Effects of Income Distribution Changes on Assortment Size in the Mainstream Grocery Channel
43 Pages Posted: 7 Nov 2018
Date Written: September 1, 2018
The authors study the effect of recent changes in the U.S. income distribution on assortment size in the mainstream grocery channel. Census demographics for 1,711 counties are matched to local product count records from Nielsen store scanner data in 944 grocery product categories from 2007 to 2013. The authors show that an increase in income inequality (measured by the Gini index) — holding average income and other demographics constant — is associated with a decreased assortment of brands and universal product codes at Nielsen-reporting retailers, consistent with expenditure changes predicted for necessity-type goods by Engel’s law. This reduction happens at both the store level and at the county level and affects private labels and branded products to a similar extent. Brands with large product lines tend to lose a disproportionate number of products, but large brands end up with higher market shares, and the Herfindahl-Hirschman Index for product categories increases with income inequality. Further, the effect is largest for products in mid-level price tiers, consistent with the hollowing out of the middle class that has accompanied rising Gini indices. The findings offer implications for manufacturers and retailers in the grocery industry, consumer welfare, and policy interventions.
Keywords: Income Distribution, Gini Index, Census Data, Consumer Packaged Goods, Retailing, Assortment Decisions
JEL Classification: D31, M3, L81, L11
Suggested Citation: Suggested Citation