Making Manufacturers Bend to Retailers’ Wills

I wonder how those shelves would be structured if Hyrule had different brand options?

I wonder how those shelves would be structured if Hyrule had different brand options?

Ever notice how different types of stores have different layouts for their products? Take Walmart and Bloomingdale’s, for example. When you go into Walmart looking for a new table, it’s not that big of an ordeal. All of their cheaply made furniture is sitting together in the same row, allowing for a quick side-by-side comparison. But if you go into Bloomingdale’s, you’re going to have to do some legwork. Their stores are organized by brands, meaning having to travel to several different parts of the store in order to check out several different tables.

Why is that?

According to research from the University of Illinois, it’s all about the retailer trying to balance out the desires of the consumer and the wants of the manufacturer. There’s an optimal balance for displaying wares based on the fit probability of products.

For example, there’s not a whole lot of difference between brands of toothbrushes; they have a high fit probability. In that case, it’s in the retailers best interest to put them side-by-side and let the manufacturers have a price war. But when it comes to tables, the fit probability is much lower; not all tables are created equal. A consumer isn’t likely to see all tables as being equally desirable, and isn’t likely to make a decision until they’ve actually gotten their hands on the product, to see how sturdy it is, how the color will match their existing décor.

In this case, it’s all about product placement. Shoppers are less likely to visit every single corner of the warehouse in order to compare every single table. Thus, it’s advantageous to have the best location in the store. Not only are you first and foremost in the customer’s mind, there’s a chance your competition is being diminished. For the retailer, it’s best to let the manufacturers fight a supply war, offering premier retail space to those giving the store the best supply price.

You can see this give and take within a single store, too. In most sporting goods stores, all of the shoes and basketballs are sitting right next to each other. Most shoppers don’t put that big of an emphasis between different brands of running shoes or different brands of basketballs. They do, however, put a big emphasis on different brands of clothing. And if you take a walk around Dick’s Sporting Goods, you’ll notice that all of the clothing is grouped together by brand. If you’re coming in looking for some compression shorts and are greeted by some nice-looking Under Armor ones, why would you bother to compare Nike and Reebok’s versions as well?

In the study, the researchers have all sorts of equations and models that show how these decisions are affected by fit probability and wars between prices and store location. While it doesn’t really do anything to suggest optimal store layouts, it calls attention to the competing interests at work for the common retailer.

Just something interesting to consider the next time you’re in your favorite store.

The paper, “Consumer Fit Search, Retailer Shelf Layout, and Channel Interaction,” was published in the journal Marketing Science by University of Illinois business professor Yunchuan “Frank” Liu and State University of New York, Albany, professor of marketing Zheyin “Jane” Gu.

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About bigkingken

A science writer dedicated to proving that the Big Ten - or the Committee on Institutional Cooperation, if you will - is more than athletics.
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