Marketing Science
Channel Coordination in the Presence of a Dominant Retailer
Marketing Science
Overchoice and Assortment Type: When and Why Variety Backfires
Marketing Science
The Effect of Product Assortment Changes on Customer Retention
Marketing Science
New Product Development Under Channel Acceptance
Marketing Science
Strategic Manufacturer Response to a Dominant Retailer
Marketing Science
The Length of Product Line in Distribution Channels
Marketing Science
Competition in Consumer Shopping Experience
Marketing Science
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In certain product categories, large discount retailers are known to offer shallower assortments than traditional retailers. In this paper, we investigate the competitive incentives for such assortment decisions and the implications for manufacturers' distribution strategies. Our results show that if one retailer has the channel power to determine its assortment first, then it can strategically reduce its assortment by carrying only the popular variety while simultaneously inducing the rival retailer to carry both the specialty and popular varieties. The rival retailer then bears higher assortment costs, which leads to relaxed price competition for the commonly carried popular variety. We also show that when the manufacturer has relative channel power, it chooses alternatively to distribute both product varieties through both retailers. Our analysis suggests, therefore, that when a retailer becomes dominant in the distribution channel, it facilitates retail segmentation into discount shops, carrying limited product lines, and specialty shops carrying wider assortments. We also illustrate how retailer power leading to strategic assortment reduction can lead to lower consumer surplus.