Sales by multi-product retailers

Research output: Contribution to journalArticle

9 Citations (Scopus)

Abstract

This paper examines the rationale underlying periodic price promotions, or sales, for perishable food products by supermarket retailers. Whereas previous studies explain sales in a single-product context as arising from informational, storage cost, or demand heterogeneity, this study focuses on the central role of retailers as multi-product sellers of complementary goods. By offering a larger number of discounted products within a particular category, retailers are able to attract a sufficient number of customers to offset the effect of lower margins on sale items by selling more high-margin items. The implications that emerge from the resulting mixed-strategy equilibrium are tested in a product-level, retail-scanner data set of fresh fruit sales. Hypotheses regarding the rationale and effectiveness of sales are tested by estimating econometric models that describe (1) the number of sales items per store, (2) the depth of a given sale, and (3) promotion effectiveness on store-level demand. The results of this econometric analysis support the hypothesis that the breadth and depth of price promotions are complementary marketing tools, thus explaining how EDLP and HI-LO store formats can exist in the same monopolistic-ally competitive market equilibrium.

Original languageEnglish (US)
Pages (from-to)261-277
Number of pages17
JournalManagerial and Decision Economics
Volume27
Issue number4
DOIs
StatePublished - Jun 2006

Fingerprint

Sales
Retailers
Fruits
Marketing
Price promotions
Margin
Rationale
Costs
Store format
Fruit
Everyday low price
Scanner data
Complementary goods
Supermarkets
Retail
Market equilibrium
Marketing tools
Seller
Competitive market
Econometric models

ASJC Scopus subject areas

  • Business and International Management
  • Management of Technology and Innovation
  • Strategy and Management

Cite this

Sales by multi-product retailers. / Richards, Timothy.

In: Managerial and Decision Economics, Vol. 27, No. 4, 06.2006, p. 261-277.

Research output: Contribution to journalArticle

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