Retail Assortment Under Demand Shocks: Evidence from the U.S. Yogurt Market
AAEA members research featured in JAAEA
New research estimates that a 5.0% decline in local wealth (measured by house values) would result in grocery stores reducing their offerings by approximately 20 unique products (or 11% of the average number of products offered), while mass merchandisers removing nearly 17 unique products (roughtly a quarter of their average products on the shelf). Given the US per-capita yogurt consumption from 2008 to 2010, the corresponding decrease in consumer surplus is about $36 million per year.
In the recent article “Retail Assortment under Demand Shocks: Evidence from the US Yogurt Market” published in the Journal of the Agricultural & Applied Economics Association, Meilin Ma and Fei Qin from Purdue University, and Jayson Lusk from Oklahoma State University examine if a retail store’s assortment is affected by the local demand downturns.
The authors say, “Using retail scanner data, we estimate changes in assortment of yogurt products offered in U.S. retail stores during the 2008 Great Recession, a drastic shock that caused heterogenous impacts on local demand across counties. We find that, facing negative income and wealth downturns, retail stores reduced the number of yogurt products on the shelf besides lowering prices. Differentiation among products offered weakened, too, probably because more niche, instead of mainstream products were removed by stores.”
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