On the relationship between inventory costs and variety benefits in retail assortments

On the relationship between inventory costs and variety benefits in retail assortments

0.00 Avg rating0 Votes
Article ID: iaor20003344
Country: United States
Volume: 45
Issue: 11
Start Page Number: 1496
End Page Number: 1509
Publication Date: Nov 1999
Journal: Management Science
Authors: ,
Keywords: inventory
Abstract:

Consider a category of product variants distinguished by some attribute such as color or flavor. A retailer must construct an assortment for the category, i.e., select a subset of variants to stock and determine purchase quantities for each offered variant. We analyze this problem using a multinomial logit model to describe the consumer choice process and a newsboy model to represent the retailer's inventory cost. We show that the optimal assortment has a simple structure and provide insights on how various factors affect the optimal level of assortment variety. We also develop a formal definition of the level of fashion in a category using the theory of majorization and examine its implications for category profits.

Reviews

Required fields are marked *. Your email address will not be published.