This study uses observation of shopping behaviour as a method for developing shopper segments. Shoppers were observed at different stores and based on the behavioural cues they were classified into six segments. The study generated some segments that were similar to earlier studies based on attitude or psychographics. In addition, it identified new segments. More importantly, the study proposes an alternative basis and methodology for segmenting shoppers. The study also found that the segments were differentiated largely on the basis of the type of products the stores sold and the format of the stores. The study suggests that in an evolving market situation where the manufacturers’ brands constitute a major portion of the merchandise, a store could add value through store format design to create differentiation in the market place and mould the behaviour of the shoppers to its benefit.