SHOPPING FOR MEAT: EMPIRICAL DEMAND ESTIMATION FOR NATURAL BEEF ACROSS STORE CHOICES

Conventional supermarkets concentrate on capturing the largest pool of consumers to generate profits from the industry's low margins. Selling to the largest pool of customers means that marketing, promotion, stocking and service decisions are based on the tastes and preferences of an average consumer. Innovators in the grocery industry, recognizing a shift in consumer tastes and preferences, are changing the industry to attract smaller segments of consumers. The theory presented here demonstrates a method to understand the value of product diversification and a model of the gains from providing products that may not have broad appeal to the average customer base. The increase in retail returns through this approach of developing in-store niches lies not in increased single-item purchases of any one consumer, but through the increased number of items purchased (a larger bundle) by an individual on a single shopping trip.