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How Do Diminishing Returns and Dynamic Effects Influence Assortment Size-Sales Elasticity?

In: Advances in National Brand and Private Label Marketing

Author

Listed:
  • Elvira Sáez-González

    (University of Almería)

  • Juan Carlos Gázquez-Abad

    (University of Almería)

  • José Luis Ruiz-Real

    (University of Almería)

Abstract

This study examines the relationship between retail assortment size and category sales in FMCG settings using weekly panel data from Spanish hypermarkets and supermarkets over a 24‐month period, specifically focusing on the beer product category. Employing both static and dynamic econometric models—specifically, fixed-effects and Arellano–Bond approaches—the analysis uncovers an inverted U-shaped relationship between assortment size and sales, indicating diminishing returns beyond an optimal threshold. The results further demonstrate significant dynamic effects, with past period sales exerting a strong influence on current demand. Notably, the sensitivity of sales to assortment size is more pronounced in supermarkets compared to hypermarkets, reflecting differences in consumer behavior and store format constraints. These findings contribute to our understanding of assortment elasticity and offer actionable insights for retail category management. Retailers can benefit by tailoring assortment strategies to store format and product characteristics, thereby optimizing SKU mix and mitigating potential negative effects such as consumer overload and internal cannibalization.

Suggested Citation

  • Elvira Sáez-González & Juan Carlos Gázquez-Abad & José Luis Ruiz-Real, 2025. "How Do Diminishing Returns and Dynamic Effects Influence Assortment Size-Sales Elasticity?," Springer Proceedings in Business and Economics, in: Raj Sethuraman & Juan Carlos Gázquez-Abad & José Luis Ruiz-Real (ed.), Advances in National Brand and Private Label Marketing, pages 59-69, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-97133-4_8
    DOI: 10.1007/978-3-031-97133-4_8
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