Response to stockout in grocery stores: A small city case in a changing competitive environment

Abstract

Empirical studies of customers' response to their favored brands' being out of stock (OOS) have focused on customers' characteristics and have been almost exclusively conducted in metropolitan areas of Europe and North America. Less is known about the effect of new retail market entry on customers' OOS response and the associated implications for retailers and manufacturers in the context of small regional centers and cities. This paper investigates customers' response to OOS in the context of a small Australian city experiencing market entry by a new supermarket. A Multinomial Logit model is used to analyze the primary survey data from 378 food shoppers. Prices for a selection of food items were also tracked for the relevant period. Our results show that changing competitive environment is likely to be a driver of customers’ switching store in response to OOS. Overall, most of the influential variables are positively associated with switching stores rather than switching brands, and this indicates that OOS is more costly for retailers than for manufacturers.