Retail store formats, competition and shopper behavior: A Systematic review

https://doi.org/10.1016/j.jretai.2022.02.006Get rights and content

Highlights

  • 178 papers examine empirical evidence relevant to grocery retail store formats.

  • Main drivers of format choice include location, assortment and pricing.

  • Response to retail activities hinges mostly on pricing, promotions, and assortment.

  • Future research should focus on causality, international growth and dynamics.

Abstract

This study presents a systematic review of literature covering 178 articles relating to physical store-based grocery retail formats. The research questions for the review were based on drivers of consumer choice and response to marketing activities across store formats, competitive effects and conduct in the context of format evolution, and the interplay of retail formats with societal stakeholders and environmental context over time. The review reveals substantial evidence on drivers of shopper choice among formats including intrinsic household characteristics, time value factors, shopping goals and motivations, and actionable retailer factors such as location, assortment, pricing, promotion. The evidence is scarcer where such marketing activities are difficult to vary. There is limited consensus that inter-format competition is more intense than intra-format. The modernization of formats globally was found to change the way they compete and how consumers behave toward them. There is evidence of substantial impact of entry of new formats, but less guidance for incumbent retailers on how they should respond. Several gaps were identified, and research directions included a typology for format types, the role of technology, a call for more causal evidence, and deepening the empirical base for intra- versus inter-format competition and drivers of format choice.

Introduction

Consumers face a diverse set of physical store formats when purchasing groceries (Gauri, Jindal, Ratchford, et al., 2021, Shankar, Kalyanam, Setia, et al., 2021). Store-based retailing formats have continued to evolve over the past few decades, along with the market shares they account for (Bronnenberg and Ellickson 2015). Newer formats such as discounters, supercenters and hypermarkets (e.g. Walmart, Aldi, Lidl, Carrefour) have broadened grocery consumption choices and disrupted traditional grocery formats across the globe, challenging traditional format retailers. Traditional average category shares have declined from 27% globally in 2005, to around 21% by 2020, giving up much of this share to modern store formats such as supermarkets, hypermarkets and discounters (EuroMonitor International 2021) and carrying substantial implications for society (Hausman and Leibtag 2007).

Store format decisions are often difficult to reverse due to the costs involved in changing store format attributes such as store size, location (or proximity to consumers), store layout, customer service levels, and price strategy. While the choice of a grocery retail store format is highly strategic and typically made only once by retailers, some formats have diversified by introducing sub-brands. For example, Walmart now operates multiple retail formats in Mexico including supermarkets, hypermarkets, Bodega Aurrera discount stores, and warehouse clubs. Its competitor Tesco also operates multiple formats based on different sub-brands, including forecourts (Tesco Fuel), convenience stores (Tesco Express), supermarkets (Tesco Superstores), hypermarkets (Tesco Extra), as well as one-stop convenience stores.

Store format decisions must be informed by a comprehensive body of evidence pertaining to consumer demand, competition and society. This systematic review involved an extensive examination of the literature, to derive generalizations of physical store retail formats that most impact consumer demand, market structure and competition. More specifically, how a physical store’s retail format influences shopper (customer) behavior and competitive conduct/market structure in the context of grocery shopping.

Section snippets

Motivation, scope and research questions

The store format is central to a retailer’s strategy, representing the operations used to serve target markets, as defined by Levy et al. (2018, page 121): “The retailer’s type of retail mix (nature of merchandise and services offered, pricing policy, advertising and promotion program, approach to store design and visual merchandising, and typical location).” The primary aim is to achieve significant variation within such a retail mix; to nominate a format that is substantially different from

Past review work and need for a systematic review

Initial review studies conducted by Ahlert, Blut, Evanschitzky, 2006, Ahlert, Blut, Evanschitzky, 2010 examined global retail store format trends focused on the evolution of formats and did not comprehensively review the academic literature on this topic. A review of the academic literature was conducted by Gonzalez-Benito et al. (2018) and covered a subset of the empirical work relevant to formats. A more recent literature review is by Gauri et al. (2021), which aims to provide guidance for

Findings from systematic review

The discussion of the literature in this section addresses the research questions posed in the previous section. In the interest of brevity, the overarching ideas are discussed with references made to selected contributors.

Discussion and conclusion

This study has examined the body of empirical evidence in relation to retail formats and corresponding market behavior, involving 178 articles. The thematic classification in this review is based on four primary themes with nine sub-themes. The topic modeling approach enables study of dominant ideas that may span themes, and interest in research topics over time. We now provide an overall discussion of the core findings, and suggest some future research directions.

Executive summary

Physical, or “bricks and mortar”, grocery store retailing formats play a large role in markets and society, with seven of the world’s top 10 retailers by revenues having a major focus with physical store formats on grocery products, and even online retailers (e.g., Amazon) seeking to enter and grow share in the grocery market with physical store formats (Deloitte 2021, Global Powers of Retailing). Physical grocery retail store formats represent how retailers are positioned, with key attributes

Acknowledgments

The authors express their gratitude for support, constructive feedback and numerous helpful suggestions to Raj Sethuraman, Russ Winer, Els Gijsbrecht, Praveen Kopalle, Kusum Ailawadi, Michael Levy, Katrijn Gielens, Dinesh Gauri, Paul Farris, Hayiel Hino, Dhruv Grewal, Marnik Dekimpe, Scott Neslin, and Aruna Divya, and to the review team for helping shape the paper through the revision process. The authors are also indebted to Nan Ge, Chuni Fann, and Girish Gupta for excellent research

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