The Impact of Location on Consumer Purchases in Electronic Markets

The Internet has been thought of as a technological advancement that will bridge the geographical digital divide and remove the disparities between underserved communities and the rest of the society. In order to examine the existence of underserved communities, we examine how changes in the local supply of goods and services in the offline world changes consumer behavior in technology enabled electronic markets. For example, retail markets for consumer products such as books, music, and videos have traditionally been predominantly local. As local markets increase in size from small towns to large cities, consumers are affected in two ways. First, holding product offerings among retailers fixed, an increase in the size of a location encourages new firm entry that in turn lowers prices and improves service levels. Moreover, larger markets also allow retailers to provide a wider array of product offerings targeted to market segments that would be infeasible in smaller town settings. The emergence of new online retailing channels may act as a substitute for the benefits of urban concentration both by offering lower prices and by providing increased product differentiation for rural consumers. The open question is which of these phenomena are more important: how do consumers use online channels to substitute for offline supply deficiencies, and how does this vary across locations in the United States? We explore this problem using data from Amazon on the top selling books and DVDs for over 8626 unique locations in the US over 10 months between 2005-2006. We show that even controlling for product-specific preferences by location, there are still considerable differences in the responses of locations of different population sizes to price and popularity changes of DVDs and books. These can be attributed to differences in local supply conditions as well as other factors such as demographic characteristics and high speed internet penetration

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.

Local food systems: concepts, impacts, and issues

Consumer demand for food that is locally produced,marketed, and consumed is generating increased interest in local food throughout the United States. As interest grows, so do questions about what constitutes local food and what characterizes local food systems. What Is the Issue? This study provides a comprehensive literature-review-based overview of the current understanding of local food systems, including: alternative defi nitions; estimates of market size and reach; descriptions of the characteristics of local food consumers and producers; and an examination of early evidence on the economic and health impacts of such systems. What Did the Study Find? There is no generally accepted definition of “local” food. Though “local” has a geographic connotation, there is no consensus on a definition in terms of the distance between production and consumption. Definitions related to geographic distance between production and sales vary by regions, companies, consumers, and local food markets. According to the definition adopted by the U.S. Congress in the 2008 Food, Conservation, and Energy Act,the total distance that a product can be transported and still be considered a “locally or regionally produced agricultural food product” is less than 400 miles from its origin, or within the State in which it is produced. Definitions based on market arrangements, including direct-to-consumer arrangements such as regional farmers’ markets, or direct-to-retail/foodservice arrangements such as farm sales to schools, are well-recognized categories and are used in this report to provide statistics on the market development of local foods. Local food markets account for a small but growing share of total U.S. agricultural sales. • Direct-to-consumer marketing amounted to $1.2 billion in current dollar sales in 2007, according to the 2007 Census of Agriculture, compared with$551 million in 1997. • Direct-to-consumer sales accounted for 0.4 percent of total agricultural sales in 2007, up from 0.3 percent in 1997. If nonedible products are excluded from total agricultural sales, direct-to consumer sales accounted for 0.8 percent of agricultural sales in 2007. • The number of farmers’ markets rose to 5,274 in 2009, up from 2,756 in 1998 and 1,755 in 1994, according to USDA’s Agricultural Marketing Service. • In 2005, there were 1,144 community-supported agriculture organizations, up from 400 in 2001 and 2 in 1986, according to a study by the National Center for Appropriate Technology. In early 2010, estimates exceeded 1,400, but the number could be much larger. • The number of farm to school programs, which use local farms as food suppliers for school meals programs and promote relationships between schools and farms, increased to 2,095 in 2009, up from 400 in 2004 and 2 in the 1996-97 school year, according to the National Farm to School Network. Data from the 2005 School Nutrition and Dietary Assessment Survey, sponsored by USDA’s Food and Nutrition Service, showed that 14 percent of school districts participated in Farm to School programs, and 16 percent reported having guidelines for purchasing locally grown produce. Production of locally marketed food is more likely to occur on small farms located in or near metropolitan counties. Local food markets typically involve small farmers, heterogeneous products, and short supply chains in which farmers also perform marketing functions, including storage, packaging, transportation, distribution, and advertising. According to the 2007 U.S. Census of Agriculture, most farms that sell directly to consumers are small farms with less than $50,000 in total farm sales, located in urban corridors of the Northeast and the West Coast. In 2007, direct-to-consumer sales accounted for a larger share of sales for small farms, as defi ned above, than for medium-sized farms (total farm sales of$50,000 to $499,999) and large farms (total farm sales of$500,000 or more). Produce farms engaged in local marketing made 56 percent of total agricultural direct sales to consumers, while accounting for 26 percent of all farms engaged in direct-to-consumer marketing. Direct-to-consumer sales are higher for the farms engaged in other entrepreneurial activities, such as organic production, tourism, and customwork (planting, plowing, harvesting, etc. for others), than for other farms. In 2007, direct sales by all U.S. farms surpassed customwork to become the leading on-farm entrepreneurial activity in terms of farm household participation. Barriers to local food-market entry and expansion include: capacity constraints for small farms and lack of distribution systems for moving local food into mainstream markets; limited research, education, and training for marketing local food; and uncertainties related to regulations that may affect local food production, such as food safety requirements. Consumers who value high-quality foods produced with low environmental impact are willing to pay more for locally produced food. Several studies have explored consumer preferences for locally produced food. Motives for “buying local” include perceived quality and freshness of local food and support for the local economy. Consumers who are willing to pay higher prices for locally produced foods place importance on product quality, nutritional value, methods of raising a product and those methods’ effects on the environment, and support for local farmers. Federal, State, and local government programs increasingly support local food systems. Many existing government programs and policies support local food initiatives, and the number of such programs is growing. Federal policies have grown over time to include the Community Food Project Grants Program, the WIC Farmers’ Market Nutrition Program, Senior Farmers’ Market Nutrition Program, Federal State Marketing Improvement Program, National Farmers’ Market Promotion Program, Specialty Crop Block Grant Program, and the Community Facilities Program. State and local policies include those related to farm-to-institution procurement, promotion of local food markets, incentives for low-income consumers to shop at farmers’ markets, and creation of State Food Policy Councils to discuss opportunities and potential impact of government intervention. (WIC is the acronym for the Special Supplemental Nutrition Program for Women, Infants, and Children). As of early 2010, there were few studies on the impact of local food markets on economic development, health, or environmental quality. • Empirical research has found that expanding local food systems in a community can increase employment and income in that community. • Empirical evidence is insuffi cient to determine whether local food availability improves diet quality or food security. • Life-cycle assessments—analyses of energy use at all stages of the food system including consumption and disposal—suggest that localization can but does not necessarily reduce energy use or greenhouse gas emissions. How Was the Study Conducted? Existing analyses of local food markets by universities, government agencies, national nonprofit organizations, and others of local food markets were synthesized to evaluate the definition of local foods and the effects of local food systems on economic development, health and nutrition, food security, and energy use and greenhouse gas emissions. The report’s content relies on data collected through the 2007 Census of Agriculture, as well as other surveys by USDA’s Agricultural Marketing Service, the National Farm to School Network, university extension departments, and others, to provide a comprehensive picture of types of local food markets, their characteristics, and their importance over time.Local food systems; farmers’ markets; direct-to-consumer marketing; direct-to-retail/foodservice marketing; community supported agriculture; farm to school programs; Farmers’ Market Promotion Program; food miles; ERS; USDA

Local Food Systems: Concepts, Impacts, and Issues

This comprehensive overview of local food systems explores alternative definitions of local food, estimates market size and reach, describes the characteristics of local consumers and producers, and examines early indications of the economic and health impacts of local food systems. There is no consensus on a definition of “local” or “local food systems” in terms of the geographic distance between production and consumption. But defining “local” based on marketing arrangements, such as farmers selling directly to consumers at regional farmers’ markets or to schools, is well recognized. Statistics suggest that local food markets account for a small, but growing, share of U.S. agricultural production. For smaller farms, direct marketing to consumers accounts for a higher percentage of their sales than for larger farms. Findings are mixed on the impact of local food systems on local economic development and better nutrition levels among consumers, and sparse literature is so far inconclusive about whether localization reduces energy use or greenhouse gas emissions.local food systems, farmers’ markets, direct-to-consumer marketing, direct-to-retail/ foodservice marketing, community supported agriculture, farm to school programs, Farmers’ Market Promotion Program, food miles, Community/Rural/Urban Development,

Against Inefficacy Objections: The Real Economic Impact of Individual Consumer Choices on Animal Agriculture

When consumers choose to abstain from purchasing meat, they face some uncertainty about whether their decisions will have an impact on the number of animals raised and killed. Consequentialists have argued that this uncertainty should not dissuade consumers from a vegetarian diet because the “expected” impact, or average impact, will be predictable. Recently, however, critics have argued that the expected marginal impact of a consumer change is likely to be much smaller or more radically unpredictable than previously thought. This objection to the consequentialist case for vegetarianism is known as the “causal inefficacy” (or “causal impotence”) objection. In this paper, we argue that the inefficacy objection fails. First, we summarize the contours of the objection and the standard “expected impact” response to it. Second, we examine and rebut two contemporary attempts (by Mark Budolfson and Ted Warfield) to defeat the expected impact reply through alleged demonstrations of the inefficacy of abstaining from meat consumption. Third, we argue that there are good reasons to believe that single individual consumers—not just individual consumers taken as an aggregate—really do make a positive difference when they choose to abstain from meat consumption. Our case rests on three economic observations: (i) animal producers operate in a highly competitive environment, (ii) complex supply chains efficiently communicate some information about product demand, and (iii) consumers of plant-based meat alternatives have positive consumption spillover effects on other consumers

Shopbots, Powershopping, Powersales: New Forms of Intermediation in E-Commerce - An Overview -

With the advent and proliferation of the Internet many aspects of business and market activities are changing. New forms of intermediation also called cybermediaries are becoming increasingly important as a coordinator of interaction between buyers and sellers in the electronic market environment. Especially the overwhelming abundance of information offered by the Internet promotes the development of new intermediarie like malls, shopbots, virtual resellers etc. This paper provides a detailed overview of different new forms of cybermediation and illustrates their influence on consumer choice, firm pricing and product differentiation strategies.comparison shopping, cybermediaries, e-commerce, shopbots

Exogenous coalition formation in the e-marketplace based on geographical proximity

This paper considers a model for exogenous coalition formation in e-marketplaces. Using the informational advantage e-retailer creates coalitions of customers based on geographical proximity. Most of the literature regards this process as endogenous: a coalition leader bundles eventual purchases together in order to obtain a better bargaining position. In contrast - and in response to what is being observed in business practice - we analyse a situation in which an existing e-retailer exogenously forms customers' coalitions. Results of this study are highly encouraging. Namely, we demonstrate that even under highly imperfect warehouse management schemes leading to contagion eects, suggested combined delivery service may oer signifficant efficiency gains as well as opportunities for Pareto-improvement.Coalition formation, e-commerce, multi-agent systems, consumer satisfaction, demand planning, warehouse management.

Finnish consumers' expectations on developments and changes in payment habits. Survey in connection with the research project 'Finnish payment habits 2010'

The Bank of Finland’s Finnish Payment Habits 2010 project predicts that Finnish payment habits will face substantial changes. The causes for these changes include: the standardisation and integration of European payment systems, development of payment services-related legislation and regulation at EU level, changes in payment services-related cost factors and pricing, and new opportunities offered by technological advances. The last few years have seen a surge in new payment instruments and services. Increasing reliance on information and communication technology is characteristic to the development of these payment instruments, the vast majority of which have however failed to entice consumers. To increase our understanding of changes in payment patterns, this report analyses consumer needs, tastes and payment habits as new payment systems are adopted. Research data was collected in September 2005 using a mail-survey covering the central payment methods and addressed to 2,000 randomly-sampled Finnish consumers. According to our findings, security and trustworthiness are the most important characteristics of any new payment instrument. Other essential characteristics are the ability to produce good transaction-related information, compatibility with shopping and payment habits, accessibility, ease of use, time and cost savings, as well as time and place independence. New payment instruments – electronic billing and paying for shopping by mobile phone – are not likely to supersede conventional payment methods by 2010 when judged by the aforementioned characteristics: Trust and cost factors do not separate consumers well-disposed towards electronic bills and mobile payments from those set against these payment methods. A relatively restricted group of differentiating factors was found. Ease of use is a common differentiating factor for both electronic bills and mobile payments adoption. Additionally, accessibility is a differentiating characteristic in mobile payments adoption.payment habits; payment services to consumers; consumer behaviour; diffusion of innovations; theory of planned behaviour (TPB)