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Retail Research
Takes Off
By Sharon L. Crenson
Baker Initiative Director Blazes own
Path, Real-World Research Bridges
Academia with Industry
Believe it or not, there are
those among us who don't mind grocery shopping. A few
even relish it. And then there are those for whom pushing
that four-wheeled cart is practically a competitive sport:
people who are willing to clip coupons, scour in-store shoppers
and navigate their family sedans and SUVs through
over-crowded parking lots multiple times in a single day.
In the world of retail marketing, this sub-species is known
as the "cherry picker," a shopper who visits more than one
store looking for the best price per unit and bypassing all
the rest. For retailers like those in the grocery and drugstore
businesses, and for companies that sell big-ticket durable
goods, understanding what makes these shoppers buy—as
well as when it isn't worth the cost of attracting them—is
an important component of the bottom line.
Professor Stephen J. Hoch is out to pick the brains of
cherry-pickers.
In addition to chairing the Marketing Department
at Wharton, Hoch is the John J. Pomerantz Professor of
Marketing and director of Wharton's Jay H. Baker Retailing
Initiative. Hoch's latest paper, "Cherry Picking," to be published
in the Journal of Marketing, provides a taste of the
research ideas the $10 million Initiative will fund beginning
this year.
Hoch's research, like that of many of his department's colleagues,
is highly quantitative: While it may not be rocket
science, his statistical analysis has more in common with
flying the space shuttle than with the latest issue of Fast
Company or The Wall Street Journal.
In the cherry picking paper, for example, Hoch and
Southern Methodist University Professor Edward J. Fox, a
Wharton PhD alumnus, use mathematics to sum-up cherry
picking behavior and its benefits to the consumer. Using two
years of household data collected from Chicago shoppers,
Hoch and Fox compared cherry picking shoppers to people
who alternate between different stores periodically and to
those who are loyal to just one grocery outlet. Cherry pickers
accounted for 18 percent of the 201 household sample,
while so-called "store loyals" accounted for 27 percent of the
shoppers studied and periodic store "switchers" made up 55
percent.
Highlights of the study include the following:
- Cherry
picking households were more likely to include
an elderly person. They also had slightly lower incomes.
- Cherry pickers shopped more often, and bought more
merchandise on special and featured in advertising.
They also bought larger quantities and paid lower unit
prices even after controlling for package size.
- Despite his initial suspicions that cherry picking behavior
provides largely emotional rewards, Hoch's research
found real net economic benefits for consumers.
- Finally, Hoch and Fox found that the second-stop
stores where cherry pickers shopped absorbed a disproportionate
cost. Those stores captured only 60 percent
of the expenditures made at the primary store on the
same day, according to the study.
While the study's results aren't likely to surprise retailers,
Hoch believes the research will help managers better formulate
their approach to attracting discriminating shoppers.
It's this kind of real-world thinking by academics, students
and retail practitioners that Jay Baker, W'56, and
his wife Patty hope to foster. Announced in
2002, the Baker Retailing Initiative is the
result of a $10 million pledge by the couple.
The money endows a faculty chair, expands
curriculum and research in retailing, and promotes
faculty and student interaction with industry
experts. "Our primary goal is bridging
academia with industry," says William Cody,
managing director of the Initiative.
Baker says he couldn't be more pleased
with the progress thus far. Two years ago
when the program was launched, Wharton
sometimes offered just one undergraduate
retailing course per semester, serving just 20
students. This spring the School has five such
classes enrolling 300 students, and administrators are considering
offering a secondary concentration in retailing for
undergraduates.
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