May 2014 | Retailing
Every day, millions of retailers, from all over the world, offer up products and services to their billions of consumers. In most countries, retailers and retailing simply dominate the economy. Giant retailers such as Walmart even generate more revenue (in this case, more than $400 billion) than many countries. To achieve this position, retailers have had to exploit the resources at their disposal to offer strategies that provide unique customer benefits in an ever-changing environment. In turn, researchers have worked to understand a range of strategic retailing issues, through a host of theoretical and methodological lenses, and using a vast variety of data collection methods — from proprietary panels and longitudinal studies to lab experiments and field studies to firm-level data sets.
Each study in this collection provides unique insights into several strategic retail issues, including operating stores in an uncertain environment, managing the store environment and its merchandise, integrating multiple channels, and developing optimal return policies. Their insights help clarify how consumers respond to a constantly changing retail environment and to various strategies adopted by the many retailers in the market today.
For example, Ma, Ailawadi, Gauri, and Grewal (2011) rely on panel data from IRI to describe how consumer shopping behavior changed over a three-year period in response to uncertainty in the marketplace, manifested in radically changing gasoline prices. Their results demonstrate that consumers faced with rising gas prices seek to reallocate their spending and minimize their travel time by purchasing more from supercenters rather than traditional grocery stores. To save money, they also shop for more private labels (versus national brands) and take more advantage of promotions (versus buying merchandise at regular prices).
Some of these promotions that consumers look for in uncertain times might entail changes to the store environment. Bruggen, Foubert, and Gremler (2011) highlight how retailers spend millions of dollars to refresh and reinvigorate their store environments — as well as how the end result might not be worth the investment. Their data (survey and transaction) come from a natural field study, focused on a major chain that remodeled many its stores. The short-term effects were as expected: Average spending increased after the remodeling effort. But the long-term effects suggest a note of caution for retail decorators, because average spending soon returned to its initial levels.
Beyond the overall atmosphere, retailers spend a lot of time of managing their shelves, because as every retailer knows only too well, "retailing is detailing." Castro, Morales and Nowlis (2013), using both experiments and a field study, explore these details, in the form of merchandise presentation cues (organized versus disorganized, availability). Their results reveal that for food products, well-organized, well-stocked shelves increase sales, whereas disorganization and limited quantities in these product categories not only grab consumers' attention but also cause them to feel disgust. Such negative responses are a food retailer's biggest nightmare. For non-ingested products though, no such effects arise.
Kushwaha and Shanker (2013) take on another familiar retail mantra and strategy: the notion that multichannel customers are more valuable. To do so, they examine whether the value of a customer's purchases depend on the channel (e.g., traditional, electronic, multichannel) or on product category characteristics (e.g., hedonic versus utilitarian). Contrary to the conventional wisdom though, multichannel customers are more valuable only in hedonic categories, not for utilitarian categories.
Finally, in the face of abuses and in an attempt to ensure customers remain valuable, some retailers require customers to pay to return merchandise, if the reason for the return can be attributed to the customer rather than the retailer. Bower and Maxham (2012) explore the role of these return polices among online retailers and find, using two longitudinal field studies, that customers who must pay for returns lower their spending by 75%–100%. Those who have the option of free returns increase their spending by 158%–457%. The better strategy is thus abundantly clear, as is the poorer one: Charging customers for returns will backfire on retailers.
Each article in this collection addresses multiple issues. In turn, it also identifies a host of testable research ideas that are worthy of additional empirical examination.
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