Executive Summary
Because of increased competition of “category killers,” such as Wal-Mart and Aldi, traditional grocery retailers, such as Kroger (United States), Edeka (Germany), and Albert Heijn (the Netherlands), are forced to implement cost-saving programs. One way to achieve cost savings is to cut assortment (e.g., reducing the number of items offered within a category). However, retailers fear that there may be a downside to reducing assortment as well—namely, complaining customers, lower assortment satisfaction, and lower category sales.
To test the effect of cutting assortments, the authors study an assortment reduction of 37 out of the total number of 150 detergent items at two test stores of a major Dutch food retailer. The items that are delisted contributed approximately 14.2% of the detergent sales in the 26 weeks before the delistings were effective. The authors use survey data (N = 354 buyers) and loyalty-card data (N = 26.936 households) to measure the effect of the assortment reduction on assortment evaluation and category sales.
Among buyers of detergent, the perceived assortment choice is not affected, and perceived search efficiency and actual search time are significantly improved. Average search time among detergent buyers in front of the detergent shelf decreased from 20 seconds to 14 seconds. Assortment satisfaction among detergent buyers also improved. However, total store satisfaction among detergent buyers did not change significantly after the item delistings.
On an aggregated level, detergent sales in the test stores significantly decreased by approximately 9% compared with detergent sales in control stores. However, short-term losses were larger than long-term category sales losses. The losses of category sales can be attributed to the group of detergent buyers that bought at least one of the delisted items in the 26 weeks period before the delistings. Detergent sales of former nonbuyers of delisted items were not significantly affected by the item delistings. Both brand and item delistings cause a loss of detergent sales among former buyers of these items. However, brand deistings seem to have a larger negative impact on category sales than item delistings. Finally, and perhaps most notable, the authors find that the “cleaned-up” detergent category attracts more new detergent category buyers in the test stores than in the control stores. This finding is in line with the idea that “too large” assortments may lead to lower category sales due to increased choice complexity.
On the basis of the collaborative research, the retailer decided to reduce the detergent assortment on a national level. The results of the national rollout were in line with the aggregated results of the pilot test.
Biography
Laurens M. Sloot is director of the Erasmus Food Management Institute at Erasmus University Rotterdam, the Netherlands. His research interests include retailing, assortment management, pricing and promotions, and buyer–seller relationships.
Dennis Fok is Assistant Professor in the Econometric Institute at Erasmus University Rotterdam, the Netherlands. His research interests include modeling unobserved heterogeneity, panel models, marketing econometrics, and nonlinear models.
Peter C. Verhoef is Professor of Marketing in the Department of Marketing, Faculty of Economics, at the University of Groningen, the Netherlands. His research interests include customer management, customer loyalty, multichannel issues, category management, and buying behavior of organic products.
J Marketing Research, Volume 43, Number 4, November 2006
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