Evaluating Alternative Retail Repositioning Strategies

Abstract

A methodology is provided for examining the impact on profitability of a significant change in the merchandise portfolio of a retailer. Such repositioning is essential to maintain competitiveness in a rapidly changing environment. At the same time, management is often reluctant to undertake such changes because they risk undermining the long-term core business. A model is provided which incorporates both short- and long-run estimates of the trade-off of new business generated against old business lost as a result of the change.