The Future of Retail Operations

Retailing consists of all the activities associated with the selling of goods to the final consumer. In this article, we review the research on retail operations published in Manufacturing & Service Operations Research (M&SOM) since 1999. We then discuss the current retail landscape and the new research directions it offers, in which M&SOM can play a prominent role

Does Search Matter? Using Clickstream Data to Examine the Relationship between Online Search and Purchase Behavior

One of the most frequently used cues of the likelihood to purchase in a brick-and-mortar setting is the searching and browsing behavior of consumers. Retail sales employees are often trained to examine a consumer’s searching behavior in determining their likelihood to purchase. It would seem, therefore, that such a similar correlation should occur in the online setting. Namely, consumes’r search behavior should be related to their likelihood to purchase. However, does search behavior offer any information in the online setting? It is this question that we explore in this paper. In addition, we investigate how the relationship between search and purchase behavior differs at different levels of analysis, extended search, and session-level search. We find that in the aggregate, when taking extended search into account, search breadth and depth are both positively associated with purchase behavior, suggesting that the extended search process is positively associated with purchase behavior. When we drill down to the session level, separating the sessions by person, we find that search breadth is negatively associated with amount spent online, whereas search depth is positively associated with amount spent online. These results show that a relationship exists between search behavior and purchase behavior. In addition, the results suggest that firms should examine both extended search and session-level search when assessing their consumer base

Towards a Deeper Understanding of Store Branded Lookalikes: Similarity Judgment and Price Influence

Abstract The development of store branded lookalikes (SBLs) imitating established manufacturer national brands has long been a source of friction and dispute between brand manufacturers and retailers. It is evident that retailers often use a close positioning strategy on store brands (SBs) to imitate the look and appearance of leading national brands (NBs) on a wide range of fast moving consumer goods. It is, though, less clear why and how a me-too store brand is perceived to be a lookalike to an imitated national brand. At issue is a fundamental question: What makes a store brand lookalike and imitated national brand look alike? Precisely to what extent do the different packaging features, both in isolation and in tandem, trigger in the consumer’s mind similarity between the two goods? Furthermore, the overall market outcome from the introduction and use of lookalike packaging on store brands is also not clear or evidenced, especially its effect on pricing and more generally how this impacts national brand/store brand competition as well as well as competition between competing retailers each purveying their own store brand. Does offering a closer lookalike allow a retailer to price the store brand higher and close the price gap with the imitated national brand? Does offering a closer lookalike allow a retailer to price higher than rival retailers offering less close lookalike store brands? This thesis seeks to provide some answers to these important questions that have so far received relatively little attention in marketing research. The analysis is based on undertaking different studies of consumers’ perceptions gathered through structured surveys regarding actual national brand and store brand equivalents as well as through experiments in manipulating features of store brands (to control for individual effects) to understand how consumers form judgments over product similarity. Along with additional information provided by respondents on their own backgrounds and their shopping behaviour, this primary data is supplemented with secondary data on market features and outcomes, including market share and sales performance data as well as prices, to allow for consideration of contextual aspects that might influence similarity perceptions and also for analysing how the degree of perceived similarity relates to the price gap between competing products. Collectively, the studies undertaken and iv reported in the thesis provide several new and perhaps counterintuitive insights to improve our understanding of this prevalent marketing phenomenon and its effects on market outcomes as well as the nature of competitive rivalry in positioning and selling FMCG products. On the issue of what makes a brand and a lookalike look alike, the analysis shows that whether consumers perceive a store brand to be a lookalike is initially derived from the physical similarity of its packaging, which is primarily determined by colour, size & shape, and imagery. However, the analysis shows that the context matters. Specifically, the findings show that consumers’ degree of brand loyalty and brand familiarity, as well as their perception of the retailers’ store work together to influence the perception of similarity for a particular pairing of a national brand and the intended equivalent me-too store brand. Accordingly, different consumers will perceive the same product pairings differently based on their experience, tastes and broader perceptions. Regarding the nature of NB and SBL prices, it might be expected that high packaging similarity of SBLs will bring more intense price competition between the SBLs and the targeted NBs they imitate and among competing SBs. There is indeed evidence for this here. However, again, the context is shown to be important. Several marketing context indicators were considered in analysing the price competition between the products. A key finding is that the price gap tends to be wider for NBs that have growing sales (measured by a higher sales turnover compared to the previous year) or have higher market shares in a given category. In contrast, the price gap between an SBL and targeted NB tends to be lower the greater market power of the SBs in a category (measured by store brands share of category sales) and the strength of rival manufacturer brands in the same category (captured by relative brand shares). In terms of cross-retailer rivalry, an SBL tends to be priced more closely to a competing SBL the higher is SB familiarity and the greater the relative strength of the retailer (measured by its retailer market share). In contrast, higher category share held by store brands is found to allow for a wider price gap between competing SBLs. All these effects were tested in numerous FMCG product categories from across the v different leading grocery retailers in the UK, which adds a degree of reassurance about the generality to the studies conducted in this thesis. The findings reported in the thesis add to the existing literature in five significant ways. First, it confirms that colour, when treated in isolation or in tandem with other packaging features, is the most important packaging cue that determines the physical similarity of SBLs. Second, it reveals how various contextual indicators, such as brand loyalty, brand familiarity, and store image, can moderate the similarity perception process. Third, it demonstrates that the close packaging position of an SBL to a targeted NB will intensify the price competition between the NB manufacturer and the retailer. Fourth, it highlights the strategic importance of SBs in assisting retailers with cross-store competition where retailers compete amongst themselves through their SBLs. Fifth, it reveals the necessity of considering the influence of several frequently mentioned marketing performance indicators in this price competing process and these moderate or accentuate the packaging similarity effect, such as the targeted NB manufacturer’s market strength, the general market strength of the SBs, and the competition intensity in the NBs’ market

Adding Bricks to Clicks: The Contingencies Driving Cannibalization and Complementarity in Multichannel Retailing

This paper empirically explores the contingencies that drive cannibalizing and complementary effects across channels to provide sales forecasting, promotion planning, and customer relationship management guidance to multichannel managers. We investigate three contingencies in a sales analysis of a leading U.S. retailer who adds a new retail store channel to existing catalog and online channels. We show that the emergence and strength of cannibalizing and complementary effects varies over time, across type of channel, and by type of customer, and provide insight into when and where managers can expect these effects to dominate and how to counter cannibalization and promote complementarity across channels. We find that opening retail stores cannibalizes sales in the catalog and online channels in the short term, but produces complementary effects in both channels in the long term; cannibalization is magnified in the catalog channel, while complementarity is magnified in the online channel. Customer analysis suggests that opening retail stores paves the way for higher rates of customer acquisition and higher rates of repeat purchasing among existing customers in the direct channels in the long term.Multichannel Retailing, Channels of Distribution, Direct Marketing, E-commerce, Channel Management

Building brands through experiential events: when entertainment meets education

Experiential marketing is increasingly getting companies’ attention as a strategy to interact with consumers and engage them to better convey their brand image and positioning. However, its effects are still unclear both at the aggregate and at the individual levels. This paper addresses this topic and presents a field experiment investigating the effects of experiential marketing on brand image in retailing. Two similar consumer electronics stores with different strategies – traditional vs. experiential – constitutes the setting in which a field experiment has been run. Two similar samples of consumers took part in our study by visiting one of these two stores, and answering a questionnaire before and after the visit with the primary goal to investigate the brand image and its changes due to the shopping visit. Brand image was measured as the overall brand attitude – via four items – and five specific desired brand claims that the company wanted to convey to consumers. Findings show that engaged consumers through the multisensory and interactive event arranged in the experiential store register higher levels of both brand attitude and all brand claims than those visiting the traditional store, and that the increase in both the dependent variables after the visit of the experiential store is higher than the increase in the traditional store. Thus, experiential stores are not only able to entertain consumers, but they are also able to educate them, by conveying them a set of brand claims more effectively than the traditional stor

Structural Estimation of the Effect of Out-of-Stocks

We develop a structural demand model that endogenously captures the effect of out-of-stocks on customer choice by simulating a time-varying set of available alternatives. Our estimation method uses store-level data on sales and partial information on product availability. Our model allows for flexible substitution patterns, which are based on utility maximization principles and can accommodate categorical and continuous product characteristics. The methodology can be applied to data from multiple markets and in categories with a relatively large number of alternatives, slow-moving products, and frequent out-of-stocks (unlike many existing approaches). In addition, we illustrate how the model can be used to assist the decisions of a store manager in two ways. First, we show how to quantify the lost sales induced by out-of-stock products. Second, we provide insights on the financial consequences of out-of-stocks and suggest price promotion policies that can be used to help mitigate their negative economic impact, which run counter to simple commonly used heuristics

Context Effects as Customer Reaction on Delisting of Brands

The delisting of brands is frequently used by retailers to strengthen their negotiating position with the manufacturers and suppliers of their product assortment. However, retailers and manufacturers have to consider the risk of potential reactions when customers are faced with a reduced or modified assortment and thus, different choice. In this paper, two studies are presented which investigate customers` switching behavior if a (sub-)brand is unavailable and key determinants of the resulting behavior are discussed. Various conditions are tested by taking into account context theory. The results reveal that customer responses depend significantly on the context. A real-life quasi-experiment suggests that manufacturers may encounter substantially larger losses than retailers. Managerial implications for both parties can be derived and recommendations for further research are developed.Consumer decisions, delisting, context effects, switching behavior, retailing, logistic regression

Evolving perceptions of assortments, image and customer experiences in retail environments

Consumers perceptions of retail stores, the assortment of products and the locations in which they are situated, all influence consumers decisions about where, when and how to shop. In the highly competitive arena of retailing, this knowledge greatly affects retailer performance and marketing strategy. Despite this strategic importance, the literature lacks empirical research into the assortment of categories offered in retail stores and their influence on store image. Moreover, image conceptualisation for different retail contexts is fragmented and the consumer image perceptions of categories are unexplored. Recent attention has shifted to customer experience research, yet this literature refers to the consumers interaction with one retailer, when consumer shopping journeys may include many retail interactions. The research presented in this thesis addresses the above gaps, contributing to theory and knowledge in the area of retail marketing. The thesis comprises eight papers published over a 17-year period. It examines the perceptions and roles of retail assortments; category perceptions and management in retail stores; customer perceptions of image and experiences of town centres. The thesis draws from a range of empirical studies documented within the eight papers. These include: a comparative study of ten major retailers assortment strategies; a survey of 504 consumers perceptions of supermarket assortments; a qualitative study involving six national focus groups of apparel consumers; and a survey of 536 consumers across five regional city centres. The studies are informed by two literature reviews documenting retail assortment research and town centre research. Collectively, the thesis delivers a significant research contribution to knowledge and theory. The first four thesis papers clarify the strategic relationships between retail assortment and image. The following two papers identify new perspectives of image congruence and relationships between category and store image. The final two papers consolidate all previous contexts in a multi-faceted retail image construct, emphasising the previously neglected psychological image elements. Fundamentally, consumers experiences in town centre retail environments contribute to the ongoing process of holistic image creation. The findings demonstrate that as retail environments change, consumers perceptions are also evolving from a functional, static image perspective to a dynamic, experience driven concept. The research commentary concludes by outlining future research agenda

Store Format Choice in an Evolving Market . A TPB Approach

<div align=justify>The store choice has been studied extensively in the literature, but store format choice has had limited research attention. The store choice modeling has been primarily done in the random utility theory framework, which however is a neo-economics based view of choice decision that ignores the psychological and behavioral aspects of this planned behavior. The store format choice for bulk grocery purchase despite being a rational context has not been conceptualized in the most accepted construct in attitude behavior, the Theory of Planned Behavior (TPB). Attitude-behavior linkage has been studied extensively in literature but there is still no consensus on the components of attitude, their interrelationship and resultant impact on conation. The Theory of Reasoned Action has evolved over time to incorporate perceived behavioral control and past behavior to improve its explanatory capacity as TPB; however, it has maintained its unidimensionalist approach and has not tested affect and cognition independently for its impact on behavior. It may therefore be relevant to explore the possibility of testing the proposed Converging framework of Affect and Cognition and comment on the relationship of the structural components of attitude and its impact on format choice. The impact of past behavior on future behavior in Theory of Planned Behavior has been ambiguous while there has not been much emphasis on the quality of past experience. The current research takes up the past experience quality and tests it in the attitude behavior relationship as an antecedent of actual behavior. This paper conceptualizes the store format choice behavior in the Theory of Planned Behavior framework by exploring the strength of attitude-behavior relationship mediated through behavioral intention and its impact on format choice as also the independent role of affect and cognition on the format choice.</div>