retail prices were significantly lower as a function of the amount of avocados imported from Chile and Mexico, meaning that consumers have benefited from trade liberalization for avocados.F13, L1, L81, Q1, Q13, Demand and Price Analysis, Marketing,

HOUSEHOLD DEMAND FOR FINFISH: A GENERALIZED DOUBLE-HURDLE MODEL

This study estimates household demand for finfish in the United States using a limited dependent variable model that accounts for both participation and consumption decisions and also accommodates nonnormal heteroskedastic errors. Results suggest that own-price elasticity is near unitary and income elasticity is small. Price of finfish, shopping frequency, Northeast, Black and other non-Whites, and the life-cycle variable “"young, single, no children”" are they key factors that affect significantly both the probability of participation and the level of finfish consumption. Furthermore, a variable may exert opposite effects on the probability and level of consumption.Consumer/Household Economics, Demand and Price Analysis,

Data Mining in Electronic Commerce

Modern business is rushing toward e-commerce. If the transition is done properly, it enables better management, new services, lower transaction costs and better customer relations. Success depends on skilled information technologists, among whom are statisticians. This paper focuses on some of the contributions that statisticians are making to help change the business world, especially through the development and application of data mining methods. This is a very large area, and the topics we cover are chosen to avoid overlap with other papers in this special issue, as well as to respect the limitations of our expertise. Inevitably, electronic commerce has raised and is raising fresh research problems in a very wide range of statistical areas, and we try to emphasize those challenges.Comment: Published at http://dx.doi.org/10.1214/088342306000000204 in the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

Who Buys Local Food?

Using data from a national survey of food shoppers, a Lancaster-Weinstein model is estimated using probit analysis to investigate the characteristics of local food buyers. Because there is no standard for what “local food†is, consumer research is used to define the term fairly narrowly as buying from farmers’ markets, buying directly from farmers, and Community Supported Agriculture (CSA) membership. The results reveal that income and demographic characteristics are not dominant factors, nor do attitudes or behaviors related to the environment and health significantly affect whether shoppers buy local. Rather, it is the attitudes and behaviors related to food and shopping that significantly increase the probability that shoppers buy local food. The implications are strategies that will be effective in promoting local foods.Food Consumption/Nutrition/Food Safety,

Food Retailers' Pricing and Marketing Strategies, with Implications for Producers

This paper examines grocery retailers' ability to influence prices charged to consumers and paid to suppliers. We discuss how retailer market power manifests itself in terms of pricing and marketing strategies by setting forth and offering evidence in support of eight "stylized facts" of retailer pricing and brand decisions. We argue that little, if any, of this behavior can be explained by a model of a competitive, price-taking retailer, but that most of the indicated behavior was also inconsistent with traditional models of market power. Finally, we discuss the impacts of aspects of this retailer behavior on the upstream farm sector.grocery retailer, market power, price spread, sales, Agribusiness, Marketing,

The food retail revolution in poor countries: Is it coming or is it over? Evidence from Madagascar

"Global retail chains are becoming increasingly dominant in the global food trade and their rise leads to dramatic impacts on agricultural supply chains and on small producers. However, the prospects and impacts of a food retail revolution in poor countries are not yet well understood. Here, we examine this question in Madagascar, a poor but stable country where global retailers have been present for over a decade. Our survey and analysis finds that while global retail chains sell better quality food, their prices are 40 to 90% higher, ceteris paribus, than those seen in traditional retail markets. In poor settings, characterized by high food price elasticities, a lack of willingness to pay for quality, and small retail margins, supermarkets appear to set prices with an eye toward maximizing profits based on price-inelastic demands for quality products from a small middle class interested in one-stop shopping. It seems unlikely that global retail chains will further increase their food retail share in such poor settings." from Authors' AbstractFood retail, Supermarkets, Food quality, Poor Developing countries,

Effects of White Space on Consumer Perceptions of Value in E-Commerce

As e-commerce becomes an increasingly large industry, questions remain about how the isolated effects of design elements on websites influence consumer perceptions and purchasing behavior. This study used a quantitative approach to measuring the effect of a ubiquitous element of design, white space, on the perception of the monetary value of individual items. White space is a key component of design and website usability, yet it has been shown to be related to the perception of luxury. Little is known about the direct relationship between manipulation of white space and the outcomes on consumer perceptions of value in an e-commerce context. This study found no significant difference between two levels of total white space area (large vs. small) measured by participants\u27 perceived cost of items (chairs). In contrast, while holding total white space constant, the effect of white space distance between images was significant for males but not for females. Additionally, no significant relationship between gender and frequency of online shopping behavior was found, χ2(1) = 3.19, p = .07, ϕ = .17. Gender and amount of time spent per month online were significantly related, χ2(1) = 6.21, p = .013, ϕ = .24

The character of demand in mature organic food markets: Great Britain and Denmark compared

We investigate the organic food market in two selected European countries, Great Britain and Denmark, identifying main differences and similarities. We focus particularly on consumer preferences and priorities, labelling schemes, supply and sales channels, as a basis for assessing market stability and prospects for future growth. We employ a unique set of household panel data that includes information on stated values and concerns, as well as registered purchasing behaviour. Most organic food on both markets is produced and processed by large-scale industrialised units and distributed through concentrated mainstream sales channels, consumer confidence being sustained at present by organic labelling schemes that appear to function well. However, a parallel market, based on various types of direct sales to heavy users, prevails. We find that organic food purchase decisions are primarily motivated by ‘private good’ attributes such as freshness, taste and health benefits, attributes that may be perceived as being compatible with modern production and sales structure. More traditional ‘public good’ organic attributes, such as environmental and animal welfare attributes, small scale production and local supply, are less compatible with current market structure, but are also accorded less priority by the majority of consumers in practice. Mature markets for organic foods nevertheless may constitute a source of consumer dissatisfaction, particularly in the group of organic heavy users

Geographic Distribution of Urban Retail and its Spatial Relationship with Subway Network: A Case Study of Retail POI Data in Shanghai

After over two decades of development, Subway has become one of the main transit modes for people's everyday commute, and is considered to attract and form retail clusters around subway stations. Based on a point of interest (POI) dataset of retail stores in Shanghai, this study looks into the geographic distribution of retail stores in Shanghai and examines its spatial relationship with subway network. The retails stores are classified into six types: department stores, specialty stores, convenience stores, restaurants and groceries, recreational facilities and personal service facilities. A series of spatial statistical analysis for measuring geographic distribution, analyzing geographic patterns and mapping clusters are conducted. The spatial pattern shows consistence to the polycentric urban structure of Shanghai and subway stations. In addition, six retail types reveal different extent of spatial clustering at different analysis scales. Last but not least, to qualify the spatial relationship between retail density and other influence factors, including density of population and local bus service, as well as the accessibility to subway station, Ordinary Least Squares (OLS) linear regression is conducted. It turns out that the Kernel Density estimation of retail stores is positively related to population density, bus stop density and existence of subway service, while negatively affected by distance from subway stations. Bus stop density tend to be the most significant influential factors, while department stores enjoy a relatively stronger correlation with distance from subway stations compared to other retail types

Grocery omnichannel perishable inventories: performance measures and influencing factors

Purpose- Perishable inventory management for the grocery sector has become more challenging with extended omnichannel activities and emerging consumer expectations. This paper aims to identify and formalize key performance measures of omnichannel perishable inventory management (OCPI) and explore the influence of operational and market-related factors on these measures. Design/methodology/approach- The inductive approach of this research synthesizes three performance measures (product waste, lost sales and freshness) and four influencing factors (channel effect, demand variability, product perishability and shelf life visibility) for OCPI, through industry investigation, expert interviews and a systematic literature review. Treating OCPI as a complex adaptive system and considering its transaction costs, this paper formalizes the OCPI performance measures and their influencing factors in two statements and four propositions, which are then tested through numerical analysis with simulation. Findings- Product waste, lost sales and freshness are identified as distinctive OCPI performance measures, which are influenced by product perishability, shelf life visibility, demand variability and channel effects. The OCPI sensitivity to those influencing factors is diverse, whereas those factors are found to moderate each other's effects. Practical implications- To manage perishables more effectively, with less waste and lost sales for the business and fresher products for the consumer, omnichannel firms need to consider store and online channel requirements and strive to reduce demand variability, extend product shelf life and facilitate item-level shelf life visibility. While flexible logistics capacity and dynamic pricing can mitigate demand variability, the product shelf life extension needs modifications in product design, production, or storage conditions. OCPI executives can also increase the product shelf life visibility through advanced stock monitoring/tracking technologies (e.g. smart tags or more comprehensive barcodes), particularly for the online channel which demands fresher products. Originality/value- This paper provides a novel theoretical view on perishables in omnichannel systems. It specifies the OCPI performance, beyond typical inventory policies for cost minimization, while discussing its sensitivity to operations and market factors