How supplier category management policy influences category sales performance

Abstract

PurposeThe purpose of this paper is to examine how several aspects of supplier category management policy might affect category sales performance at Korean supermarkets.Design/methodology/approachAggregated (market‐level) Nielsen time‐series category management and sales data for several variety enhancer categories in the Korean supermarket industry are analyzed.FindingsAcross both small and large supermarkets, both the number of brands and the forward inventory level had positive effects on sales while days of supply of a product had a significant negative effect. For large supermarkets, the out‐of‐stock rate also had a significant negative effect, while for small supermarkets the retail distribution rate had a significant positive effect.Research limitations/implicationsUsing data for the Korean supermarket industry, this study demonstrates which policies for product assortment, pricing, stocking, and product replenishment can affect category sales and how these effects may vary between large and small stores. However, the findings rest on market‐level aggregated data and may be limited in scope to variety enhancer (i.e. low purchase frequency and high penetration) categories. Future research could try to relax these limitations.Originality/valueThe value of this study lies in confirming findings such as how category sales are higher in categories with a relatively larger number of brands (as has been observed in the US supermarket industry), as well as in the surprising finding that category pricing policies do not have a significant effect on category sales even though variety enhancer categories are generally considered price sensitive.