Unlimited Shelf Space in Internet Supply Chains: Treasure Trove or Wasteland?*

Elliot Rabinovich, Arizona State University
Rajiv Sinha, Arizona State University
Timothy Laseter, University of Virginia

Internet retailing offers merchants limitless shelf space. This has led experts to highlight the existence of a “long tail” of offerings and assert that the future of online business is “selling less of more.” However, it is difficult for retailers to offer a large scope of products without having to handle large amounts of returns from customers. This is because customers can and do get overwhelmed by product variety. We shed light on this issue through an assessment of data from sales and returns of almost 7,000 products in a product category. We find that retailers can benefit from expanding the inventories’ scope to generate sales from a diversity of products. However, the success of this strategy will depend on managing recurrent execution and product failures. Furthermore, the gains that this strategy will bring to retailers will be bound by product attributes such as prices, size, and market longevity.

 

*Working paper