Optimal retail shelf space allocation with dynamic programming using bounds
01 Dec 2008-pp 1068-1072
TL;DR: It is found from experimental studies that NDP using bound was much more efficient to solve large problems as compared to original dynamic programming (ODP) without using bound.
Abstract: Efficient shelf space allocation increases profitability of a retail store and thus provides competitive advantage to the retailer. Several shelf space allocation models exist in literature. However, these models are generally solved using heuristic approaches due to NP-hard nature and there is a need to develop exact methods. In this paper, we present a non-linear shelf-space allocation model (NLSSAM) and optimally solve it with a new dynamic programming (NDP) using bounds which fathoms unpromising states. It is found from experimental studies that NDP using bound was much more efficient to solve large problems as compared to original dynamic programming (ODP) without using bound. ODP could not solve all problem instances of problem sizes (number of products, n = 30 and 40) within specified CPU time limit of 400 seconds while NDP could solved problem instances of size (n = 200) with average CPU time of 7.89 seconds.
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TL;DR: In this paper, the authors report a cross-sectional analysis of the effects of shelf position and space on sales for a frequently purchased, branded grocery product, and show that the effect of shelf positions and spaces on a product's performance on sales has been studied.
Abstract: The authors report a cross-sectional analysis of the effects of shelf position and space on sales for a frequently purchased, branded grocery product. As is the case in most cross-sectional studies...
111 citations
TL;DR: In this article, the static model is extented to incorporate market dynamics and the new model is more plausible than earlier static models in encouraging the retailer to allocate more space to new products and divest earlier from declining ones.
Abstract: The allocation of shelf space is a major determinent of a retailer's sales and operating costs. All the existing models of this problem focus on static optimization. But to the retailer, anticipating and adapting to new tastes and changing product life cycles is the central strategic problem. This paper shows how the static model can be extented to incorporate such market dynamics. The new model is more plausible than earlier static models in encouraging the retailer to allocate more space to new products and divest earlier from declining ones.
111 citations
TL;DR: In this article, a mixed-integer non-linear program is proposed to determine the product assortment, inventory replenishment, display area and shelf space allocation decisions that jointly maximize the retailer's profit under shelf space and backroom storage constraints.
106 citations
TL;DR: A shelf-space allocation optimization model that explicitly incorporates essential in-store costs and considers space- and cross-elasticities is developed and can solve single category-shelf space management problems with as many products as are typically encountered in practice and with more complicated cost and profit structures than currently possible by existing methods.
89 citations
TL;DR: In this article, the authors developed a theoretical model of the relationship between brand market shares and share of product display space, given a profile of consumer brand preferences, and used this model to evaluate the profitability of alternative shelf-space assignments.
Abstract: The growth of self-service retailing during the post-World War II period coincident with the proliferation of new products has encouraged retail management to be increasingly sensitive to the opportunity costs of their relatively scarce display areas. Many retail stores have experienced a rapid increase in the number of new items stocked and a decline in the average selling space devoted to specific goods. In supermarkets, for example, the number of items stocked per square foot of selling space increased from 0.380 in 1956 to 0.545 in 1965 (Supermarket Institute 1965). The significance of product display area in self-service stores stems from the importance of physical product exposure as a sales stimulus. Most retail stores employ product displays to attract the attention of potential buyers and stimulate their demand for goods. This strategic role of shelf space in merchandising has caused one author, Cairns (1962), to define the retailer as a merchant of product display area. Given the importance of display exposure as a stimulator of sales, and hence the pressure from manufacturers for more of it, it has become necessary to develop statistical methods which would enable retail management to evaluate the profitability of alternative shelf-space assignments. One of the most significant short-run decisions of retail management is to assemble a portfolio of product brands and determine the shares of display area which should be assigned to each. This paper develops a theoretical model of the relationship between brand market shares and share of product display space, given a profile of consumer brand preferences. An empirical measure of market-share elasticity, suggested by the theory, is statistically evaluated using experimental data. These developments are used as part of an integrated theory of the profit-maximizing allocation of product display space.
74 citations