“Hello Jumbo!” The Spatio-Temporal Rollout and Traffic to a New Grocery Chain After Acquisition

Grocery retailers increasingly use acquisitions to expand their presence. Such acquisitions are risky, especially when retailers decide to subsume the acquired stores under their own banner, which can take years and demands careful planning. We show how the dynamics of consumer valuations of the old and new banner affect the traffic implications of various (spatio-temporal) rollouts, and how this can be incorporated in the conversion planning. In a store-choice model with Bayesian learning, consumers update their perceptions about the old banner as its value deteriorates, and learn about the new banner through visits. Our model thus captures consumers’ responses to store conversion over time, in function of the local presence of other (own and competitive) outlets and new-banner advertising. An application to the national rollout of a Dutch EDLP player after its acquisition of a HILO chain, analyzes the shopping patterns of about 1,500 households over four years, involving over 100 store conversions. Our ...