Product assortment strategy is a central yet complex issue for retailers. Retail product assortments have undergone drastic changes in the past decade from unparalleled large assortments in the early 1990s to the current emphasis on streamlined, efficient assortments. The purpose of this chapter is to provide guidance to retailers making these important assortment strategy decisions.
Consumer assortment perceptions have been shown to be one of the top three criteria, along with location and price, in determining retail patronage. In the 1980s and early 1990s, retailers assumed that larger product assortments better met consumer needs. Broad assortments should increase the probability that consumers will find their ideal product and offer flexibility for variety seekers. Thus, in an effort to serve the customer, the number of products offered in supermarkets escalated from 6000 stockkeeping units (SKUs) in the 1980s to over 30,000 SKUs in the early 1990s. However, the Food Marketing Institute issued two imperative reports that called this increasing assortment into question. First, these broad assortments resulted in higher inventory costs and more out-of-stocks for retailers (see Verhoef & Sloot chapter in this book for further information on out-ofstocks). Second, these higher costs made it difficult for conventional supermarkets to compete against the growing retail formats of discount stores, warehouse clubs, and supercenters.