The Effects of Menu Costs on Retail Performance: Evidence from Adoption of the Electronic Shelf Label Technology

Ioannis Stamatopoulos (), Achal Bassamboo () and Antonio Moreno ()
Additional contact information
Ioannis Stamatopoulos: McCombs School of Business, The University of Texas at Austin, Austin, Texas 78712;
Achal Bassamboo: Kellogg School of Management, Northwestern University, Evanston, Illinois 60208;
Antonio Moreno: Harvard Business School, Boston, Massachusetts 02163

Management Science, 2021, vol. 67, issue 1, 242-256

Abstract: We use the adoption of electronic shelf labels (ESLs) by an international grocery retailer in 2015 to identify the effects of physical menu costs (i.e., labor and material costs of price adjustment) on retail performance. We find that the installation of ESLs increased gross margins substantially, which implies profit gains that go far beyond labor cost savings. We also explore the mechanism behind this effect. We find that the lift in gross margins was associated with an increase in quantity sold and a decrease in price per unit sold, and that the lift primarily came from low-shelf life product categories. Moreover, we find that more and smaller price changes occurred with ESLs. These additional price changes were mostly price decreases, and they were dispersed in time. Our findings are consistent with reductions in both variable and fixed menu costs (i.e., both costs that scale with the number of products affected and costs that do not).

Keywords: retail operations; dynamic pricing; revenue management (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2019.3551 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:1:p:242-256

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().