Market environment, assortment policy, and performance of small retailers

This study surveys small retail pharmacies to examine the relationship between managers’ perceptions of
local market environments, their stated assortment policies, and their reported performance levels for a
large product category. Managers report wider assortments when market diversity and market munificence
are high. In turn, wider assortments have a positive effect on reported relative category sales
and stock. In addition, market uncertainty has a direct negative effect on reported margins. This study
controls for both store space as well as the potential direct performance effects of the local market environment
faced by small retailers.