Canary Categories

Past spending by a customer is generally a positive signal of future spending at the same retailer. We show that there exist “Canary Categories” for which the reverse is true. The more purchases customers make in these categories, the less likely these customers are to return to that retailer. The finding is robust and replicates at different retailers. We show that the effect results at least in part from different customers preferring different brands. Because retailers cannot stock every brand, customers cannot always find their favorite brand. While they may purchase on the current trip, they return to a different store on future purchase occasions. We support this explanation with evidence from both historical data and laboratory experiments. The findings confirm that, compared to non-harbinger categories, in harbinger categories customers are less likely to find their favorite brands when visiting a store, and are less likely to return if their favorite brands are unavailable. These findings also suggest an important implication for managers. Harbinger categories can help retailers identify where to broaden their assortments. Retailers have to prioritize where to expand their assortments, and harbinger categories can help them do so.