The researchers, including Assistant Professor of Marketing Marleen Hermans, analysed a major German retailer that underwent a transformation of one of its stores. The format shifted from low-priced and transaction-focused to more expensive and experience-focused. For instance, categories such as fresh fish and ready-to-eat meals were emphasized, whilst pet supplies and cigarettes were scaled back. A third group of categories remained unchanged: with the same product range and the same location and presentation within the store.
Frequently purchased products particularly vulnerable
Using data from a loyalty program covering over 323,000 customers and a comparison with a similar, untransformed store, the researchers were able to accurately measure the effects. Hermans: “Some of the findings were in line with our expectations. For example, sales of emphasized product categories rose sharply by an average of 18%, while sales of the product categories that were scaled back declined by around 4%. A surprise, however, was what happened to the categories that were left unchanged by the transformation. Sales in those categories also declined by an average of 6%.” The research shows that familiar, frequently purchased categories – such as basic groceries – are actually particularly vulnerable. Hermans: “Customers may find it easier to cut back on products they already know, leaving them with more money to spend on new, more attractive, and often more expensive products. This pattern does not apply, however, to products that are more visually prominent, for example because they are frequently promoted or have a large share of private label products. These are generally more resilient to a store transformation.”
"Managers should be aware of 'rosy view bias': the tendency to overestimate the positive effects of a transformation"
Important take-away for retailers
The conclusion of the research is clear: a store transformation has greater consequences than previously thought. Hermans: “Managers should be aware of 'rosy view bias': the tendency to overestimate the positive effects of a transformation.” Supermarket managers, in particular, must ensure they actively support the product categories not included in the transformation. Hermans: “This can be done, for example, by giving them a prominent position in the supermarket or promoting them more actively.” After all, a makeover changes not only the store, but also customers’ buying behaviour.