The Impact of Category Captainship on the Breadth and Appeal of a Retailer's Assortment

Category captainship is a collaborative channel arrangement wherein a retailer cedes control of category management decisions, such as developing a marketing strategy to grow the category and assortment selection, to one of the category's leading manufacturers. This paper studies the consequences of captainship practices on the breadth and appeal of a retailer's assortment. We consider a model where multiple manufacturers sell a product to consumers through a common retailer. In the benchmark, the retailer decides on effort to drive traffic into the category and assortment. Under captainship, the retailer delegates both of these decisions to a captain in return for target sales. The capability of the captain to stimulate demand is unknown to the retailer. We find that the breadth and/or appeal of the assortment at the retailer can increase or decrease under captainship relative to the benchmark. We identify three factors that play a role on the impact of captainship on the breadth and appeal of retailer's assortment: (i) the retailer's beliefs about the captain's capability, (ii) the captain's true capability, and (iii) product set heterogeneity. We find that the benefit to the captain sometimes comes at the expense of the non-captain manufacturers, but we also identify conditions where captainship can be beneficial for not only the retailer and the captain but also the non-captain manufacturers.     

Dynamic assortment in the presence of brand heterogeneity

In this paper, we study the dynamic assortment planning problem in the presence of heterogeneous brands. Over a limited selling season, the retailer sells heterogeneous products from one store brand and one national brand. We use the nested multinomial logit (NMNL) framework to model consumer choice process, in which consumers choose first which brand to buy and then a product within that brand. We formulate this problem using the finite-horizon dynamic programming approach. Using available sales transaction data, we estimate the consumer choice behavior and empirically demonstrate existence of brand heterogeneity. Further, our results suggest that ignoring brand heterogeneity will make the retailer’s expected revenues significantly overestimated, and the potential revenue overestimation depends on initial inventories and prices of products of two brands. We finally show that the retailer will benefit from dynamic assortment optimization with the estimated consumer choice model.     

LOGISTICS AND ASSORTMENT DEPTH IN THE RETAIL SUPPLY CHAIN: EVIDENCE FROM GROCERY CATEGORIES

Managing the logistical issues resulting from changes in assortment depth in the retail supply chain is challenging, involving various complex tradeoffs. While increasing assortment depth can increase sales, it also increases inventory‐holding costs and reduces the amount of space for other items. As space is taken from existing items to increase assortment depth, it reduces the inventory‐holding capacity of existing items on the shelf, increasing expected annual cost of lost sales. The paper presents a conceptual model of the relationships between assortment depth, category gross margins, and the logistical concerns resulting from inventory costs and out‐of‐stocks. Evidence for the significance of depth and resulting costs are provided in an examination of 100 product categories from a case study of a retail grocery chain.     

A Micromodel of New Product Adoption with Heterogeneous and Forward-Looking Consumers: Application to the Digital Camera Category

We develop an empirical model for the adoption process of a new durable product that accounts for consumer heterogeneity as well as consumers forward-looking behavior. Accounting for heterogeneity is important for two reasons. As the mix of consumers with different preferences and price sensitivities could change over time, firms need to update their marketing strategies. Further, it allows for a variety of shapes for the aggregate adoption process over time. As prices for durable and technology products fall over time with firms continually introducing enhanced products, consumers may anticipate these prices and improvements and delay their purchases in the product category. Forward-looking consumers optimize purchase timing by trading off their utilities from buying the product and their expectations on future prices, quality levels, and brand availability. Such forward-looking behavior will result in price dynamics in the marketplace as price changes today influence future purchases. And it results in different shapes of the new product sales pattern over time by influencing the time to take-off. We show how the parameters of our model can be estimated using aggregate data on the sales, prices, and attributes of brands in a product category. We apply our model to market data from the digital camera category. Our data are consistent with the presence of both heterogeneity and forward looking behavior among consumers. At the product category level, we are able to decompose the effects of the entry of Sony into primary demand expansion and switching from other brands. At the brand level, we find that there exist several segments in the market with different preferences for the brands and different price sensitivities leading to differences in adoption timing and brand choice across segments. For a given brand, we show how the changing customer mix over time has implications for that brands pricing strategies. We characterize how price effects vary across brands and over time and how price changes in a given time period influence sales in subsequent periods. Model comparison and validation results are also provided.     

See How Much We’ve Sold Already! Effects of Displaying Sales and Stock Level Information on Consumers’ Online Product Choices

Many online retailers make sales and stock level information live available to customers on their websites and offline retailers also increasingly can display this information. Yet it is unclear how consumers perceive such information and how it influences consumer choice. High sales and low stock may both signal popularity and quality, which will stimulate further sales. We however argue that sales level is more diagnostic than stock level as a cue and hence the effect of sales level on consumer choice will be stronger than that of stock level. Also, when both cues are available, the effect of sales level is expected to dominate. In addition, brand familiarity is expected to moderate these effects. These hypotheses are tested in two scenario-based online experiments in which participants choose between competing products for which information about either sales levels, stock levels, or both sales and stock levels is displayed. Results support the hypotheses and also show that sales level is indeed a more diagnostic cue than stock level. Analyses further reveal how perceptions of the popularity and quality of a product mediate the effects of sales and stock levels on consumer choice. The findings imply that retailers can successfully use sales and stock level information to induce quality perceptions and influence consumer choices.     

Market and Product Diversification: The Evidence From Retailing

This study explored the number of international regions in which retailers operate, the assortment of product categories they offer their customers, and the effects of these market and product category diversification strategies on retail sales volumes. The analysis used sales data about 246 global large-scale retail stores from diverse industries and countries of origin. We found that both strategies have positive effects on retail sales volumes. The two strategies interact such that the positive effect of market expansion on retail sales volumes is larger for retailers who also follow a strategy of greater product category diversity.     

Identifying Sales Performance Gaps with Internal Benchmarking

This research investigates how retailers can benefit from identifying the sales growth potential of in-store salespeople in every product category. The proposed novel approach helps retailers develop an equitable evaluation of their sales force, using both observable and unobservable factors that affect sales. By extending stochastic frontier regression to a multivariate case, the resulting factor-analytic frontier formulation leverages the correlation pattern of sales across product categories and salespeople over time. A unique data set, from a franchise chain with 481 salespeople, operating in 35 stores and selling 11 related product categories, identifies a gap between observed category profits and an estimated profit frontier for each salesperson and category. This novel model also can benchmark each salesperson against all others across product categories while accounting for observable and unobservable factors. This approach has practical value, in that retailers can identify both top-performing salespeople and underperformers, who then might be matched to establish a positive learning environment that aligns top performers with proven sales expertise in a product category with peers who struggle with that category.     

Retail network performance evaluation: a DEA approach considering retailers' geomarketing

Stores develop customized assortments based on localization characteristics. In terms of performance analysis, these changes make it more difficult to analyse store performance. This adjustment procedure entails an internal benchmarking which needs small samples to control regional and assortment effects. This paper explores the influence of competitive environment and store neighbourhood characteristics on store efficiency by using three data envelopment analysis (DEA) models. This research is illustrated by using real data from a French supermarket retail chain at the product category level. It is shown that the two-steps DEA model is a relevant analysis tool to take into account location aspects. It presents a discriminant power strong enough to derive managerial implications with small samples.     

Experience-based corporate corruption and stock market volatility: Evidence from emerging markets

This paper reassesses how “experience-based” corporate corruption affects stock market volatility in 14 emerging markets. We match the World Bank enterprise-level data on bribes with a unique cross-country macroeconomics dataset obtained from the World Bank development indicators. It is found that wider coverage of “realized” corporate corruption in the emerging markets investigated reduces the stock market volatility, attributed to decrease in uncertainty about government policy with regard to the business environment, as implied by the general equilibrium model of Pastor and Veronesi (2012). Overall, our results suggest that stock price volatility decreases as the uncertainty about government policy becomes more predictable, which is consistent with the testable hypotheses of Pastor and Veronesi (2012).     

The Impact of Price-Based and New Product Promotions on Fast Food Restaurant Sales and Stock Prices

A key tool used in demand or revenue management marketing strategies is the application of pricing tactics based on anticipated demand to enhance both customer utility and maximize firm performance (Wirtz et al., 2003). In the restaurant segment, particularly in quick-service restaurants (QSR), organizations focus on two main promotion formats to attract customers: price-based promotions and new product promotions. The purpose of this article is to explore how the number of price-based promotions and new product promotions influence firm sales growth or decline and change in stock prices. Results suggest that new product promotions can have a significant and positive effect on same store sales, whereas price-based promotions tend to results in lower same-store sales changes and changes in stock price. As an additional control for these results, the study controls for economic and seasonal conditions effects.     

Evaluating store location and department composition based on spatial heterogeneity in sales potential

In this paper, we extend a retail location evaluation model with the possibility to include the effect of department size adaptation at the store level. We relate department-level store sales to a store's competitive and demographic environment, thereby providing richer insights into the drivers of department sales than a model of just aggregate sales. Further, we accommodate heterogeneity in consumer characteristics over space by using zip code level data and unobserved spatial effects in department sales by including spatially autocorrelated error terms.Using spatial panel data for 30 clothing stores belonging to one Dutch retail chain, we demonstrate how to use the modeling approach to analyze and predict sales performance of new and existing stores. We show that the predictive performance of our model is superior to that of a benchmark model that does not include spatial autocorrelation.     

The impact of introducing a customer loyalty program on category sales and profitability

The authors propose and empirically investigate the effect of category-specific attributes as important factors associated with the change in pre-versus post-loyalty program introduction category sales and profits. Category penetration and frequency are positively correlated with loyalty program success with an increase in sales and profits, whereas impulse buying and ability to stockpile show negative correlations. Furthermore, although introducing a loyalty program generates immediate spikes in sales and profits in most categories; its impact is generally short-lived. It results in an initial redistribution of category expenditures during the program launch, where consumers seemingly shift consumption from lightly purchased categories to heavily purchased categories. But the effect soon erodes. Nevertheless, by modeling the diffusion process of loyalty program performance, this paper finds that penetration rate and private label share are key drivers of a category's sustainable growth. The evolution of consumer price elasticities and promotion sensitivities are tracked pre- and post-loyalty program introduction, and profit-driving categories are identified according to their category characteristics. New insights are offered on category management and long-term program planning.     

The effect of retail assortment size on perceptions,choice, and sales: Review and research directions

We perform a meta-analytic review of the effect of retail assortment size on consumer perceptions, choice, and retail sales/share using a database comprising of 177 studies obtained from 95 academic papers published during 1970–2021. We define assortment size broadly as the total number of distinct alternatives (options) available to the consumer when he/she makes a choice in a product category. This number of alternatives manifest in the form of a number of brands, number of stock-keeping-units (SKUs), or simply number of items such as different colors or packaging. An increase in assortment size can lead to beneficial effects such as assortment preference, perceived choice satisfaction, confidence, freedom, purchase incidence, sales, and profits, as well as negative consequences such as information overload, increased cognitive effort, choice uncertainty, choice difficulty, and hence choice avoidance. Numerous researchers have reported the effect of assortment size on one or more of these factors. We summarize these effects using a metric called assortment size (net) benefit elasticity by positively valuing the beneficial effects and negatively valuing the harmful effects. Assortment size benefit elasticity is defined as the percent change in net benefit for a 1% change in assortment size. Our meta-analysis reveals that the mean assortment size benefit elasticity across 1936 valid elasticity observations is .082, and this effect is moderated by many study design and environmental factors. We also explore nonlinearity in assortment size effect and whether the effect is different for online vs. offline purchasing. Based on these findings, we list 30 characteristics conducive for assortment addition/deletion and specify several directions for future research.     

我国股市非对称反应影响因素的实证分析

本文运用T-Garch-M模型对我国股票市场的特征风格指数和不同样本期的综合指数进行了实证分析,结果表明,市道(牛市或熊市)、市盈率高低、盈利状况(绩优或绩差)、股价高低和股票风格特征(价值股或成长股)等因素对我国股票市场信息非对称反应有显著影响,股票规模大小(盘子大小和市值大小)对非对称性反应的影响不显著。     

Exports versus multinational production under nominal uncertainty

This paper examines how nominal uncertainty affects the choice that firms face to serve a foreign market through exports or to produce abroad as a multinational. I develop a two-country, stochastic general equilibrium model in which firms make production and pricing decisions in advance, and I consider its implications for the relative attractiveness of exporting and multinational production. I find that when multinational sales are priced in the local currency while exports are priced in the producer currency, destination volatility benefits exporters: during a foreign nominal contraction, the foreign exchange rate appreciates, causing exports to be relatively cheaper. Exporters gain non-linearly through demand, making profit convex in prices. As foreign volatility rises, the model implies that the home country should serve the foreign country relatively more through exports. I take this implication to bilateral U.S. data, using inflation volatility as a proxy for nominal volatility. Using sectoral data on sales by majority-owned foreign affiliates matched with U.S. exports, I find that higher inflation volatility is associated with a significantly lower ratio of multinational sales to total foreign sales.     

Category management,product assortment,and consumer welfare

In this article, we endogenize product assortment decisions under a category management (CM) framework in a channel setup. We find that (1) product assortment is polarized more under CM than under a non-CM regime; (2) the price of a high-end (low-end) product in an assortment increases (decreases) under CM than under a non-CM regime; and (3) a high-quality manufacturer makes more profit than a low-quality manufacturer. In our model, the manufacturer’s choice of quality and its polarization is driven by the existence and the decisions of the retailer (CM or non-CM). Finally, we have an interesting result on consumer welfare. We find that the total consumer welfare, as measured by consumer surplus, worsens under CM only when there is sufficient heterogeneity in consumers’ tastes.     

The evolving role of hit and niche products in brick-and-mortar retail category assortment planning: A large-scale empirical investigation of U.S. consumer packaged goods

Long tail theory, the notion that the future of retailing could involve shifting product assortments to offer more product variety to precisely serve the unique needs of individual customers, has largely been proven true in the context of online distribution. However, it has been implicitly assumed that this theory does not apply to brick-and-mortar selling situations due to higher supply side inventory costs and higher demand side consumer search costs. Academics and practitioners alike have thus advocated for the use of Pareto rules to make category assortment planning decisions about product inventory breadth and depth in the brick-and-mortar channel. This research directly challenges this received wisdom by noting that the widespread prevalence and use of mobile technology is causing information flows to speed up for consumers even while performing traditional shopping tasks. Such information flows should theoretically favor the strategic importance of niche products in the long tail of the sales distribution. A large-scale empirical analysis of consumer packaged goods brick-and-mortar retailing data indicates that this alternative prediction is indeed true. This research contributes to a larger body of research as well that has documented how major environmental forces are shifting the nature of retail strategy, particularly in the brick-and-mortar channel.     

Exports versus multinational production under nominal uncertainty

This paper examines how nominal uncertainty affects the choice that firms face to serve a foreign market through exports or to produce abroad as a multinational. I develop a two-country, stochastic general equilibrium model in which firms make production and pricing decisions in advance, and I consider its implications for the relative attractiveness of exporting and multinational production. I find that when multinational sales are priced in the local currency while exports are priced in the producer currency, destination volatility benefits exporters: during a foreign nominal contraction, the foreign exchange rate appreciates, causing exports to be relatively cheaper. Exporters gain non-linearly through demand, making profit convex in prices. As foreign volatility rises, the model implies that the home country should serve the foreign country relatively more through exports. I take this implication to bilateral U.S. data, using inflation volatility as a proxy for nominal volatility. Using sectoral data on sales by majority-owned foreign affiliates matched with U.S. exports, I find that higher inflation volatility is associated with a significantly lower ratio of multinational sales to total foreign sales.     

Competitive advantage,private-label brands,and category profitability

Abstract

The purpose of this study was to investigate the influence of private-label resources possessed by a supermarket retailer. Our study examines whether or not private-label products can help in the overall enhancement of product category performance. We examine the performance of a supermarket retailer in the Northeast United States that operates over 100 stores and generates a total yearly sales volume in excess of $3 billion. Data of this nature is difficult to obtain for research purposes, and this proved to be very valuable. Data obtained from the internal financial database of the supermarket was used and generated from point-of-sale information. We then developed a research model from the literature review and used structural equation modelling to analyse the data. The findings of this study indicate that a change in category private-label sales penetration and category market share had little impact on category profitability. The major implication for retailers is the necessity for category managers to focus on all brands within their respective categories and not over-emphasise a private-label brand focus.