Satisfaction with the local grocery store mix: A consumer perspective

1. Satisfaction with the local grocery store mix: A consumer perspective Harmen Oppewal (Monash University) Ian Clarke (University of Edinburgh) Malcolm Kirkup (University of Exeter) Supermarket Power in Australia Symposium, Melbourne, 1 August 2013 Department of Marketing

2. UK grocery sector issues similar but further developed and more debated than in Australia • Concerns over increasing concentration • Supply chain issues & accusations of abuse of power • Town centre v out of town locations • Role of the small store & supermarkets moving into the convenience sector • Homogenisation of high street • Food deserts debate • Overseas entrants incl ALDI and Walmart • Private labels • Loyalty cards • Unit pricing • Organic and local products • Online channel • Consumer concern and activism

5. Aim and approach of this research • Aim • Explore what it means to have variety in the retail setting, what influences it, and how it affects consumer perceptions of choice • Assess how concentration, format diversity and proximity to stores influence satisfaction with the local store mix • Approach • Consumer satisfaction survey among consumers from different neigbourhoods, across different cities • Respondents rated their current neighbourhood’s provision and then completed a set of ‘stated preference’ tasks.

6. Some relevant literature • Consumer perceptions of local choice • Quality of consumers’ lives affected by neighbourhoods in which they live, including retail provision • Clarke et al., 2006; Jackson et al., 2006 • Perception of assortments within stores • Effects of assortment reductions and extensions • Botti & Iyengar, 2006; Broniarczyk et al, 1998; Iyengar & Lepper, 1999; Oppewal & Koelemeijer, 2005 • Access and disadvantage • Benefits of co-location • Arentze et al., 2005; Dellaert et al., 1998, Oppewal et al, 1997 • Role of location and distance • Dawson et al 2008; Talukdar 2008; Wrigley et al 2003

7. Stated preference study (Clarke et al 2012) • Personal interviews across the population in one ‘average’ town in Mid England (Worcester) (n=288) • Respondents evaluate hypothetical store mixes for their local area • Local parade of shops within 5 minutes • Location at 15 minutes but near the town centre • Location at 15 minutes towards the edge of town • Presence/absence of 8 individual stores varied across the three locations • Tesco (3x); Sainsbury; ASDA; Morrison; Somerfield • Tesco Express; Independent small retailer • Satisfaction with store mix • 1=very unsatisfied, .., 5 = very satisfied

8. Stated preference task • “Imagine your neighbourhood has a completely different range of food store available…” • “How satisfied or dissatisfied would you be with this mix of stores” (1= very dissatisfied, 5 = very satisfied)

9. Store presence effects (regression parameters)

10. Findings • Supermarkets at 5 minutes have largest contribution • Tesco more than Sainsbury • If both present then joint effect is reduced • Only minimal contribution of small stores • Small effect for independent, does not depend on presence of other retailers; mainly reduces dissatisfaction • No effect for Tesco Express at 15 minutes • Effects at 15 minutes vary by brand and location • ASDA and Morrison larger effects than (second) Tesco • If Tesco at 5 minutes then smaller effects of ASDA/Morrison

11. Main findings • Consumers are more satisfied if they have more grocery stores available • Consumers are more satisfied if they have a greater variety of brands and formats available Published as: Clarke I., M. Kirkup and H. Oppewal (2012), “Consumer satisfaction with local retail diversity in the UK: effects of supermarket access, brand variety, and social deprivation”Environment and Planning A, 44: 1896- 1911

12. Extension (similar approach, separate sample) • Role of online shopping • Extra condition varied presence of online channel • No significant effect: online is no substitute for brick and mortar store access • Role of discounters • ALDI adds significant benefit, but only if a main supermarket is also present • Role of premium stores • Waitrose adds only modest amount

13. Store presence effects (study 2)

14. Next steps in the research • Real neighbourhood evaluations • Effect of actual store mix and access levels • Comparison across two towns • With different levels of concentration

15. Study Areas Telford Milton Keynes

16. Retail supply in the two towns • Town A = Telford: • Low level of concentration of main supermarket brands (HHI<1500) and a Tesco market share of only 17%, • Town B = Milton Keynes: • High level of concentration (Herfindahl-Hirschman Index >3000) and a high Tesco market share of 52% (at time of surveying) • Approximately 20 supermarkets and 50 small local supermarkets and convenience stores in each town • All main competitors present • Similar presence of discounters and of high end luxury supermarkets

19. Methodology • Careful selection of nine local areas in each town • 60 face to face interviews in each area to collect consumer evaluations of the retail supply • Location data for all supermarkets combined with travel time data for all area postcodes. • Resulted in each respondent’s available set of stores, including their brands and travel times. • Selected nearest six supermarkets for each respondent

23. Descriptive statistics

24. Analysis: mixed linear regression (18 groups; 1129 respondents)

25. Results (1) • Distance to nearest supermarket: no effect • But negative effect of distance to next nearest • So it is the access to multiple supermarkets in the vicinity that is important • Variety: Presence of a discount store increases satisfaction • No effect of the presence of a high end store • So the effect is due to discounter availability, not mere variety

26. Results (2) • Proportion of Tesco’s negatively affects satisfaction • Consumers are more satisfied when there is more brand variety among the main supermarkets • Respondents in Low Concentration town more satisfied than those in HC town • The High Concentration town also included more Tesco branded convenience stores • Higher satisfaction if car available • No interaction with distance variables

27. Conclusions • Consumers in the town less dominated by Tesco significantly more satisfied with their local mix • Satisfaction does not depend on distance to the nearest supermarket; instead it depends on the combined distances to the set of nearest stores • Consumers value brand variety and discounter • Policy makers should focus on variety, not just on providing ‘minimal’ access levels • But there may be vulnerable subgroups who need access • No indication that online can provide a substitute

28. Do these findings transfer to the Australian context? • Yes, in principle, – • But differences to note • Number of competitors • Regulatory environment • … • Still an open research question • Research pending • Partnering (Monash): acrs@monash.edu

29. Thank you! Questions & discussion

30. Satisfaction with the local grocery store mix: A consumer perspective Harmen Oppewal (Monash University) Ian Clarke (University of Edinburgh) Malcolm Kirkup (University of Exeter) Supermarket Power in Australia Symposium, Melbourne, 1 August 2013 Department of Marketing