Conclusion
What makes marketing organics special in mainstream U.S.
retail settings? Not as much as Ngobo (2011) implies:
Reducing price and increasing price promotions and assortment
strongly increase organic product sales in our largescale
analysis over 56 categories. Moreover, reducing prices
on organic products hurts conventional product sales more
than vice versa, consistent with the asymmetric price competition
literature (Sethuraman and Srinivasan 2002). However,
marketing organic products is special to the extent that
retailers need enduring actions (assortment and regular
price) to overcome the perceived costs of going organic,
especially for shoppers with currently low intrinsic value
for organic products. Increasing organic assortment is also
superior to increasing conventional assortment in terms of
category margin and store revenues.
In light of recent contradictory findings, we note the
large (negative) price elasticity of organic products in each
of our 56 analyzed product categories. What might explain
the difference between some of the results of our study and
those of previous research? First, we base our analysis on
data that also include transactions by customers who
(almost) never buy organic products, whereas other studies
focus solely on the core organic consumer. Indeed, we find
that the core organic consumer is not as price sensitive as
the noncore organic consumer. Second, we use more recent
data in which the organic penetration is approximately 5%.
Thus, we believe we are capturing a more current state of
organic demand and supply characteristics. Industry reports
confirm that organic sales have remained strong during the
recession, mostly because manufacturers and retailers
decreased organic prices iSupermarket News 2011).
Limitations of the current study include the absence of
data on competing retailers' marketing, actions by suppliers
of organic products, category advertising, and consumer
perceptions of the store and its organic offering. As in any
econometric study, our focus was on the sign and size (i.e.,
the "what" and "how much") of consumer purchase actions,
not on the "why." Further research should unravel the motivations
behind these observed actions and generalize our
findings to other retail settings. For example, we find little
evidence that marketing organics can increase store revenues
at the studied retailer. A more focused repositioning,
even fully converting to organic products (e.g.. Whole
Foods), may be needed to achieve this.
This study represents an important step forward in
resolving the "balancing act between the old and the new"
for conventional retailers iProgressive Grocer 2008). Our
analysis implies that organic products are compatible with
conventional retailers and marketing acfions. With the
inspiration from high-profile role models (e.g., Michelle
Obama starting a White House organic garden) and the
practical support of mainstream retailers, the future of
organics looks healthy indeed.