The Effect of Product Variety and Inventory Levels on Misplaced Products at Retail Stores: a Longitudinal Study

From a four-year longitudinal study of 333 stores of a large retailer, we show that increasing product variety and inventory level per product is associated with an increase in misplaced products. We also show that increasing misplaced products at a store is associated with a decrease in store sales. Hence, we highlight a consequence of increased product variety and inventory level per product that had been previously overlooked in studies of retail product variety and inventory management. In addition, we make two contributions to the literature on quality management. One, we provide empirical evidence to support earlier assertions that higher product variety and inventory levels lead to an increase in defects. Two, we show empirical support for studies that demonstrated the beneficial impact of increased quality on firm performance.