A study of food retailing: How does consumer price sensitivity vary across food categories and retailer types in Mexico?

Resumen

The cost of food in Mexico has increased over several decades while modern retailers face intense rivalry. Currently, consumers have several choices for buying food, which prompts retail managers to implement pricing strategies designed to differentiate from competitors and attract more customers. The problem is that several retailers seem to be using the same approach without a clear understanding of consumer price sensitivity, the effect of non-price promotions, and the variations across retail formats. This research will address these issues by analyzing scanner sales data and mystery shopper price reports to calculate price sensitivity across six food categories sold in four retail chains. Results indicate that product demand, in most food categories, is sensitive to price changes at big-box retail competitors and not traditional supermarket retailers. Additionally, results indicate that the six food categories in the study are sensitive to feature advertising. Retail managers can use these findings to help define their value propositions, focus their pricing strategies, and inform their marketing communications strategy.