Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing

Abstract

Product variety is an important strategic tool that firms can use to attract customers and respond to competition. This study focuses on the retail industry and investigates how stores manage their product variety, contingent on the presence of competition and their actual distance from rivals.Using a unique data set that contains all Best Buy and Circuit City stores in the United States, the authors find that a store's product variety (i.e., number of stock-keeping units) increases if a rival store exists in its market but, in the presence of such competition, decreases when the rival store is collocated (within one mile of the focal store). Moreover, collocated rival stores tend to differentiate themselves by overlapping less in product range than do non-collocated rivals. This smaller and more differentiated product variety may be due to coordinated interactions between collocated stores. In summary, this article presents evidence of both coordination and competition in retailers' use of product variety.

Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

“…Recent literature in this area attempts to discern conditions under which an incumbent will maintain its distance from or stay close to the entrant (e.g., de Figueiredo and Silverman 2007;Wang 2011). A closely related subset of this literature studies how firms use product variety as a strategic response to entry (e.g., Olivares and Cachon 2009;Ren et al 2011). We contribute to this stream of literature by studying incumbent product repositioning in a multi-sided market setting, and by documenting that the repositioning occurs in tandem with other responses including price increases.…”

Does experience imply learning?

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“…generate the instrument. Ren et al (2011) applied a probit model in the first stage to predict the probability of whether a rival chain opens a store or not in a local geographic market, then used the predicted probability as an instrument for the second-stage binary endogenous variable. 11 Semadeni et al (2013) have recently surveyed all empirical papers appearing in the Strategic Management Journal between 2005 and 2012 that used the IV approach to analyze continuous endogenous variables.…”

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