Understanding Consumer Reactions to Assortment Unavailability

More documents

Recommendations

Info

changes in assortment perceptions (i.e. assortment variety, search efficiency, and assortment satisfaction) and actual search time due to the assortment reduction. The remainder of this chapter is structured as follows: In the following section, we discuss the collaborative research project that underlies this study in more detail. Subsequently, we discuss the theory, methodology, and results. We then briefly discuss the results of our additional study, followed by a discussion of our results and managerial implications, in which we also specifically focus on the implications for our collaborative research partner. We end with research limitations and resulting future research issues. 4.2 Collaborative assortment reduction project A team—consisting of a retailer, a brand manufacturer, and academics—carried out this assortment reduction project. The retailer aimed to save costs in the supply chain and reduce complexity by lowering the number of items in various categories, particularly those defined as “routine categories” (Dhar, Hoch, and Kumar 2001). Primarily, the retailer’s objective was to lower its total number of store items by approximately 1,500, which would enable it to close a warehouse. The associated cost savings were estimated to be approximately €4.5 million per year. However, the retailer feared that such an assortment reduction might affect its category sales. Therefore, we conducted a pilot project in one category to investigate the impact of a major assortment reduction. In this chapter, we focus on the results of this pilot project, which considers an assortment reduction in the detergent category. The retailer used to offer 150 detergent items in its assortment. Despite this large number of items, this category performed below its fair share compared with a price-aggressive competitor with only approximately 80 items in its detergent assortment. Hence, the retailer decided to remove 37 items of the total 150 items. The removed items constituted 25% of the total number of category items and 14% of the category sales. Thus, in general, low-selling items were removed. For each delisted item, the assortment manager verified that there was at least one reasonable alternative item within the remaining assortment. The 37 delisted items include brand delistings (all items of one brand are delisted) and item delistings (e.g., a delisting of a package format or variety within a brand). Overall, the assortment reduction resulted in the delisting of six complete brands, corresponding with 17 different items. 95
All the delisted brands can be considered low-equity brands. For the other 20 delisted items, consumers could still switch within the brand. The selection of items that were delisted in the test stores was based on item turnover statistics and a consumer decision tree analysis provided by the manufacturer. First, items that did not meet regular turnover demands were selected for reduction. Second, the consumer decision tree analysis showed in which detergent segments there was potential overlap between items. The retailer’s category manager made the final decision which items should be delisted. In the case of clear “me-too” items, the category manager preferred to delist the item with the lowest gross margin. Category space was held constant by giving the remaining items more shelf space and keeping the overall structure (e.g., location of items on the shelf) of the presented assortment constant. Furthermore, no new items were introduced during the test. Sales data before and after the assortment reduction were collected from two test stores and two control stores. The perception data were collected in the two test stores before and after the assortment reduction occurred. On the basis of the outcomes of this project, the retailer decided whether the assortment reduction would be rolled out nationwide and, if necessary, which adaptations it needed to make. 4.3 Theoretical background 4.3.1 Sales effects of assortment reductions Several studies have considered the category sales effects of assortment reductions. Drèze, Hoch, and Purk (1994), for example, report positive sales effects, though their positive effects may be due to other changes to the assortment presentation in their study. Using six categories, FMI (1993) reports both negative and positive sales effects of assortment reductions, though the negative effects mainly occurred in categories with deep cuts. Boatwright and Nunes (2001, 2004) report, on average, a neutral sales effect of reductions for an online grocery store, though they find negative sales effects in categories with very deep assortment cuts. In a recent working paper, Zhang and Krishna (2005) also report sales decreases of assortment reductions in three categories in an online retail context. Moreover, practical experiences show the negative effects of assortment reductions. For example, in 2001, the leading Dutch grocery retailer Albert Heijn deleted almost 1,500 items across categories, which caused widespread consumer complaints (Foodmagazine 2002). 96
Page 1 and 2:
LAURENS SLOOT Understanding Consume
Page 4 and 5:
UNDERSTANDING CONSUMER REACTIONS TO
Page 6 and 7:
PREFACE (IN DUTCH) Begin 2001 schre
Page 8 and 9:
TABLE OF CONTENTS Preface (in Dutch
Page 10 and 11:
3.7 Study 2 74 3.8 Hypotheses 74 3.
Page 12 and 13:
CHAPTER 1: INTRODUCTION AND OVERVIE
Page 14 and 15:
Most supply chain-oriented reductio
Page 16 and 17:
400 square meters) are disappearing
Page 18 and 19:
more. However, Aldi is known to be
Page 20 and 21:
antecedents, such as the brand equi
Page 22 and 23:
of assortment reduction responses a
Page 24 and 25:
assortment benefits and assortment
Page 26 and 27:
2.1 Introduction Out-of-stock (OOS)
Page 28 and 29:
other explanatory studies, we study
Page 30 and 31:
Studies that apply exploratory desi
Page 32 and 33:
Table 2.2: Methodological overview
Page 34 and 35:
Situation-related variables. Situat
Page 36 and 37:
As noted, consumers generally prefe
Page 38 and 39:
2.3.3 The interaction of hedonic le
Page 40 and 41:
For example, supermarkets are usual
Page 42 and 43:
were selected for further analyses.
Page 44 and 45:
example, a key utilitarian benefit
Page 46 and 47: The mathematical formulation of the
Page 48 and 49: Table 2.6: Correlation matrix depen
Page 50 and 51: correlation between the hedonic lev
Page 52 and 53: 2.6 Discussion In this study, we in
Page 54 and 55: Following the literature on promoti
Page 56 and 57: consider this finding when they att
Page 58 and 59: Appendix 2A: Overview and definitio
Page 60 and 61: CHAPTER 3 UNDERSTANDING THE IMPACT
Page 62 and 63: the Dutch food retailer Edah delist
Page 64 and 65: FMI (1993) conducts natural experim
Page 66 and 67: customers no longer or less frequen
Page 68 and 69: extent, comparable to the tendency
Page 70 and 71: Figure 3.1: Graphical display of as
Page 72 and 73: consumers evaluate assortments that
Page 74 and 75: Figure 3.3: Interaction effect of a
Page 76 and 77: SSI (H1). We expect that the brand
Page 78 and 79: 3.8.4 Store-related antecedents Fin
Page 80 and 81: among the 10 specified product grou
Page 82 and 83: Retail assortment-related anteceden
Page 84 and 85: Table 3.4: Average, standard deviat
Page 86 and 87: 3.10.2 Store switching intentions W
Page 88 and 89: effects indicated in Study 1 (β =
Page 90 and 91: 3.12 Managerial implications Retail
Page 92 and 93: Appendix 3A: Overview and definitio
Page 94 and 95: 4.1 Introduction Since the early 19
Page 98 and 99: Negative sales effects may occur be
Page 100 and 101: therefore might question the existe
Page 102 and 103: Table 4.2: Overview of separate ana
Page 104 and 105: analogously. The resulting complete
Page 106 and 107: changes in the price level do not i
Page 108 and 109: Table 4.4: Estimated parameters for
Page 110 and 111: Table 4.5: Estimated parameters for
Page 112 and 113: infrequently in the sample stores a
Page 114 and 115: Measurement. Following Hoch, Bradlo
Page 116 and 117: 4.7 Discussion In this collaborativ
Page 118 and 119: into consequences at the customer l
Page 120 and 121: eduction occurs, and the type of st
Page 122 and 123: Manufacturers in hedonic product gr
Page 124 and 125: 2. When retailers set priorities fo
Page 126 and 127: References Aaker, David A. (1991),
Page 128 and 129: Broniarczyk, Susan M. and Wayne D.
Page 130 and 131: Franses, Philip Hans and Richard Pa
Page 132 and 133: Narasimhan, Chakravartthi, Scott A.
Page 134 and 135: Van Trijp, Hans C.M., Wayne D. Hoye
Page 136 and 137: de rol van het assortiment bij het
Page 138 and 139: die het out-of-stock niveau binnen
Page 140 and 141: Campbell, R.A.J., Rethinking Risk i
Page 142 and 143: Langen, P.W. de, The Performance of
Page 144 and 145: Slager, A.M.H., Banking across Bord
show all

Understanding Consumer Reactions to Assortment Unavailability

Create successful ePaper yourself

Delete template?

Save as template?