The Effects of Sister-Store Presence and Market Competition on Product Assortment: Evidence from Book Retailing

Abstract

Product assortment is a critical competitive tool for retailers to increase sales, maximize profits, and attain customer satisfaction. Increasingly, more and more retailers provide in-store product assortment information online or via smartphone apps for consumers to check if their preferred items are carried by local stores. Such information systems make it easier for customers to switch between sister stores of the same chain, as well as between competing chain stores, which poses new challenges to retailers’ assortment strategies. Retailers must understand and evaluate the important role of sister-store presence and market competition in their product assortment strategies. In this paper, the authors obtain product assortment data from all stores of a nation-wide bookstore chain. The authors then study how competition and the presence of sister stores affect the retail chain’s product assortment. The authors also explore how product popularity affects this assortment and moderates the impact of competition and the presence of sister stores. The authors find that having a sister (competing) store nearby reduces (increases) product assortment and such effects are stronger for niche products.