Product Line Simplification and Profit Recovery in Multi Category Markets Facing Persistent Assortment Complexity over Time

• Hoang Duc Minh

  Department of Business Administration, Ha Tinh University, 447 26/3 Street, Dai Nai Ward, Ha Tinh City 480000, Ha Tinh Province, Vietnam

  Author

• Doan Anh Tuan

  Faculty of Economics and Business Administration, An Giang University, 18 Ung Van Khiem Street, Dong Xuyen Ward, Long Xuyen City 900000, An Giang Province, Vietnam

  Author

• Le Quang Hieu

  Department of Finance and Banking, Hung Vuong University, Nong Trang Ward, Viet Tri City 290000, Phu Tho Province, Vietnam

  Author

Product strategy in mature consumer markets is often discussed through expansion, innovation, and line extension, yet a substantial share of strategic adjustment takes the opposite form. Firms frequently remove stock-keeping units, collapse adjacent variants, harmonize packaging, and narrow attribute dispersion when their portfolios become difficult to manage. These actions are common, but their economic consequences remain difficult to evaluate because product deletion can reduce apparent choice while simultaneously improving operational discipline, retailer execution, and demand concentration. A further complication is that simplification programs are rarely implemented in stable environments; they usually occur when categories are already experiencing promotional pressure, rising logistics costs, and slowing marginal returns to assortment growth. This paper examines whether product line simplification improves business performance and identifies the conditions under which pruning generates recovery rather than decline. The study uses a longitudinal archival-style panel comprising 27{,}648 product-family-quarter observations drawn from 864 product families marketed by 58 manufacturers across 41 consumer categories over twelve years. The empirical design links product retirement decisions to scanner outcomes, shipment records, retailer execution data, and internal cost allocations. Estimation combines staggered event-study models, fixed-effects regressions, instrumental-variables estimation, and nonlinear response analysis. The evidence indicates that moderate pruning improves gross margin, reduces earnings volatility, and increases demand concentration on surviving core items. The average simplification program generates a short-run revenue decline, but that decline dissipates within three quarters and turns positive when pre-existing assortment overlap is high. Very aggressive pruning reverses these benefits, revealing an interior optimum rather than a monotone gain from deletion. Margin recovery occurs through lower forecast error, fewer markdown episodes, improved shelf productivity, and tighter promotional allocation. The results show that product strategy is shaped not only by what firms add to the market, but also by how effectively they withdraw redundant complexity.

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