Peter T.L. Popkowski Leszczyc and Harry Timmermans

Over the past several decades, the retail industry has witnessed the emergence of several new retail formats. Traditional convenience and specialty stores, strip malls, and regional malls now face competition from box stores, power centers, and factory outlets. In addition, new specialty and department stores have entered the market or repositioned themselves by emphasizing discounts, customer quality, service, and/or selection. As a result, consumers can now choose between many different types of retail outlets. At one end of the retail spectrum, there are a plethora of small-scale retail operations offering personalized service, convenient locations, and high quality products. At the other end, there are the increasingly larger megastores and hypermarkets offering one-stop convenience and lower prices, but often at the cost of less service and less convenient locations. For large stores, this raises the question of how to assess competition from small stores; for small stores, it raises the problem of how to develop strategies of co-existence with large, general assortment retailers.

This research looks at how consumers organize their shopping trips when faced with the enlarged set of retail format alternatives. Consumers are faced with a retail environment where goods like general merchandise and drug store related products can be bought at smaller specialty or convenience stores, and at larger "combination stores." In particular we study whether consumers typically organize their shopping behavior in terms of single-stop trips to large-scale retail operations, in terms of multi-stop trips to specialty and convenience stores, or in terms of some hybrid strategy in which their shopping at large scale retail operations is complemented by trips to smaller specialty stores.

We also study the impact of management's strategic decisions related to pricing, promotion, merchandising, and service on the choice of a particular shopping strategy. Some of these attributes are of a more strategic nature, and cannot be easily changed in the short run, or may be even typical of the retail format, while other attributes are more related to the day-to-day operations of the retail format. Finally, we consider whether there is a difference in this respect between daily shopping, end of the week shopping, and end of the month shopping that offers particular prospects for specific types of retailers.

A conjoint choice experiment was constructed and administered to a convenience sample of 405 shoppers in the city of Edmonton, Canada in early 1996. The model differs from most previous conjoint choice models in retailing in that it incorporates the similarity of competing strategies (the cross-effects) and allows one to test whether consumer choices of shopping strategy are dependent on contextual variables such as weekday vs. weekend vs. month-end shopping.

Because conjoint analysis is based on consumer responses under (quasi-) laboratory situations, it allows the researcher to develop scenarios that reflect potential retail management decisions not currently observed in the market place, and to study their impact on consumer choice behavior. A context-sensitive universal logit model was used to examine the (competitive) effects of managerial decisions on the probability that a particular shopping strategy will be chosen.

In terms of managerial implications, the results of the study suggest that the probability of choosing a particular shopping strategy rises in an increasing, non-linear way with lower prices and lower parking fees, better assortment, more national brands, less travel time, and shorter check-out lines. Sample respondents prefer the multi-stop specialty/convenience store shopping strategy, while a single-stop trip to a combination store was the least preferred. The prevalence of the specialty/convenience store shopping strategy depends on the extent to which the specialty store can successfully effectuate lower prices for general merchandise and drugs. Low prices and travel times, and a larger assortment will increase the likelihood that consumers will shop at combination stores.

The cross-effects indicate the degree of similarity between shopping strategies. Managers of combination stores can attract more customers by offering lower prices and convenience (shorter check-out lines), while managers of specialty stores can most effectively compete by providing a better assortment. Hence, while assortment is important for both specialty and combination stores, specialty stores can more effectively attract customers from their competition by offering a wider selection. Combination stores will be less effective in attracting customers from competition by offering more assortment; offering lower prices is more effective. Specialty stores gain most from using price promotions and also attract consumers from other multi-stop shopping strategies but not from the combination stores.