What is happening to my nearby stores?
The own- and cross-effect of a radical store transformation on existing customers

Brick-and-mortar grocery retailers that undertake major format changes often do so in a staggered rollout and radically transform just one store at a time. This approach begs two questions: What effects does a radical store transformation have on existing customers’ sales at the transformed store (own-effect) and at the chain’s nearby untransformed stores (cross-effect)? Do the effects vary with customer characteristics? In a joint research effort, Professor Els Breugelmans (KU Leuven), Assistant Professor Marleen Hermans (Radboud University), Professor Manfred Krafft, Professor Murali Mantrala (University of Kansas), Dr. Mirja Kroschke, and Ph.D. student Felix Lehmkuhle investigated these questions in a large quasi-field experiment and found some surprising results.

Although one might expect that neighboring stores with the old format would suffer from customer churn, the study shows that the opposite was true, at least among existing customers. In fact, existing customers migrated from the transformed store to the nearby old-format stores. In this way, nearby and untransformed stores helped to prevent customers from migrating to competitors. Nevertheless, the positive "cross-effect" was insufficient to offset the negative "own-effect" on the shopping behavior of existing customers in the transformed store. The study shows how central the power of habit is. In a radical store transformation, the interests of existing customers should not be neglected, as they sometimes prefer the familiar format to a renewed one. Retail managers should take proactive steps to meet the needs of these customers and should not assume that renewal will only lead to positive effects.

After several years of research and revision, the prestigious Journal of the Academy of Marketing Science finally accepted the study for publication. Please find the publication here, if you are interested in the exact findings.

In fact, the research team is already working on a follow-up study investigating whether and how a radical store transformation also affects categories that remain stable in assortment size and composition. If you are interested in our research or would like to initiate a possible collaboration in the future, we would be happy to hear from you at any time.