Estimating the Effect of In-Store Travel Distance on Unplanned Spending: Applications to Store Layout and Mobile Promotion Strategies

Recent advances in shopper insights reveal that consumers rarely “shop” the entire store. On average, shoppers’ paths only cover about one-third of the areas in a grocery store and hence are unexposed to the majority of products in the store. Given that shoppers typically use physical products in the store as an external memory cue, encouraging shoppers to travel more of the store may increase unplanned spending. Estimating the direct effect of in-store travel distance on unplanned spending, however, is complicated due to the difficulty of collecting in-store path data and the endogeneity of in-store travel distance. To address both issues, we collect a novel dataset using in-store RFID tracking that measures in-store travel distance accurately, and develop an instrumental variable approach to account for endogeneity. Our estimates suggest that the elasticity of unplanned spending on travel distance is 1.57, which is 57% higher than the uncorrected OLS estimate. Further, we apply our estimates to assess the effectiveness of two strategies that encourage longer shopping paths. We find that changing the locations of three destination categories can increase unplanned spending by 7.2%, while strategically promoting three product categories via mobile promotion may increase unplanned spending by 16.1%.