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Sales by multi‐product retailers
Author(s) -
Richards Timothy J.
Publication year - 2006
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1251
Subject(s) - sales promotion , product category , product (mathematics) , context (archaeology) , marketing , business , economics , promotion (chess) , margin (machine learning) , sales journal , microeconomics , advertising , sales management , computer science , mathematics , paleontology , geometry , machine learning , politics , political science , law , biology
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 monopolistically competitive market equilibrium. Copyright © 2006 John Wiley & Sons, Ltd.