Assortment Rotation and the Value of Concealment

43 Pages Posted: 31 Oct 2016 Last revised: 29 Jan 2019

See all articles by Kris Ferreira

Kris Ferreira

Harvard Business School

Joel Goh

Harvard Business School

Date Written: January 2019

Abstract

Assortment rotation – the retailing practice of changing the assortment of products offered to customers – has recently been used as a competitive advantage for both brick-and-mortar and online retailers. We focus on product categories where consumers may purchase multiple products during a season and investigate a new reason why frequent assortment rotations can be valuable to a retailer. Namely, by distributing its seasonal catalog of products over multiple assortments rotated throughout the season – as opposed to selling all products in a single, fixed assortment – the retailer effectively conceals a portion of its full product catalog from consumers, injecting uncertainty into the consumer's relative product valuations. Rationally-acting consumers may respond to this additional uncertainty by purchasing more products, thereby generating additional sales for the retailer. We refer to this phenomenon as the value of concealment and show that the retailer enjoys a positive and significant value of concealment under quite general conditions. However, we show that when consumers are forward-looking, the value of concealment is context-dependent; we present insights and discuss intuition regarding which product categories likely lead to a positive vs. negative value of concealment.

Keywords: assortment optimization, retail, dynamic programming, imperfect information

Suggested Citation

Ferreira, Kris and Goh, Joel, Assortment Rotation and the Value of Concealment (January 2019). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 17-041. Available at SSRN: https://ssrn.com/abstract=2861521 or http://dx.doi.org/10.2139/ssrn.2861521

Kris Ferreira (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States
617-495-3316 (Phone)

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=773347

Joel Goh

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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