An Analysis of Assortment Choice in Grocery Retailing

Consumers in grocery retailing commonly buy bundles of products to accommodate current and future consumption. When all products in a particular bundle share common attributes (and are selected from the same product category), the consumer is said to assemble an assortment. This research examines the impact of assortment variety on the assortment choice process. In particular, we test the prediction that consumers demand less variety for higher quality items. To investigate this relationship, we employ a flexible choice model, suitable for the analysis of assortment choice. The model, based upon the assumption that the utility of purchase of one item in an assortment depends upon the set of items already selected, allows for a general utility structure across the assortment items. We apply the model to household assortment choice histories from the yogurt product category. Substantively, we show that yogurt choice is affected by brand quality perceptions (quality-tier competition). Moreover, we show that reaction to reductions in variety (number of yogurt flavors) is mediated by brand quality perceptions. Taken together, these empirical facts paint a picture of a consumer who is willing to trade-off variety against product quality in assortment choice. (C) 2014 New York University. Published by Elsevier Inc. All rights reserved.