The Rise of Niche Consumption: A Shopping Basket Similarity Approach

Abstract

The rise of e-commerce and globalization has led to a surge in product variety. As a result, consumers are now able to purchase products that meet their specific needs and wants. A rise of such niche consumption may be evidenced by a long-tailed market share distribution, or falling aggregate spending concentration accompanied by rising consumer spending concentration. In this paper, I propose a more direct method to uncover whether consumers become similar or different in the products they spend more on. Using Nielsen's consumer panel data, I compute cosine similarity scores for each pair of household shopping baskets represented by the expenditure share distributions. I find the households' grocery baskets became increasingly different from one another from 2005 to 2019 regardless of whether products are defined narrowly or broadly. But, when products are broadly defined as brands, the aggregate and individual consumer spending concentration both rise from 2015 and on. This shows the consumer shopping basket similarity approach can unveil patterns of niche consumption even when consumer and aggregate spending concentration move in the same direction.