What Is Happening to My Categories? Differential Effects of a Radical Store Transformation on Category Sales
Abstract
Today, many retailers radically transform their physical stores to meet changing customer preferences. Typically, such store transformations emphasize certain categories that align with the new positioning, de-emphasize categories that do not, and keep a significant portion of categories unchanged in assortment size, composition, and presentation. This study deals with the impact of a radical store transformation on category performance and investigates how this effect differs depending on whether a category is emphasized, de-emphasized, or remains unchanged. Results from a quasi-experimental analysis of a radical transformation of a German grocery retailer reveal a positive (negative) effect of the transformation on sales of emphasized (de-emphasized) categories. Interestingly, unchanged categories also experience a negative effect. Subsequently, the study probes which unchanged categories are more or less adversely impacted depending on their category characteristics (8Ps): purchase frequency, penetration, perishability, price level, processed level, promotion intensity, portfolio, and private label share. The research finds that the transformation effect on sales is more negative for unchanged categories that are comprised of processed/ready-to-eat goods, have a higher purchase frequency and higher prices, but less negative when unchanged categories score high on perishability, promotion intensity, and private label share.
Keywords
Quasi-field experiment, Store transformation, Category performance, Unchanged categories, Category characteristics