Why Retailers Sell More or Less Than Their Fair Share in a Category

Assessing a retailer’s performance in a category is important to both manufacturers and retailers. The main objective of this paper is to understand the factors that determine across-retailer variation in category performance as measured by the Category Development Index (CDI). Based on data from 19 food categories sold in 85 major supermarket chains operating in the largest 50 retail markets in the U.S, our analysis shows that the best performing retailers: (a) offer broader assortments, (b) have strong private label programs, (c) charge significantly lower everyday prices, and (d) use feature advertising to drive store traffic and display to increase in-store purchases. In addition, the best performing retailers also are more likely to engage in a formal category management process. Finally, we find that the impact of the price, promotion and assortment variables depends importantly on the role (staple, variety enhancers, niche, or fill-in) that the particular category plays in the store’s overall portfolio.