Research reports and case studies

Market study into the retail grocery sector and consumer decision-making

Dr Steven Tucker | Associate Professor of Economics
Dr Michael Cameron | Associate Professor of Economics

Groceries are an essential purchase for all consumers as well as a major expense for most households. In the year to December 2020, more than $22 billion was spent at supermarkets and grocery stores. In the year to June 2019, food was the second largest expense for New Zealand households, with an average spend of $234 a week.

The Commerce Commission commissioned NZIBR to conduct research into how complexity affects consumers’ decision making. In particular, the Commission asked for research where the contexts would mimic as much as possible the decision making that consumers face when considering supermarket promotional schemes. This research fed into the Commission’s market study into the grocery sector.

The research was conducted using laboratory experiments conducted in the Waikato Experimental Economics Laboratory (WEEL) at the University of Waikato. Specifically, this research looked at how consumer purchasing decisions are influenced by the existence of multiple discounting schemes, and whether the existence of different schemes led to a reduction in consumer welfare compared to pricing with fewer, or no schemes. It also looked at whether displaying unit prices would mitigate any negative impacts on consumer welfare.

The study found that having multiple discounting schemes led to suboptimal decision making on the part of consumers. This could be interpreted as evidence for how difficult consumer decisions can be. Consumers find it difficult to identify the best choice. The difficulty of consumer decisions is compounded when the consumer is faced with a lot of complexity, such as when there are many different offers, with different pricing schemes, loyalty schemes, and options. That can lead consumers to make poor decisions, that leave them worse off. Reducing the complexity of consumer decision-making would likely lead to better outcomes.

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Professor Eva Collins | Associate Dean of Research & Postgraduate – WMS | Director of the New Zealand Institute for Business Research (NZIBR)

Collaborative advantage is the concept that a group acting collectively can deliver more than the sum of their parts. The importance of collaborative advantage is shown by its inclusion as the final United Nations’ Sustainable Development Goal (SDG). Naming “Partnerships for the Goals” as a separate goal is a testament to the significance of collaboration, particularly for the type of systems change required by the other 16 SDGs.            

Although forming collaborations is a powerful strategy to tackle complex problems such as climate change, it is notoriously difficult to implement in practice. Collaborations fail because of a lack of trust, competitive self- interest and failure to agree on shared objectives.

In May 2019, a group of stakeholders from the heavy transport sector was brought together by the Sustainable Business Council (sbc.org.nz) to explore how to deliver low carbon solutions for the sector.

The group identified opportunities to transition the freight sector to net zero by 2050. Participants believed the ambitious goal could be achieved through true collaboration, sharing a vision, knowledge and resources.            

The collaboration began in February 2020, completing its work in April 2021 with the launch of the Low Carbon Pathway Report . The collaboration was documented so that the learnings could be shared to make future efforts more effective.  

The researcher had access as an observer to all meetings and meeting documents.  Collaboration participants were interviewed after the collaboration in November and December 2020 (before the report launch in April). Quotes in the report are from the collaboration participants.

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Dr Anna Strutt | Professor of Economics
This study, commissioned by the New Zealand Ministry for Primary Industries (MPI), estimates the impacts of agricultural domestic supports in farm-supporting countries and in other – especially developing – economies.  View as PDF.

Agricultural price and trade policies were highly distortive of world food, feed and fibre markets in the latter half of the 20th century, but many reforms began in the 1980s and continued following the implementation over 1995-2004 of the Uruguay Round Agreement on Agriculture. Some import tariffs have since come down further, and export subsidies were outlawed by WTO members in 2015.

However, domestic support has replaced the assistance previously provided to farmers by tariff. Over the past 20 years, export subsidies have been largely abolished and import tariffs on farm products have fallen considerably, while domestic subsidies to farmers have more than doubled in OECD countries and are starting to emerge in emerging economies.

To inform discussions, the present study was commissioned by the New Zealand Ministry for Primary Industries. It seeks to estimate the impacts of agricultural domestic supports globally and in both farm-supporting countries and other – especially developing – economies. It does so by calibrating the database of the global economywide GTAP (Global Trade Analysis Project) model to 2019 and then simulating the removal of food and agricultural domestic supports globally.

The estimated impacts of globally removing domestic support are of course negative for supported farmers, who are primarily in Western Europe, Northeast Asia and South Asia, but they are positive for most farmers in the rest of the world (and for the global economy). Impacts vary across product groups, consistent with the considerable variations in levels of support across agricultural industries.

The global economic welfare benefit from removing all domestic support to farmers is conservatively estimated to be US$4.7 billion per year. The most assisted farmers would be worse off if not compensated, but all other farmers would gain from higher output prices, including those in supporting countries who currently receive little or no support.

A side benefit of removing domestic supports is that it boosts government budgets in reforming countries. That allows society to re-purpose that spending to achieve more socially desirable objectives. Examples include investing in growth-enhancing rural public goods such as education, health, agricultural research, and transport and communication infrastructure. It could also include paying farmers for their provision of ecosystem services. Targeted income supplements fully decoupled from production, via generic social safety nets/trampolines, are another possible use of savings from removing distortionary domestic supports and instead reducing poverty and inequality directly.

Dr Gazi Hassan | Senior Lecturer in Economics

The International Rice Research Institute (IRRI), based in Manilla is an independent, non-profit, research and educational institute, founded in 1960 by the Ford and Rockefeller foundations with support from the Philippine government. The institute has offices in 17 rice-growing countries in Asia and Africa.

It is the world’s premier research organisation dedicated to improving the health and welfare of those who depend on rice-based agri-food systems and contributing to the environmental sustainability of rice farming for future generations.

In March 2019, the Philippine government has promulgated a bill called the Rice Tariffication Law (RTL), which abandoned the quantitative restrictions on imports and replaced them with ad valorem tariffs. Today with RTL in place, there is more concern on how farmers would become more competitive in rice production in the face of lower prices of paddy.

The implications of the RTL on rice farmers are three-fold: 1) top farmers are already competitive and can continue to operate, but with lower profit in the short term due to lower farm prices, 2) mid-level farmers should be able to reduce production cost and increase income with suitable technological support and investment, and 3) less efficient farmers are unlikely to become competitive even with substantial government support.

Farmers under the third category may need to be transitioned out of rice production towards other higher value crops because they may lack capital for fertiliser. This project explores fertilizer use patterns using a unique panel data based on the Central Luzon Loop Survey collected by IRRI every 5 years since 1960. Since lack of working capital is considered as a major constraint for cultivating other crops, this project examines examine the impact of remittances which alleviates cash constraints of recipient households. The project’s outputs were:

1. To explore a relationship between farm household total expenditure on fertilizer and overseas remittances inflow in the Philippines.
2. Create a database from the loop surveys in the Philippines, conducted in the wet and dry season every four to five years from 1966-67 to 2015-16.
3. The main finding is that remittances recipients' families invest more in fertilizer to enhance rice productivity.

The households with fertilizer expenditure in the mid-range tend to leverage the benefit of remittances the most.

AskYourTeam was established in 2014 as a new business empowerment practice providing insights and information for organisational leaders. It is trusted by organisations across New Zealand given its knowledge systems and analyses are based on evidence from robust academic and scholarly research. With over 14 million data points, AskYourTeam is one of the richest sources of business performance data in New Zealand.

The partnership between the New Zealand Institute for Business Research (NZIBR) and AskYourTeam started in 2014. At that time Associate Professor Asad Mohsin was Director of NZIBR. The relationship strengthened in 2015 when AskYourTeam contacted Professor Frank Scrimgeour to write blogs for AskYourTeam website. A number of blogs were written on different topics including leadership, performance management and social media. In late 2015, AskYourTeam and NZIBR signed a contract for a research project. The project was related to the validation of professional advice instruments of AskYourTeam. The project was successfully completed. Since then, on behalf of NZIBR, Professor Frank Scrimgeour and Dr Vijay Kumar has done more than ten research projects for AskYourTeam.

In 2019, NZIBR organised a one-day conference on the ‘Future of Work’. The conference proved to be very successful over 150 paying delegates. AskYourTeam participated in the conference as a major sponsor. In the same year, NZIBR Director Associate Professor Eva Collins, Professor Frank Scrimgeour and Dr Vijay Kumar visited AskYourTeam Head Office in Havelock North to strengthen the partnership and to explore the possibilities of using AskYourTeam database for student projects and academic research.

Recently Professor Frank Scrimgeour, Dr Vijay Kumar and Dr Nelwin Luo completed a comprehensive research project for AskYourTeam. The project focused on the review of methodology and philosophy of AskYourTeam, the evaluation of base instrument and identification of the new themes that have emerged as a result of COVID-19 across major sectors in Australasia.

AskYourTeam is keen to continue to relationship with NZIBR. The AskYourTeam base instrument database contains more than 14 million datapoints from over 100,000 participants allowing validity and reliability analyses to be conducted. There is potential for NZIBR to do more work for AskYourTeam related to content and construction validation.