Patricia Nisol

Towards understanding consumer response to stock-outs

Abstract Manufacturers as well as retailers can suffer important losses as a result of stock-outs. The magnitude of these losses depends on specific consumer reactions, which have been found to vary with product, consumer, and situation factors. This paper presents a conceptual framework that integrates the major determinants of consumer reactions to stock-outs. The theoretical relationships provide explanations for the marked differences in stock-out effects observed in previous studies. Moreover, the framework can be empirically implemented, allowing retailers and manufacturers to determine how much each factor contributes to stock-out losses. We collect survey data to provide evidence on the relevance of the framework and the direction and importance of the effect of different consumer behaviors.

Dynamics in consumer response to product unavailability: do stock-out reactions signal response to permanent assortment reductions?

This paper investigates consumer reactions to out-of-stocks (OOS) – which are unexpected and temporary in nature – as opposed to permanent assortment reductions (PAR). We discuss similarities and differences between OOS and PAR reactions as well as their underlying factors, and empirically test our propositions in two product categories. Next, managerial implications are discussed. Our results indicate that retailer losses incurred in case of a PAR may be substantially larger than those in case of a stock- out for the same item, suggesting that retailers (i) should be cautious in extrapolating consumer response to stock-outs, to situations where the item would be permanently removed, (ii) should keep a minimum of variation in the assortment even if this implies a higher stock-out risk for these items, (iii) may wish to explicitly signal the temporary character of a stock-out by leaving the shelf space of the OOS item unused. The results further suggest that stock-out losses may disproportionally grow with stock-out frequency and duration, emphasizing that even if OOS cannot be completely avoided, efforts should be made to keep their occurrence and length within limits.

Do Promotions Increase Store Expenditures? A Descriptive Study of Household Shopping Behavior

An important question for retailers is whether promotions induce households to increase their in-store expenditures or merely reallocate a predetermined shopping budget. Should expenditures be fixed, retailers might decrease their profitability when running promotions by displacing expenditures from high margin to lower margin products. Using household level store receipts and an extended AIDS model, we provide evidence that while household expenditures do increase with promotions, there is also a significant reallocation of expenditures among the different categories. This implies that retailers have to choose carefully which products are promoted, if promotions are to increase profits.

Buying in multiple stores : Shopping strategies beyond price promotions and their effects on Store Competition

Abstract Grocery-store switching has typically been viewed as evidence of cherry-picking behavior, with consumers switching stores to benefit from temporary promotional offers. However, research reveals that it may also result from a longer-term planning process based on stable store characteristics. Even in the absence of promotions, consumers have good reasons for shopping in multiple grocery stores. There is a link between consumer motives and the way shopping trips are organized. Some consumers visit different stores on separate shopping trips, while others visit multiple stores on combined trips depending on individual cost and benefit considerations. On the one hand, combined visits allow the consumer to save on transportation costs per trip and to purchase each product exclusively in the store where it is preferred. On the other hand, when the stores are visited on separate trips, the number of trips per store can differ and the trips to different stores can be spread over time. This allows the consumer to purchase high holding-cost categories on a more frequent basis, shifting some portion of these categories’ purchases to the less-preferred store. Depending on a store’s characteristics relative to local competitors, different competitive strategies are recommended for retailers.