Do Sales Matter: Evidence from UK Food Retailing. (Discussion Papers in Economics, No.11/01)
2011
This paper assesses the
role
of
sales as a feature of price dynamics using scanner data. The
study analyses an extensive,
high fre
quency panel of supermarket prices consisting of over
230,000 weekly price observations on around 500 products in 15 categories of food stocked by
the UK’s seven largest retail chains. In all, 1,700 weekly time series are available at the
barcode
-
specific
level including branded and own
-
label products.
The data
allow
s
the
frequency, magnitude and duration of sales to be analysed in greater detail than has hitherto
been possible with UK data.
The main results are: (
i) sales are a key feature of aggregate
pri
ce variation with around 40 per cent of price variation being accounted for by sales
once price differences for each U
nique
P
roduct
C
ode (UPC)
level across the major
retailers are accounted for; (ii)
there is considerable heterogeneity in the use of sales
across retailers; (iii)
much of the price variation that is observed in the UK food
retailing sector is accounted for by price dif
ferences between retailers; (iv
) only a small
proportion of price variation that is observed in UK food retailing is common ac
ross
the major retailers suggesting that cost shocks originating at the manufacturing level is
not one of the main sources
of price variation in the UK; (
v) own
-
label products also
exhibit considerable sales behaviour though this is less important than sal
es for
branded goods; and (v
i
) there is some evidence of coordination in the timing of sales
across retailers insofar as the probability of a sale at the UPC level at a given retailer
increases if the product is also on sale at another retailer.
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