Assortment Diversification in the Retail Industry : The Impact on Market-based and Accounting-based Performance

This study examines the performance implications of the world's leading retailers' assortment diversification behavior over thirteen years (from 1997 to 2009). Results show that assortment diversification into food and non-food retailing increases retailers' sales, while it decreases their profits. Thus, our findings indicate that retailers' decision to diversify across food and non-food assortments results in a trade-off between the objectives of market-based (i.e., sales) and accounting-based (i.e., profits) performance maximization. Moreover, beside the negative effect of assortment diversification on profits, we find suggestive evidence that retailers can decrease the volatility of their profits by diversifying into food and non-food assortments