Retailing in the 21st Century - Current and Future Trends

PRODUCT (p. 225-226)

Retail Assortment: More Better

Susan M. Broniarczyk and Wayne D. Hoyer
University of Texas at Austin, USA

Product assortment strategy is a central yet complex issue for retailers. Retail product assortments have undergone drastic changes in the past decade from unparalleled large assortments in the early 1990s to the current emphasis on streamlined, efficient assortments. The purpose of this chapter is to provide guidance to retailers making these important assortment strategy decisions.

Consumer assortment perceptions have been shown to be one of the top three criteria, along with location and price, in determining retail patronage. In the 1980s and early 1990s, retailers assumed that larger product assortments better met consumer needs. Broad assortments should increase the probability that consumers will find their ideal product and offer flexibility for variety seekers. Thus, in an effort to serve the customer, the number of products offered in supermarkets escalated from 6000 stockkeeping units (SKUs) in the 1980s to over 30,000 SKUs in the early 1990s. However, the Food Marketing Institute issued two imperative reports that called this increasing assortment into question. First, these broad assortments resulted in higher inventory costs and more out-of-stocks for retailers (see Verhoef &, Sloot chapter in this book for further information on out-ofstocks). Second, these higher costs made it difficult for conventional supermarkets to compete against the growing retail formats of discount stores, warehouse clubs, and supercenters.

As part of its 1993 report, the Food Marketing Institute conducted a field study in which it reduced SKUs in six product categories (cereal, pet food, salad dressing, spaghetti sauce, toilet tissue, and toothpaste) at 24 test stores. Redundant SKUs were eliminated and shelf space was held constant, with more space now allocated to high-market-share items. Importantly, the results showed no significant negative impact of SKU reduction on sales. In other words, this initial evidence suggested that efficient assortment might result in cost savings without loss of sales. However, it was difficult to draw definite conclusions as the magnitude of SKU reduction in these categories was vague.

In another series of in-store studies, Dreze, Hoch, and Purk (1994) examined a 10% reduction of low-volume SKUs in eight test categories over a 4-month period. Their shelf-reset procedure was similar to that in the Food Marketing Institute study, with shelf space held constant and freed-up shelf space reallocated to high-volume SKUs. Across eight categories, they found that sales increased by 4% for 30 test stores compared with 30 control stores. These results began to indicate the possibility that smaller assortments might even have a positive effect on sales.

In the remainder of this chapter, we review recent research that further questions the conventional wisdom on assortment and shows that more product assortment does not necessarily lead to a better shopping experience. The chapter is organized around four research questions: (1) How do consumers perceive assortment? (2) How should assortments be organized? (3) How does assortment affect consumer product choice? and (4) How do marketing mix variables interact with assortment?