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  • September – October 2010
  • Article
  • Production and Operations Management

The Effect of Product Variety and Inventory Levels on Retail Sales: A Longitudinal Study

By: Zeynep Ton and Ananth Raman
  • Format:Print
  • | Pages:15
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Abstract

We examine the effects of product variety and inventory levels on store sales. Using four years of data from stores of a large retailer, we show that increases in product variety and inventory levels are both associated with higher sales. We also show that increasing product variety and inventory levels has an indirect negative effect on store sales through their impact on phantom products-products that are physically present at the store, but only in storage areas where customers cannot find or purchase them. Our study highlights a consequence of increased product variety and inventory levels that has previously been overlooked in studies of retail product variety and inventory management. It also quantifies the impact of phantom products on store sales. In addition, our study provides empirical evidence to support earlier claims that higher product variety and inventory levels lead to an increase in defect rate. We discuss the implications of our findings for retail inventory and assortment planning and for the design of retail stores.

Keywords

Buildings and Facilities; Design; Logistics; Product; Quality; Sales; Retail Industry

Citation

Ton, Zeynep, and Ananth Raman. "The Effect of Product Variety and Inventory Levels on Retail Sales: A Longitudinal Study." Production and Operations Management 19, no. 5 (September–October 2010): 546–560.
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About The Author

Ananth Raman

Technology and Operations Management
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More from the Authors
  • Hamptonshire Gas and Convenience By: Ananth Raman, Nathan Craig and Ehsan Valavi
  • Human-Computer Interactions in Demand Forecasting and Labor Scheduling Decisions By: Caleb Kwon, Ananth Raman and Jorge Tamayo
  • Innovations in Retail Operations: Thirty Years of Lessons from Production and Operations Management By: Marshall Fisher and Ananth Raman
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