Friday, November 25, 2022

Quantifying Spatial and Non-Spatial Differentiation in Omnichannel Grocery

Quantifying Spatial and Non-Spatial Differentiation in Omnichannel Grocery

Jia Li

Wake Forest University

Charles C. Moul

Miami University of Ohio - Department of Economics


Differentiation is arguably the most important business strategy, but optimal investment in differentiation requires understanding the magnitudes of its implications. We consider the extent and dimensions of differentiation in omnichannel grocery by examining the impacts of entry events on grocery sales. Specifically, employing data obtained from multiple companies covering all Carolina grocery markets for two years, we empirically quantify the maximum distances that consumers are willing to travel to a grocery store for in-store shopping and curbside pickup, and the extent of non-spatial differentiation between grocery chains and across the two channels. We utilize a recently suggested set of instrumental variables to address the possible concern of endogenous entry. Our empirical results reveal that some consumers are willing to travel four times farther for curbside pickup than for in-store groceries. Non-spatial differentiation is important in both the in-store shopping and the curbside pickup channel, but there is suggestive evidence that curbside pickup exhibits greater differentiation against rival-chains than the in-store shopping experience. These findings can have a direct managerial application in retailers’ geotargeting marketing communications program planning, and retailers’ future business establishment development.

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