The Demand for Convenience
Convenience means ease to obtain or reach. Substantial amounts of resources are being used to produce convenience to consumers. From the National Accounts Data Base at the United Nations, the expenditure in a typical country on retailing and wholesaling is close to 22% of GDP, irrespective of country wealth, ease of doing business, proxies for consumer travel costs, or proxies for the modernity of the national retail system.
The production of convenience adds value. Using data from the National Accounts at the UN, the figure below outlines the distribution (across nations) of the (log) ratio between the value added from retailing and manufacturing. The mode at zero shows the density of the distribution where 'making products' and 'making products available' add about the same amount of value.
My interest in convenience is based in part on the idea that using the market to buy products takes effort on behalf of the consumer and that the production of convenience can be viewed as a transfer of consumer cost of purchasing to firm cost of selling. More specifically, I am interested in how competitive forces divide the total cost of using the market into a firm cost of selling and a residual consumer effort of buying.
Convenience also means ease of use. I am currently working on projects that investigate how time availability impacts variety and the nature of consumption goods bought by consumers.
Brands and Brand Strategy
The logo to the left belongs to my favorite brand of beer, brewed in Wylre in the Dutch province where I grew up, Limburg. Named after Frederik Edmond Brand, who took ownership of the brewery in the late 1800's, it is the most preferred beer in its local market. Different Dutch brands experience leadership in other regional markets, Grolsch in the east, Bavaria in Brabant, and so on. Interestingly, these brands have been able to successfully defend their historical position head-to-head against large opponents such as Heineken.
Local market share leadership and sustenance of local advantages are very common in European and United States markets. Manufacturers of branded goods often have a large market share premium in markets where they were launched early and enjoy strong consumer loyalty towards their brand, even when the products they sell are close substitutes. With several co-authors, I am working on answering questions about the origins and the persistence of these effects, and about the underpinnings of brand preferences.
Online Consumer Search and Purchase Behavior
Product search is costly, in terms of effort and time. This cost limits the set of products consumers consider for purchase. With co-authors, I study how consumers search for durable goods online. I am interested in what happens to search and choice behavior if search becomes less costly or if information about products is organized differently.
Using large consumer panels, we find that consumers often search products that are quite similar to the ones they buy (see the figure below for a recent example using comScore's panel data). Related to this stream of work, together with colleagues, we are working on developing methods that predict what consumers buy, using data covering what they search. This is especially useful in estimating demand for consumer durable goods (cell phones, cameras, computers, etc.), for which a market analyst usually does not observe many choices per consumer.[