Time and product variety competition in the book distribution industry

Abstract Product variety and time have emerged as prominent dimensions in global competition. Marketers have emphasized the strategic advantages accruing from offering increased variety: on the other hand, operations managers have stressed reduced operations cycle times and faster response times to customer needs. Although substantial documentation supports the impact of such activities on costs, the only empirical evidence concerning actual rewards in the marketplace from such strategic endeavors is anecdotal. This study of the book distribution industry demonstrates a two-phase methodology for valuing the rewards from faster response and improved variety. First an industry analysis was conducted to determine at a macro level how time and variety have been treated strategically and how it has affected the industry. The conclusion was that the very existence of the industry depends on the ability of these firms to offer a greater variety of titles shipped in smaller quantities in a relatively rapid fashion. Within the industry, those who can do this best have increased their market share substantially. To quantify the potential rewards accruing to time-based and variety-based strategies, conjoint (or trade-off) analyses were conducted via telephone to estimate the specific trade-offs that retailers were willing to make among price, delivery time, and product variety. By understanding the relative value of different services or attributes to the consumer (in this case the book retailer), the impact of changing these services by either the firm or one of its competitors can be evaluated. For example, in our study, to overcome retailer's loyalty to a competitor, distributors would need to deliver one day faster than the average and fill about 3% more of the retailer's title needs. Similarly, one can determine what order fill rate increase or delivery time reduction would be necessary to offset a specific price increase and not lose customers. In conclusion, the empirical research confirms the importance of time and variety as critical strategic dimensions. The emergence of a distributor that distinguishes itself from the competition along one or both these dimensions can alter the structure of the industry. Consequently, managers need to be cognizant of the relative values of time and variety in configuring their distribution strategy.