Variety is the key to shopper satisfaction

Most people’s preferred supermarket is Tesco, but new research funded by the Economic and Social Research Council challenges the ‘onward march’ of Tesco. It reveals much greater consumer satisfaction in areas where retail choice is varied. Significantly, the presence of a small store is an important element of consumer satisfaction with choice. The major new study from Lancaster University Management School (LUMS) is set be presented at a workshop in London on Friday, 15th June.

The research is released ahead of the Competition Commission’s forthcoming report into the grocery industry, within which the impact of local competition on consumer choice has been a key issue. The Lancaster team has conducted a major study into how different local assortments of stores influence consumer satisfaction, and the range, type and brands of stores that are most preferred.

The increasing dominance of certain retail brands, the decline of small independent stores, and fears of detrimental effects on competition and consumer welfare prompted the research. Almost 2000 interviews were undertaken with consumers in several local areas of three towns (Milton Keynes, Worcester, and Telford), chosen to reflect different competitive circumstances, store choices and levels of affluence and mobility.

Key findings include:

· The retailer with the largest positive effect on consumer satisfaction with store choice is Tesco. However, the highest levels of satisfaction were found in areas where Tesco was operating only as part of a varied mix of stores locally. The researchers found strong evidence that consumers derive greater satisfaction from having a variety of stores. For example, the research demonstrated that respondents are more satisfied if their local area has one Tesco and one ASDA than if the area has two Tesco’s but no ASDA. Some stores are particularly valued if they are accompanied by a complementary format, for example the combination of a Sainsbury and an Aldi or Lidl is valued much higher than when either of these stores is available on its own.

· The presence of a small store within a local retail assortment is significantly valued but, for many consumers, it makes little difference whether this store is operated as a Tesco Express, by an independent, or another multiple chain. This finding is especially relevant for the debate over the declining numbers of small shops.

· The “local” picture of retail provision is very different and more extreme compared to what is often reported at the “national” level. In Milton Keynes, Tesco has 15 large and small stores, and in some neighbourhoods as many as 90% of households use Tesco as their main supermarket. But Tesco is not the only dominant retailer at the local level – ASDA and Morrisons also draw very high numbers of households from neighbourhoods close to their stores, partly reflecting the considerable importance that consumers place on ‘convenience’ when choosing stores.

· The research found as much variation in consumer satisfaction within towns as between towns. Whilst much previous research has suggested that nationally, and within regions, consumers are generally satisfied with their levels of retail choice, this survey reveals pockets of low levels of satisfaction – where particular groups of consumers are disadvantaged by their local and personal circumstances. If planners and policy-makers are serious about protecting or enhancing consumer satisfaction, they should consider the examples of Arleston in Telford, where satisfaction is particularly high, reflecting the local presence of all four major supermarket retailers alongside a healthy selection of complementary choices. In greater need of planners’ attention are areas like St. Johns in Worcester, where residents face much more limited store choices.

· Consumer satisfaction with the mix of local food stores does not depend simply on proximity to a particular supermarket, or to a large supermarket, or to a particular brand of retailer. Satisfaction depends on a range of factors, including consumers’ levels of mobility; their age; their level of affluence; their perceptions of prices; and the availability of, and access to, what they regard as quality and healthy food.

· Some interesting statistics revealed by the research show that 73% of surveyed households travel to their main choice of supermarket by car, but in some localities this is as high as 97%, highlighting the high dependency of many consumers on their cars for grocery shopping. In addition, a substantial number of consumers use supermarkets not only for regular weekly bulk buying shopping trips but also for top-up shopping. 78% of households engage in top-up shopping at least once a week. Of these, as many as 1 in 4 households use supermarkets for top-up shopping. This adds to the evidence that there is a ‘single market’ for groceries.

Professor Ian Clarke from LUMS said: “We have interviewed almost 2000 consumers in an intensive locally-focused survey, exploring how they shop, their preferences, and the ideal mix of stores. The research shows consumers’ local and personal circumstances are major factors in determining their satisfaction with local retail choice, but these consumer aspects have largely been ignored in recent debates.

“The research reveals the importance of assessing choice at a local level, and brings a much-needed consumer voice to the planning table.”