Retail Assortment Planning Under Category Captainship

Abstract

Retail assortment planning can have a tremendous impact on a retailer's bottom line performance. Over the past years, retailers have increasingly relied on their leading manufacturers for recommendations regarding the assortment to be offered to the consumers in a particular category, a practice often referred to as category captainship. Our research investigates the consequences of using category captains for assortment selection decisions. We develop a game theoretic model where multiple manufacturers sell their products to consumers through a single retailer. We compare a model where the retailer selects the assortment in the category with a model where the retailer relies on a category captain for assortment decisions in return of a target category profit. We show that category captainship can, in some circumstances, benefit not only the retailer and the category captain but also the non-captain manufacturers. Our results have implications regarding the implementation of the category captainship practices.