Where to refuel: Modeling on-the-way choice of convenience outlet

Abstract

For many goods consumers do not make a special trip to a store. Especially for a convenience good such as fuel they will buy the product while on-the-way to some final destination. This paper introduces on-the-way choice of retail outlet as a form of convenience shopping. It presents a model of on-the-way choice of retail outlet and applies the model in the context of fuel retailing to explore its implications for segmentation and spatial competition. The model allows analyzing how choice of retail outlet varies not only with spatio-temporal variables (distance, detour, local competition and agglomeration) but also with trip-related characteristics such as time of day and prior awareness of one's purchase need. The model is a latent class random utility choice model. An application to gas station choices observed in a medium-sized Asian city show the model to fit substantially better than existing models. The empirical results indicate consumers may adopt one of two decision strategies. When adopting an immediacy-oriented strategy they behave in accordance with the traditional gravity-based retail models and tend to choose the most spatially convenient outlet. When following a destination-oriented strategy they focus more on maintaining their overall trip efficiency and so will tend to visit outlets located closer to their main destination and are more susceptible to retail agglomeration effects. The paper demonstrates how the model can be used to inform segmentation and local competition analyses that account for variations in these strategies as well as variations in consumer type, origin and time of travel. Simulations of a duopoly setting further demonstrate the implications.

Risk Assessment Framework for Electric Vehicle Charging Station Development in the United States as an Ancillary Service

“…This study characterized charging points depending on their distance to the closest Alternative Fuel Corridor (AFC). Previous research has indicated that needing to travel additional distance is an important factor for customers when deciding where to refuel vehicles [60]. Businesses in the vicinity of highways can attract drivers to charge vehicles, as long as the access and distance are convenient.…”