Metters shops for ways to explain grocery choices

By Eric Rangus erangus@emory.edu

When a shopper pulls into the parking lot of a local Kroger, does he think about why he has chosen this particular store, at this particular location, at this particular time?

Richard Metters has.

In his paper, “Every House a Warehouse: An Inventory-Theoretic Model of Retail Shopping Behavior,” Metters, along with coauthors Edward Fox and John Semple of the Cox School of Business at Southern Methodist University, delve into the often complex world of household shopping and emerge with some interesting results.

“We wanted to come at this problem from both the marketing side and the operational side of things,” said Metters, associate professor of decision and information analysis in the Goizueta Business School. They approached it from the angles of both consumer behavior and traditional inventory theory, he said.

Metters and his coauthors constructed a “flexible stochastic inventory framework that links store choice, purchase cost, purchase timing and consumption within a single dynamic system.”

To accomplish this, the researchers studied 246 households in the Chicago area over a two-year period. The participants recorded not only what they bought, but how much each item cost, as well as where it was purchased.

Metters found that two types of shoppers exist: those who are loyal to a single store and others who are “store switchers”: People who shop at a variety of stores for a variety of reasons.

The most intriguing of these two groups are the store switchers, who were the majority. Metters found that shoppers needing a large quantity of goods would generally go towarehouse stores and stock up, trading convenience (like easy parking and short travel time) for lower prices. If shoppers needed just one or two items, they generally would go to more convenient (and expensive) traditional grocery stores and mini-marts.

“If you’re out of just about everything, you’re going to load up the car and drive 20 miles to Sam’s Club and buy $200 worth of groceries,” Metters said. “But if you want to make lasagna and you’re out of lasagna noodles, you’re going to go to the 7-11 around the corner. Your household inventory causes you to make different decisions about store choice.”

This type of shopping behavior confounds store marketers who strive to cultivate customer loyalty—most often through coupon programs and selected sales. If Metters’ research that shows a consumer’s need to replenish their inventory is the most underlying factor in store choice, then most store marketing is off the mark.

“If that’s the case, then none of these types of promotions will change anything,” Metters said. “What stores can do to keep customers loyal is make time-based promotions on an individualized basis, which they now have the ability to do.”

That ability comes with the relatively recent advent of member-card programs, which retailers scan each time a customer makes a purchase at the store. Metters said stores collect this information, which reveals buying habits and the frequency of the customers’ visits, but do not fully utilize it.

The paper concluded that the best way stores can court more loyalty from store switchers is to match targeted retail promotions with time-dependent shopping behavior. Through the card systems, stores already have a log of what their customers buy—they just need to use the information more strategically.

Examples include offering coupons at the point of sale or coupons for frequently purchased items, such as bread or milk, that expire before a customer could switch to another store.

“They have this great database,” Metters said, “but really no clue how to use it.”