Quality competition in retailing
In many retail industries, the most successful firms are the ones that offer the widest selection. For example, Wal-Mart rose to the top of the Fortune 500 by offering consumers a vast array of products at very competitive prices. The emphasis on product variety is particularly strong in the supermarket industry, where the introduction of computerized logistical and inventory management systems in the 1980s allowed firms to stock an ever expanding array of products. The explosion in both product variety and store size in the supermarket industry is striking.
According to the Food Marketing Institute, the number of products offered per store increased from about 14,000 in 1980 to over 30,000 by 2004. To accommodate the greater selection, store size has increased an average of 1,000 sq ft (100 m2) per year for the past three decades. Maintaining this variety requires substantial firm level investments. Every major supermarket firm invests in proprietary information technology and logistical systems aimed at increasing variety while minimizing storage and transportation costs. The emphasis on variety and the requisite fixed investments yield tightly contested markets among a handful of rival chains, a pattern that is repeated throughout much of retail.
Read more about Quality Competition In Retailing: Competition in The Retail Food Industry
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