Patterns in Cross Shopping for Groceries and their Implications for Co-operation in Retail Location

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SUMMARY

One determinant of the success of a retail outlet is its location. The location strategies adopted by many retailers of convenience products, including those marketing groceries, have been based upon the principle of siting stores away from competition. Recent moves by leading grocery retailers to develop out of town and other sites jointly, where they would trade side by side, mean that methods are needed to appraise the selection of location partners to supplement or replace traditional, spatial analyses. A method based on similarity of image and cross-shopping behaviour is proposed and tested on two substantial data bases. A concept, drawn from theory on brand switching, that customers would treat outlets seen as similar in a similar way, is found not to apply to source switching. Source switching behaviour is found instead to vary with the source itself, according to two distinct patterns. In one, shoppers cross shop more to retailers perceived to be similar; in the other, shoppers cross shop more to retailers perceived to be different. The strategies currently adopted by four grocery retailers in joint site development are appraised against the model of source switching that can be defined from these patterns. Some location alliances are predicted to be potentially more valuable to one partner than another both in the short and long term. The anomalies identified in the selection of location partners are analysed by reference to concepts drawn from the literature on co-operation. Two different types of relationship exist between the various retail partners; a longer term alliance at each site and shorter co-operation between head offices. It is suggested that the nature of the second could prejudice the outcome of the first.

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