Executive Summary:
Cherry picking means taking the best and leaving the rest. We focus on buyer-side cherry picking in the context of grocery shopping and compare the behavior of consumers who cherry pick by visiting two grocery stores on the same day (8% of all trips) compared to when they make single store visits. We identify both trait and state aspects of cherry picking. Drawing upon economic theory of search, we find that the propensity to cherry pick is inversely related to shoppers’ transaction and inventory holding costs, both due to demographics (e.g., working women, age, income, household size, home ownership) and geography (distance between nearby stores). We find that likelihood of cherry picking is higher on the weekends and more likely when household inventory is low because of the time since the last shopping trip and amount purchased on that trip. We then address the question of whether cherry picking is economically justified which boils down to a cost-benefit tradeoff between the extra money saved and the extra shopping costs incurred by making an additional store visit. We find that shoppers save over $14 more when cherry picking two stores rather than just one; this surplus compares favorably with the opportunity cost of shopping in terms of after-tax wage rates. The cherry picking surplus arises from two sources that, when multiplied together, equal the economic savings: (i) higher percent savings on items purchased (about 5% higher); and equally important (ii) much larger market baskets (about 67% larger in both dollar and units terms). Finally, we take the retailer’s perspective and show that cherry picking is significantly more painful for shoppers’ secondary compared to primary stores because not only do consumers buy at bigger discounts at secondary stores, they also buy significantly less. |
