Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing

35 Pages Posted: 16 Feb 2010 Last revised: 13 Jun 2014

Charlotte R Ren

Purdue University

Ye Hu

University of Houston - Bauer College of Business

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 24, 2011

Abstract

Product variety is an important strategic tool that firms can use to attract customers and respond to competition. This study focuses on the retail industry and investigates how stores manage their product variety, contingent on the presence of competition and their actual distance from rivals. Using a unique data set that contains all Best Buy and Circuit City stores in the United States, the authors find that a store’s product variety (i.e., number of stock-keeping units) increases if a rival store exists in its market but, in the presence of such competition, decreases when the rival store is collocated (within one mile of the focal store). Moreover, collocated rival stores tend to differentiate themselves by overlapping less in product range than do non-collocated rivals. This smaller and more differentiated product variety may be due to coordinated interactions between collocated stores. In summary, this article presents evidence of both coordination and competition in retailers’ use of product variety.

Keywords: product variety, competition, collocation, differentiation

JEL Classification: M20

Suggested Citation

Ren, Charlotte R and Hu, Ye and Hu, Yu Jeffrey and Hausman, Jerry A., Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing (January 24, 2011). Management Science, 2011; Atlanta Competitive Advantage Conference 2010. Available at SSRN: https://ssrn.com/abstract=1553417

Charlotte R Ren (Contact Author)

Purdue University ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Ye Hu

University of Houston - Bauer College of Business ( email )

Houston, TX 77204-6021
United States

Yu Jeffrey Hu

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-271a
Cambridge, MA 02142
United States
617-253-3644 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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