Shelf space
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Shelf space[1] is the total amount of space for the display of goods for sales, or storage. Shelf space is an economics terminology; it comes from the retail industry and is strongly related to space management. Shelf space and space management are widely used in both small retail stores and large supermarkets. Retailers have improved profit by using shelf space allocation, facing, and several other tools. The shelf space consists of shelves (storage), which are used to store items that are being displayed, stored, or offered for sale. Shelves can be designed to be mounted against a wall, a table, or may be mounted as a console, similar to individual shelves. About this shelf space, there are many strategies retailers can use to achieve earning forecasts, such as using limited shelf space more efficiently, maximising shelf space with limited shelves, impacting revenue through shelf allocation, and using the DPP shelf space allocation model to help retailers reasonably use shelf space, therefore expanding profit.
Shelf space can comprise shelves, open-type refrigerators, or closed-type refrigerators.
Shelf Space Allocation
Shelf space allocation tends to benefit retailers by making higher profits. Shelf space allocation is used to attract consumers by using strategy and facing tools. The methods of shelf space allocation are data collection and preprocessing, data mining, and product-to-shelf allocation[2]. By designing the allocation of shelf space so as to influence customers' purchase decisions. All products in the store have been classified into main items[3], secondary items and ordinary items and arranged in categories, so that consumers can choose products according to their preferences.
Shelf Space Allocation Strategy
Organised shelf space allocation to maximise profit by increasing the visibility of popular products is one of the common ways used by retailers[4]. In the retail industry, one of the best ways to manage shelf space is to use planograms[5] to analyse parts of the store to stay profitable[6]. Planograms have to be updated regularly as the range of products sold by retailers is constantly changing. When a product's profit does not meet expectations, the product is removed or its panels are reduced, and any gaps are replaced with items that can provide the retailer with better sales and profits. Therefore, planograms need to be added and removed to remain relevant to the consumer and provide them with the products consumers want. As manufacturers gain access to retail distribution channels, the next step is to compete for market share on increasingly crowded shelves, according to the shelf space allocation strategy[7]. Manufacturers with widely recognised product lines will get the best placement, aisle impulse buying points and terminal caps, while unpopular products will be relegated to the bottom shelf.
Shelf space can be used to stimulate the sale of goods and services. For example, a hair cut store provides haircuts as services and shampoo as goods. Through several analyses and shelf space allocation, then evaluate the economics of the strategy.
Facing (Show of Shelf Space in Retail)
In the retail market, facing is a common tool used to decorate stores and show products to consumers. A neat retail store is inviting to customers, helps customers find what they want and is ultimately better for sales, and gives consumers a great shopping experience[8]. Shelves are separated into several layers, and a perfect-looking inventory store will place all the products on display or in front of the shelf, as well as use stacking to stack goods. Shelf space allocation can also be used to build a neat facing. Retail markets are generally divided into many sections, such as Fresh Produce, Lean Meat, Dairy, frozen food, Miscellaneous Foods, Health, Beauty, Furniture, Book, and so on[8].
Shelf Space and Sales
There is a close relationship between shelf classification and profit maximisation. According to the data collected on consumer behaviour, goods are redistributed to appropriate shelves to increase the cross-selling opportunities of primary and secondary goods[9]. Retailers first classify products according to product similarity, cross-selling opportunity or current shelf space allocation in stores[9], and then allocate product categories to available shelves and aisles in stores to attract shoppers to buy products and lead to impulse purchases. Finally, by improving the visibility of products to customers with high impulse potential, the profit brought by impulse buying can be maximised. This shows that shelf space should be one of the important things retailers should be most concerned about.
Professional management is used to plan shelf space.[citation needed]
Brand and Shelf Space
As consumers walk past the shelves, dozens of products will come to their attention. Products with the best location, probably at eye level, are most likely to get customer's attention. Products of the same nature have a fierce competitive relationship for shelf space; those brands with a higher rate of return would be placed in the best placement. For example, a retailer buys two brands of chocolates from the chain supplier, one of which is easy to melt, which makes it cost more on transport than the other, and it's not as popular. So it will be placed at the bottom or top of the shelves. The relationship between brand and shelf space affects retailers' decision on shelf space allocation strategy. The lower the unit cost, the greater the price elasticity and the larger the shelf space allocation of the brand[10]. Second, the more flexible the shelf space, the lower the wholesale price and the lower the profit for all channel members[11].
DPP Shelf-Space Allocation Model
The use of direct product profitability (DPP) and retail shelf-space allocation models has been used globally. Direct product margin (DPP) is a method of dividing a project's gross margin into a single SKU profit contribution. The DPP method has been widely used by large supermarket chains in North America and Europe. Although developing a nonlinear programming model, economists find that shelf space allocation among products is dependent on the profitability of each product, spatial elasticity of demand, and cross-elasticity of product[12]. In simple terms, retailers would allocate each product's location based on its rate of return, which is whether it has more exposure and how much shelf space it occupies.
See also
References
- ↑ "Cambridge English Dictionary".
- ↑ Tsai, C; Huang, S (2014). "A data mining approach to optimise shelf space allocation in consideration of customer purchase and moving behaviours". International Journal of Production Research. 53 (3): 11. doi:10.1080/00207543.2014.937011.
- ↑ 3. Tulay, F., Ahmed, G. and Bacel, M. (2016). "Promoting impulse buying by allocating retail shelf space to grouped product categories". The Journal of the Operational Research Society.
- ↑ 8. Cairns JP (1962) "Suppliers, retailer and shelf space". Journal of Marketing 26:34–36
- ↑ Fannin, R (1988). "Planograms: friend or foe? (shelf-management systems)". Academic OneFile. Marketing & Media Decisions. p. 48(4).
- ↑ Kathryn, B. (2002). "Managing your prime real estate: shelf space: whether you're a large format home improvement retailer or an independent, shelf space is your most valuable real estate" Hardware & Home Centre Magazine, pp.Vol.26(2), pp. 19–20.
- ↑ Herr'an GM, Taboubi S, Zaccour G (2006) "The impact of manufacturers' wholesale prices on a retailer's shelf-space and pricing decisions". Decision Sciences 37(1):71–90
- ↑ 8.0 8.1 Inman, J. Jeffrey (March 2017). "Shopper-Facing Retail Technology: A Retailer Adoption Decision Framework Incorporating Shopper Attitudes and Privacy Concerns". Sydney library.
- ↑ 9.0 9.1 Huang, S (August 2014). "A multi-data mining approach for shelf space optimization: Considering customer behaviour". p. 89–95.
- ↑ Hansen P, Heinsbroek H (1979) "Product selection and space allocation in supermarkets". European Journal of Operational Research 3:474–484
- ↑ Martín-Herrán G, Taboubi S (2005) "Shelf-space allocation and advertising decisions in the marketing channel: a differential game approach". International Game Theory Review 7(3):313–330
- ↑ Bookbinder, James H. and Feyrouz H. Zarour (2001). "Direct Product Profitability and Retail Shelf-space Allocation Models". Journal of Business Logistics, 22 (2): pp. 183–208.
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