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Press Release From the Journal of Marketing: How Generalist Stores Can Protect Category Sales When Specialist Merchants Enter the Market

Marilyn Stone

Researchers from Imperial College and KU Leuven published a new paper in the Journal of Marketing that examines the implications of organic specialist store entry on the performance of generalist stores.

The study, forthcoming in the Journal of Marketing, is titled “The Impact of Organic Specialist Store Entry on Category Performance at Incumbent Stores” and is authored by Stijn Maesen and Lien Lamey.

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Niche markets such as organic products form an important source of growth for generalist grocery stores. However, generalists increasingly face competition from organic retailers expanding their store network. Thus, the growth of organic specialist retailers creates a need for generalist retailers to evolve their strategies. Using a rich store-level scanner dataset covering all SKUs from all major packaged food and beverage categories, the researchers study the impact of three organic stores’ entries on organic product sales at 38 incumbent generalist grocery stores from five retailers in the Dutch market. Their study provides novel insights on strategies that reduce the harm for generalist stores.

Results indicate that category sales at the incumbent generalist store are about 3% lower after an organic store entry. Additionally, price sensitivity (i.e., the impact of price on sales) at incumbent generalist stores intensifies compared to pre-entry levels. Hence, unlike discounter store entries, incumbent stores are likely to experience a more price-sensitive consumer base after an organic store enters their area.
 
However, the performance impact of specialist store entry on generalist incumbents can be mitigated by reducing the relative distinctiveness to the new entrant, unlike the entry of another generalist store. Maesen says that “We identify three underlying dimensions, namely variety, price-quality, and authenticity, of a premium specialist’s distinctiveness and propose that these dimensions can be influenced by the organic focus of the generalist incumbent.” First, when faced with a premium organic store entrant, incumbents can reduce distinctiveness in terms of variety by offering a larger number of organic products. In addition, more frequent feature/display promotions can maximize perceptions of organic product variety at generalist stores. Second, distinctiveness in terms of price-quality compared to the premium organic entrant can be reduced by increasing the focus on more premium organic products. While generalist grocery retailers have stepped up their assortment of organic products, they tend to focus more on lower premium organic products. While this may appeal to price-sensitive consumers, an increased focus on more premium organic alternatives can help withstand the growing network of premium organic specialist retailers. Frequent and deep discounting on organic products can amplify the distinctiveness in terms of price-quality relative to the premium specialist store. Third, distinctiveness in terms of authenticity can be reduced by adopting an organic specialist brand. Non-organic retailers can consider launching their own organic specialist brands using a stand-alone branding strategy. Lamey says that “Generalist stores in our study did not react to the organic store entrant, which may represent a missed opportunity. Increasing organic product variety of high-quality and authentic organic products at the generalist store after specialist entry could further reduce the specialist’s distinctiveness and the generalist’s sales losses.”

Full article and author contact information available at: https://doi.org/10.1177/00222429221090983

About the Journal of Marketing 

The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Christine Moorman (T. Austin Finch, Sr. Professor of Business Administration at the Fuqua School of Business, Duke University) serves as the current Editor in Chief.
https://www.ama.org/jm

About the American Marketing Association (AMA) 

As the largest chapter-based marketing association in the world, the AMA is trusted by marketing and sales professionals to help them discover what is coming next in the industry. The AMA has a community of local chapters in more than 70 cities and 350 college campuses throughout North America. The AMA is home to award-winning content, PCM® professional certification, premiere academic journals, and industry-leading training events and conferences.
https://www.ama.org

Marilyn Stone is Director, Academic Communities and Journals, American Marketing Association.