Product Assortment Case Study

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Problems and Motivation
While planning product assortment, nowadays retailers considers a number of factors such as consumer preferences of product and channels, and consumer perception and behavior across different channels. Inappropriate assortment gathered by retailers will avert customers and thus resulting in loss of current and future revenue earning options. Hence, assortment planning is still one of the most important decision for retail houses (Mantrala et al. 2009).

In this section, we will look into the research studies done on each of these factors.

Customer preferences of product and channel
Different customers have different product assortment and channel preferences. In certain situations, it is beneficial to have a prior
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(Jacoby, Speller, and Beming, 1974). A sense of overwhelming will create frustration and if the customers decide to direct the frustration toward the retailer, they may never return to the store. (Fitzsimons, Greenleaf, and Lehmann 1997). Also, customers in most likeability tend to drop an out-of-stock item from order, thus lowering the firm’s probability of earning revenue (Fitzsimons 2000).

While deciding their favorite store, customers rank variety of assortment right after location and price. In case of dynamic taste, perceived variety become all more important because consumers want to get educated about the available products. (Warsink 2004) Retailers can reduce the number of items in an assortment carried without negatively affecting assortment perceptions and store choice, as long as only low-preference items are eliminated and category space is held constant. (Broniarczyk et al 1998). Hence, while designing an optimized assortment composition, retailers must take into consideration the consumer’s shopping goals and expertise with the product category at hand (Chernev
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These models included assortment planning with multinomial logit models of consumer demand and assortment planning with exogenous demand models.

Cachon et al. in 2005 proposed a model in which consumers search among multiple competing firms for products that match their preferences at a reasonable price. The study found that easier search creates a market-expansion effect that encourages firms to expand their assortment. In 2009, Vaidyanathan et al. introduce a model of substitution behavior that takes into consideration the impact of substitution in choosing assortments. A retailer must create an assortment for all category and determine the purchase quantity for each. van Ryzin et al (1999) creaed a multinomial logit model to describe the consumer choice process and a newsboy model to represent the retailer 's inventory cost and studied how different factors affect the optimal level of assortment

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