Effects of Income Distribution Changes on Assortment Size in the Mainstream Grocery Channel

43 Pages Posted: 7 Nov 2018

See all articles by Rafael Becerril Arreola

Rafael Becerril Arreola

University of South Carolina

Randolph E. Bucklin

UCLA Anderson School of Management

Raphael Thomadsen

Olin School - Washington University in St. Louis

Date Written: September 1, 2018

Abstract

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

Becerril Arreola, Rafael and Bucklin, Randolph E. and Thomadsen, Raphael, Effects of Income Distribution Changes on Assortment Size in the Mainstream Grocery Channel (September 1, 2018). Available at SSRN: https://ssrn.com/abstract=3266922 or http://dx.doi.org/10.2139/ssrn.3266922

Rafael Becerril Arreola (Contact Author)

University of South Carolina ( email )

1014 Greene Street
Columbia, SC 29208
United States

HOME PAGE: http://https://sc.edu/study/colleges_schools/moore/directory/becerrilarreola_rafael.php

Randolph E. Bucklin

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-7339 (Phone)

Raphael Thomadsen

Olin School - Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
48
Abstract Views
289
PlumX Metrics