What Aspects Drive the Success of a Low-Fit Extension Retailer? A Structural Topic Modeling Approach Using Product Reviews: An Abstract

Abstract

A common motivation for firms’ brand extension is to leverage the equity in established brands and enable the development of profitable products or increase sales in other categories. Higher-fit congruity between established brands and a new business easily produces spillover benefits and leads to more positive evaluations of brand extensions. However, firms sometimes extend their new business to new categories, a move associated with a low-fit extension. Considering Amazon, a retailer with a low fit to fashion, and Macy’s, a retailer with a high fit to fashion, we examine the spillover effect of the retailers on consumers’ evaluations of their fashion merchandise. Drawing on product reviews of identical products from both retailers’ websites, we compare the topics discussed in the reviews as important product attributes of consumer evaluations and examine the effects of these topics on review ratings, which are potentially associated with success factors of low- and high-fashion-oriented retailers. We collected review information for two fashion product categories from 21 brand items in the men’s and women’s divisions carried by Amazon and Macy’s. Our empirical findings show that the product topics mentioned for identical products are generally different between Amazon (the low-fashion-oriented retailer) and Macy’s (the high-fashion-oriented retailer). In addition, the different topics discussed at the two retailers eventually lead to different ratings. These findings support a spillover effect of retailers on consumers’ evaluations of products and the significance of fit congruency in a brand extension. We provide managers with insights on developing and maintaining competitive advantages for the low-fit extension company and existing company.