Marketing Gag or Value Creating Strategy: How does Sustainability Impact Store Choice in Retail?

Sustainability is getting more ground in the food retail industry. But empirical studies on sus-tainability strategies in retailing are rare, and even more when it comes to highlight the cus-tomers' perspective and their willingness to pay. This paper investigates the impact of sus-tainability initiatives on store choice and on consumers' willingness to pay by conducting a web-based conjoint experiment with customers from Austria, Germany and Switzerland. We report from 1,224 choice-decisions conducted between June and October 2009. We find that price is not of highest importance when it comes to store choice. If different sustainability aspects are fulfilled customers are prepared to pay a price premium. In particular we show that (1) if a meat-assortment of standard and organic products is complemented by products from the region, customers are ready to pay a price premium of €0.99, which constitutes a premium of 51 percent on the lowest price in our study; (2) if retailers decrease the distance to their customers from 2-5 km to below 2 km, customers are prepared to pay a premium of €0.88 (45 percent on the lowest price); (3) we find that if retailers switch their power mix from conventional power to mainly renewable power, customers are ready to pay a price pre-mium of €0.91, which equals a premium of 47 percent on the lowest price. Finally, we show that bad employee treatment can lead to a real discount of €1.67 (83 percent of the lowest price). We state important implications for retail management practice and further research.