PRICE PROMOTIONS – IMPLICATIONS FOR LOGISTICS AND CONSUMER BEHAVIOUR

Abstract

Forward buying is common business practice among retailers who purchase large quantities from their suppliers when product price is low. They keep those large quantities at their stock after the price promotion ends and continue to sell them at the regular price. But what about consumers? They use different ways for informing about products and their prices and although they are well informed about prices, for some of them contemporary lifestyle leaves little time available for consumer goods shopping. One would expect that smart consumers would wait for the lower prices and then purchase extra inventory, more than they need at the moment, in order to seize the opportunity of lower prices and avoid frequent shopping trips. This kind of consumer behaviour is also well known as the starting whip in the bullwhip effect in the supply chain. This paper aims to fill the gap in the literature of products stockpiling in households (at the consumer level). Indicative research was conducted among 305 households in order to find out to what extent and to which product categories consumers are prone to stockpiling. Certain attention was given to household’s space constraints and the perception of extra inventory in the household as a good investment. Research has shown that most consumers are prone to buy products for future consumption, mostly due to rational behaviour and awareness of price promotion. Commonly stockpiled are non-perishable product categories and products that do not lead to higher consumption. Respondents who stockpile food categories mostly believe that higher household inventory of products lead to increased consumption. Unlike the household’s space constraints, perception of extra inventory in the household as a good investment proves to be statistically significant for consumers in deciding on purchasing amount of products.

Key words: stockpiling, households, price promotions, stockpiling constraints