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|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|3012||2011||17 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Retailing, Volume 87, Issue 4, December 2011, Pages 427–443
Even within a store chain and format, supermarket outlets often exhibit substantial differences in selling surface. For chain managers, this raises the issue of correctly anticipating the promotion lift, and of profitably managing promotion activities, across these outlets. In this paper, we conceptualize why and how store size influences the category sales effectiveness of four promotional indicators (depth of the promotional discount, display support, feature support, and whether the promotion is quantity-based). We then estimate the net moderating effect on four product categories for 103 store outlets belonging to four chains. For each of the promotion instruments, we find the percentage sales increases to be lower in large stores. For instance, whereas a 10% point increase in feature activity enhances category sales by about 1.64% in a 700 m2 store, this figure drops to only 1.03% in a 1300 m2 store – a 59% reduction. This moderating effect is especially pronounced for discount depth, the relative sales lift from a typical price cut being about 78% lower in the larger-sized outlet. However, since large outlets also have larger base sales, the picture changes when we consider absolute sales effects. The net outcome is that deeper discounts or quantity-based promotions do not systematically generate larger or smaller absolute sales bumps in large stores, whereas for in-store displays and features, we obtain a clear positive (be it less than proportional) link between store size and absolute category sales lift. When it comes to margin implications, we show that large stores gain higher profit from price cuts than small outlets only as long as the retailer keeps part of the manufacturer discount to himself. Managers can use these insights to improve their promotional forecasts across outlets, as well as to tailor their mix of instruments to store selling surface.
نتیجه گیری انگلیسی
Discussion Even though supermarket stores within a chain may dramatically vary in size, little is known about the differential effect of different promotion instruments in small versus large stores. This is surprising, given that a store's selling surface is bound to influence the impact of promotions on store category sales and margins, and that knowledge of these implications is important for efficient design of promotional programs as well as promotional logistics. In this paper, we conceptualize why and how store size influences the category sales effectiveness of four promotional indicators (depth of the promotional discount, display support, feature support, and whether the promotion is quantity-based), and estimate the net moderating effect on four product categories for 103 store outlets belonging to four chains. Our research generates several substantive insights, which can be summarized as follows First, by decomposing category sales into its underlying components, our conceptual framework highlights why store size influences promotion effectiveness. On the positive side, large selling areas have a larger potential customer base, implying that more consumers are prone to be affected by the promotion. Moreover, large stores typically attract consumers on major, stock-up shopping trips. These consumers rely more heavily on promotions as a shopping heuristic. They may also have lower handling costs, which – once they are aware of the promotion – increases their propensity to engage in a category purchase, and buy larger quantities. On the negative side, however, large outlets typically entail larger fixed shopping costs and in-store search costs. These costs create larger hurdles to draw consumers into the store and to the category shelf. Also, the large outlet's major trip shoppers may pay less attention to the depth of the discount, or perceive it as less consequential relative to the total basket size. This makes it less likely that a price cut will convert category – non-buyers into buyers. In all, even though our focus is not on testing the behavioral mechanisms per se, the framework helps us understand the countervailing forces that underlie the moderating effect of store size. Second, because different promotion instruments operate on different category sales components, they are also differentially affected by store size. Our empirical results reveal that deeper discounts do not systematically generate larger absolute sales bumps in large stores, despite the larger customer base of these stores. This is consistent with the observation that large store shoppers pay less attention to the value of the promotion as such, and are primarily affected by the presence of the promotional signal. Similarly, quantity-based promotions, probably because of their lower ‘convenience-appeal’, do not trigger higher incremental category sales in large outlets. For in-store displays and features, which primarily act as a ‘purchasing cue’ for major trip shoppers (Chandon et al. 2000), we do obtain a systematic positive link between store size and category sales lift. Even so, the category sales bump increases less than proportionally with store size. An auxiliary regression analysis suggests that the positive link weakens if larger selling areas are more strongly associated with a larger number of brands in the category (p < .067).10 Interestingly, no such effect is found for discount depth and quantity-based promotions. This finding is in line with our conceptualizations: while larger assortments enhance the fixed shopping benefits (and, hence, the size of the potential customer base), they also entail higher fixed shopping costs (in-store traveling) and search costs (clutter) which, apparently, dampens promotion effectiveness for the non-price support variables. Third, we also explore the implications of our findings for the link between promotion profitability and store size. For promotions involving a price cut, the profit difference between smaller and larger stores is driven by two components: the difference in absolute incremental sales from the promotion, and the difference in baseline sales. Unlike the promotional sales bump, we find that category baseline sales increase about proportionally with store size. This higher baseline will be detrimental or beneficial depending on whether the retailer bears part of the price cut himself (in which case he subsidizes current customers), or, alternatively, cashes in on part of the manufacturer's promotional offer (and reaps extra margin on baseline customers). Our empirical findings suggest that, as a result of these mechanisms, price cuts become less profitable in large than in small outlets as soon as the retailer bears part of the discount himself, because of the larger subsidization effect. This especially holds true for price cuts not supported by a feature ad or a display. However, the situation is quickly reversed if the retailer cashes in on part of the manufacturer's per-unit discount, making promotional profit far higher in large stores. Our findings also have important implications for managers As indicated by Grewal et al. (2009), “Practitioners have a good handle on how to predict sales and provide an adequate service level for retail chains as a whole, but much more work is needed to fine-tune [assortments] by individual store”. In a similar vein, industry reports suggest that, at present, there are “a handful of retailers that have looked into […] customization of their stores based on local demographics, […], adjusting their merchandising mix accordingly” (Planet Retail, 2010), with only few reaching deeper levels of customization. Our results show that, even after local market differences (i.e. supermarket competition and population profiles) are accounted for, store size remains an important moderator of promotion effectiveness and as a result should be accounted for. Building on available literature, we conceptualize that this moderation stems not only from a direct but also from an indirect effect: larger selling surfaces attracting different types of shoppers (with different shopping tasks) into the store, which respond differently to promotion instruments.11 Given that store size correlates heavily with these shopping trip characteristics – which are difficult to implement – it can serve as a valuable proxy for anticipating their promotion consequences. As indicated by Mantrala et al. (2009), the main barriers to practitioners’ adoption of models from academic research relate to data requirements, model complexity, difficulty of integration into existing systems, and cost-benefit considerations. Store size information is ‘objective’, readily available, easy to align with the retailers’ existing data and logistical systems, and – as we show here – an important driver of promotion effectiveness. Hence, it seems that refining promotion plans along store size holds the promise of implementability. For one, our findings help retailers anticipate the amount of extra promotional sales, by store size. This is important for properly handling the operational or logistical aspects of the promotional program. For price deals not accompanied by feature or display activities, and for quantity-based deals, there seems to be no need to adjust promotional shipments to store size. In contrast, feature ads or in-store announcements generate higher incremental sales in large outlets. Still, the increase is less than proportional with the store's selling area: if store size is doubled (e.g. from 600 m2 to 1200 m2, a 100% increase), incremental category sales go up by only 55% for in-store displays, and by 47% for feature ads. For displayed or featured price cuts, these figures approximately drop to 41% and 10%, respectively. Retailers can use these numbers as a first indication of the sales lift from promotions in smaller versus larger outlets. Second, by shedding light on the drivers underlying the moderating impact of store size, our results may help retailers improve the relative effectiveness of promotion instruments in large outlets. They may turn to different types of display activities in large selling areas, such as in-store demonstrations. These are more attention-catching, and particularly helpful to overcome in-store search costs. Similarly, end-of-aisle displays may make it easier for consumers to locate items from the promotional flyer, among the vast assortment inside large stores. Quantity-based discounts may be made more appealing to large store shoppers through shelf tags or on-pack messages, emphasizing the uniqueness of the offer and, hence, its signal value. Also, by offering BOGO-type deals as bundled packages, retailers may reduce the extra handling cost and enhance the appeal to large basket shoppers. Last but not least, our results show how retailers can adjust their mix of promotion instruments to stores’ selling surface, depending on whether sales or profit is their key performance metric. Shankar and Bolton (2004) find that supermarkets use more intensive price promotions in large stores, while Ellickson and Misra (2008) observe more emphasis on EDLP in large outlets. Our results shed some light on the desirability of such approaches. We find that for retailers aiming to enhance absolute category sales, featured and especially displayed price cuts appear particularly rewarding in large outlets. Display activity is easily customized across stores. In fact, having more or larger end-of-aisle displays in large stores is not only more effective, it also ‘naturally’ matches the less stringent space constraints in those stores. Differentiating feature support across outlets is less straightforward, as chains typically design their store flyer for the entire (national) market. Still, stores have been observed to place their own, outlet-specific, ads in local newspapers, and some chain flyers specify outlets in which selected feature promotions do (or do not) hold. So, even if tailoring feature support to store size is less likely to occur on a large scale, some options appear to remain. For retailers who seek to enhance profitability, it appears good practice to offer more shallow discounts and use more non-price support in large stores, thereby avoiding large amounts of subsidization of these stores’ substantially larger installed base. This holds true unless the manufacturer's promotional funding comes in the form of a per-unit discount instead of a lump-sum trade support budget (which, as observed by Ailawadi et al. 2009, is the exception rather than the rule), and the retailer can keep part of this discount to himself. Also, retailers should avoid the use of retailer-induced promotions in large outlets (e.g. on their private labels), and adopt low levels of pass-through for manufacturer-funded price cuts in those outlets. Limitations and future research Our study has a number of limitations, and opens up interesting opportunities for future research. First, our conceptual arguments suggest that store size may play a different role in different categories. For instance, one could expect more negative promotion moderation effects for categories that are a fixed item on the shopping list of large basket shoppers, or have complex assortments. Unfortunately, our data set had too few categories to systematically analyse the role of such category characteristics – an issue that we leave for future research. Second, our primary focus was on the effectiveness of category-level promotional activity. Category-level results are of key importance to the retailer (Nijs et al. 2001), and retailers typically plan their purchases at the category level (Shankar and Bolton 2004). Moreover, our current data set did not allow for brand-specific analyses. The category-level sales lift, as a function of store size, directly followed from our HLM estimates. To calculate the promotional margin implications at the category level, we could rely on previous meta-analytic results (Bell, Chiang, and Padmanabhan, 1999) to approximate the portion of the category sales elasticity attributed to brand switching. Sensitivity analysis reveals that the pattern of outcomes for large versus small stores appears quite robust to changes in this brand switching portion. Still, an analysis at the brand level may reveal important extra insights for retailers (Shankar and Bolton 2004), and future studies could investigate how the moderating effect of store size on promotion effectiveness varies across individual brands within a given category. Third, in a somewhat similar vein, the retailer's sales and gross margin implications may be further shaped by the type of brand placed on deal, i.e. whether the promotion applies to private label or manufacturer brands. Apart from margin differences (Ailawadi et al. 2006) and differences in retailer pass-through (Ailawadi and Harlam 2009), these brand types may differ in their promotional appeal in small versus large outlets (Gijsbrechts et al. 2003). Therefore, investigating the deal effectiveness of national brands and private labels across stores of varying selling areas may be a relevant topic for future study. Last but not least, this paper only studied Hi-Low chains. Future research could assess the moderating impact of store size on promotions in discount chains, as they attract different (more price-sensitive) consumer segments that could differ in promotion response (Bell and Lattin 1998). Moreover, while our framework was built to explain the impact of supermarket size differences, we believe it offers a good starting point to study promotional differences across convenience, supermarket, and hypermarket outlets of a chain. We hope that this paper is a source of inspiration for further research on this topic. Executive summary Even within a given supermarket chain, store outlets often exhibit substantial differences in selling surface. Effectively managing these differently sized-outlets, and specifically, the pricing and promotional program for these outlets, has become a paramount concern for retailers. First, headquarters need to accurately forecast the sales lift from promotional activities in the different stores, in order to anticipate the product quantities that need to be shipped to these different outlets: overestimating promotional demand in a store will lead to high storage costs or to perished items, whereas promotional stock-outs may be costly in terms of lost sales or goodwill. Second, if promotion effectiveness varies with store size, retailers may need to adjust their promotional programs accordingly. While some retailers price-promote more intensively in their larger stores, there are also cases where large stores within a chain more strongly engage in every-day-low-pricing pricing. This begs the question: which of these approaches is more advisable, and why? To complicate matters, the impact of store size on promotion effectiveness may well vary with the type of promotion. For instance, even if the percentage sales lift from a display would be the same in a 1000 m2 as in a 500 m2 store, this might not hold for a price cut. In this paper, we shed more light on the relationship between promotion effectiveness and store size, and – hence – on the potential payoffs from tailoring promotional programs to store size. Given the extensive accumulated knowledge on the drivers of promotion response, what could we gain from such an analysis? We see four reasons why analyzing the impact of store size on promotion effectiveness is fruitful. First, the sheer selling surface of the store, through its effect on fixed in-store shopping costs and search costs, exerts an impact on the promotion's category sales lift not captured by other drivers. Second, apart from its effect on promotional sales lift, store size shapes the profitability of alternative promotion instruments. Large stores – because of their larger (base) sales – are less suited for promotion activities with a large per-unit cost component. Third, store size may serve as a valuable proxy for (a multitude of) other factors that are difficult or costly to measure and integrate: differently-sized stores will attract different types of customers, for different types of shopping trips, which influences promotion response. Finally, tailoring the promotional program to store size is appealing from an implementation viewpoint: retailers have often adjusted their logistic operations to accommodate supermarket outlets of different selling surface, and promotion programs that exploit differences in promotion response among these size classes can easily be integrated into these logistical systems. Having conceptualized why and how store size influences the category sales effectiveness of four promotional indicators (depth of the promotional discount, display support, feature support, and whether the promotion is quantity-based), we estimate the effects on four product categories for 103 store outlets belonging to four chains. For each of the promotion instruments, we find the percentage sales increases to be lower in large stores. For instance, whereas a 10% point increase in feature activity enhances category sales by about 1.64% in a 700 m2 store, this figure drops to only 1.03% in a 1300 m2 store – a 59% reduction. The effect is especially pronounced for discount depth, the relative sales lift from a typical price cut being about 78% lower in the larger-sized (1300 m2) outlet. However, since large outlets also have larger base sales, the picture changes when we consider absolute sales effects. The net outcome is that deeper discounts or quantity-based promotions do not systematically generate larger or smaller absolute sales bumps in large stores. In contrast, feature ads or in-store announcements generate higher incremental sales in large outlets. Still, the increase is less than proportional with the store's selling area: if store size is doubled (e.g. from 600 m2 to 1200 m2, a 100% increase), incremental category sales go up by only 55% for in-store displays, and by 47% for feature ads. For displayed or featured price cuts, these figures approximately drop to 41% and 10%, respectively. Retailers can use these numbers as a first indication of the sales lift from promotions in smaller versus larger outlets. Our results also show how retailers can adjust their mix of promotion instruments to stores’ selling surface. We find that for retailers aiming to enhance absolute category sales, featured and especially displayed price cuts appear particularly rewarding in large outlets. For retailers who seek to enhance profitability, it appears good practice to offer more shallow discounts and use more non-price support in large stores, thereby avoiding large amounts of subsidization of these stores’ substantially larger installed base. This holds true unless the manufacturer's promotional funding comes in the form of a per-unit discount instead of a lump-sum trade support budget, and the retailer can keep part of this discount to himself. Also, retailers should avoid the use of retailer-induced promotions in large outlets (e.g. on their private labels), and adopt low levels of pass-through for manufacturer-funded price cuts in those outlets.