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One-Stop Shopping June 10, 2007

Posted by jyu in Qualifying.
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Messinger and Narasimhan (1997)

–Consumer choice of retailers, by virtue of the distributional function of retailing, is primarily influenced by (1) assortment (2) price (3) transactional conveniences relating to shopping time (4) utility or disutility from the shopping experience, itself.

–A major force behind recent growth in supermarket one-stop shopping is increased consumer valuation of time, suggesting the greater prevalence of one-stop shoping has been a response to growing demand for time-saving convenience. (net savings about 2.2% of expenditures on grocery products).  Retail formats with a wider assortment essentially reduce consumer’s shopping time.

–The equilibrium assortment of a supermarket is the assortment that equates the marginal saving in consumer shopping costs with the marginal cost to the store of providing a larger assortment.  The cost saving to consumers comes from spreading a fixed travel cost over a higher number of items bought.  The authors estimate their model on time series data spanning 1981-96, and estimate that consumers trade a 1-2% increase in store margin for a 3-4% decrease in shopping costs that results from the larger supermarket assortments.

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