Essays on Grocery Retail Operations

Abstract

This dissertation investigates various issues in grocery retail operations by analyzing field data with econometric techniques. The first two chapters examine inventory replenishment in a supermarket chain from a behavioral perspective. Particularly, I focus on the potential impact of behavioral biases when store managers receive order proposals from an automatic store replenishment system and decide on order quantities. In Chapter 1, I study a paradox where store managers deviate downward from algorithmic proposals after a stockout. I argue that this counterintuitive behavior is explained by censorship bias, and when this bias triggers such deviation decisions, it has negative performance implications. In Chapter 2, I use the same data to investigate why supermarket managers order more than the algorithmic proposals. In answering this, I empirically show that store managers are susceptible to a novel bias: newsvendor double counting. My analyses show that order increases triggered by newsvendor double-counting bias do not lead to additional sales. To sum up, these two chapters contribute to the literature by testing behavioral biases with field data, showing that they can explain deviations from algorithms, and by proposing a novel bias. In Chapter 3, I move the focus to consumer behavior. Retailers are transforming their stores to attract more customers to brick-and-mortars; one way to do so is offering experiential services. I utilize data from a supermarket chain that introduced a taproom service to some stores as an experience-enhancing service. I examine the spillover effects of this service by focusing on measures related to the retailer’s main products. Being the first empirical study of the spillover effects of experiential services, the findings of this study have significant managerial implications for retailers. Together, these three chapters provide new scholarly insights regarding contemporary and significant issues to retailers, while generating actionable policy implications that can improve management practice.