Consumer behavior and supermarkets pricing strategies. Implications for the Agrifood system

Journal title ECONOMIA AGRO-ALIMENTARE
Author/s Carlo Russo
Publishing Year 2013 Issue 2013/1
Language Italian Pages 11 P. 145-155 File size 112 KB
DOI 10.3280/ECAG2013-001007
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

The paper discusses the implications of the emerging consumers behavior model for agri-food price distribution. The motivation of the study lies in the increasing relevance of the so-called basket-shoppers, who are consumers willing to buy multiple categories of products (including food) in a single shopping experience. Their purchasing decisions are based on making the maximum use of the whole basket, regardless of the individual products which go into it. This social change has prompted adaptations in the retail industry and the emergence of strategies based on one-stop-shops and category management. Such strategies focus on the joint profit maximization of the contents of the consumer’s entire basket, without considering the margins on individual products. The paper develops a simple theoretical model to describe the implications of such adaptation on agri-food price trends. In particular, the paper shows that if the retail industry consists of firms adopting category management techniques, food prices are less elastic and less correlated to the prices of agricultural products than they would be in the absence of such practices. Also, the model shows that agricultural price volatility increases and the margin on goods with inelastic demand (such as food) increases.

Keywords: Basket shoppers, category management, agricultural and food prices

Jel codes: Q11, Q12

  1. Azzam, A. (1999). Asymmetry and Rigidity in Farm-Retail Price Transmission. American Journal of Agricultural Economics, 81, 525-533. DOI: 10.2307/1244012
  2. Becker, G. (1965). A Theory of Allocation of Time. The Economic Journal, 75, 493- 517.
  3. Cachon, G., & Kök, A.G. (2007). Category Management and Coordination in Retail Assortment Planning in the Presence of Basket Shopping Consumers. Management Science, 53, 934-951. DOI: 10.1287/mnsc.1060.0661
  4. Dockner, E. (1992). A Dinamic Theory of Conjectural Variations. Journal of Industrial Economics, 40, 377-395. DOI: 10.2307/2950530
  5. Fox, E.J., & Sathuraman, R. (2006). Retail Competition. In E.J. Fox, & R. Sathuraman (a cura di), Retailing in the 21st century. Parte 2 (pp. 239-25), Edizioni Springer.
  6. inea (2012). Annuario dell’Agricoltura Italiana. Napoli: Edizioni Scientifiche Italiane - esi.
  7. Kök, A.G., Fisher, M., & Vaidyanathan, R. (2006). Assortment planning: Review of literature and industry practice. In N. Agrawal, & S. Smith (a cura di), Retail Supply Chain Management. Amsterdam, The Netherlands: Kluwer.
  8. Mancha, P., Ansari, A., & Gupta, S. (1999). The “Shopping Basket”: A Model for Multicategory Purchase Incidence Decisions. Marketing Science, 18, 95-114. DOI: 10.1287/mksc.18.2.95
  9. Messinger, P., & Narasimhan, C. (1997). A Model of Retail Formats Based on Consumers’ Economizing on Shopping Time. Marketing Science, 16, 1-23. DOI: 10.1287/mksc.16.1.1
  10. Melnick, R. & Shalit, H. (1985). Estimating the Market for Tomatoes. American Journal of Agricultural Economics, 67, 573-582. DOI: 10.2307/1241078
  11. Nijs, V., Misra, K., Anderson, E., Hansen, K., & Krishnamurthi, L. (2010). Channel Pass-Through of Trade Promotions. Marketing Science, 29, 250-267. DOI: 10.1287/mksc.1090.0509
  12. Schroeter, J. & Azzam, A. (1990). Measuring market power in multi-product oligopolies: the us meat industry. Applied Economics, 22, 1365-1376. DOI: 10.1080/00036849000000107
  13. Sexton, R.J. (2000). Industrialization and Consolidation in the us Food Sector: Implication for Competition and Welfare. American Journal of Agricultural Economics, 82, 1087-1109. DOI: 10.1111/0002-9092.00106
  14. Wann, J., & Sexton, R.J. (1992). Imperfect Competition in Multiproduct Food Industries with Application to Pear Processing. American Journal of Agricultural Economics, 74, 980-990. DOI: 10.2307/1243196
  15. Zenor, M.J. (1994). The Profit Benefits of Category Management. Journal of Marketing Research, 31, 202-213. DOI: 10.2307/3152194

Carlo Russo, Modelli comportamentali dei consumatori e strategie di pricing della Grande Distribuzione Organizzata. Implicazioni per le filiere agroalimentari in "ECONOMIA AGRO-ALIMENTARE" 1/2013, pp 145-155, DOI: 10.3280/ECAG2013-001007