Shelf space

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A supermarket where you see shelves full of goods, and an employee.

Shelf space[1] is the total amount of space for display of goods for sales, or storage. Shelf space is economics terminology; it is comes from the retail industryand 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 used to stores to hold items that are being displayed, stored, or offered for sale, shelf can be designed to be mounted against a wall table, or may be mounted, called a console, similar to individual shelves. About this shelf space, there are many strategies can be used by retailer to achieve earning forecast, such as, use limited shelf space more efficiently, maximising shelf space with limited shelf, impact revenue through shelf allocation, and through using DPP shelf space allocation model to help retailer reasonable use shelf space, therefore expand the profit.

Shelf space can made up of shelves, open type refrigerator or close type refrigerator.

Shelf Space Allocation[edit]

Shelf space allocation tends to have benefit of making higher profit to retailer. 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 has been classified into main items[3], secondary items and ordinary items and arrange them in categories, so that consumers can choose products according to their preferences.

Shelf Space Allocation Strategy[edit]

Organised shelf space allocation to maximise the profit by increase the visibility of popular products, is one of the common way used by retailerz[4]. In retail industry, one of the best ways to manage shelf space is to use planograms[5] to analyses parts of the store to stay profitable[6]. Planogram has 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 removes or reduces its panels and replaces any gaps with items that can provide the retailer with better sales and profits. Therefore, planogram needs to be added and removed due to retail remain relevant to the consumer and provide them with the product consumer 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 use to stimulate sell goods and services. For example, a hair cut store provide haircut as services and shampoo as goods. Through several analysis make shelf space allocation, then evaluate the economics of strategy.

Facing (Show of Shelf Space in Retail)[edit]

In retail market, facing as a common tool used to decorate store and shows the products to consumer. Neat retail store is inviting to customers, helps customers find what they want and is ultimately better for sales, and give consumers a great shopping experience[8]. Shelves are separated into several layers, a perfect looking inventory store will place all the products on the display or in front of the shelf, as well as use stacking to stack goods. Shelf space allocation also can use to build a neat facing, Retail market 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[edit]

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]. The 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 the impulse purchase. 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[edit]

As consumers walk past the shelves, there will be dozens of products come to their attention. Products with the best location, probably at eye level which are most likely to get customer's attention. Products of the same nature have a fierce competitive relationship for shelf space, those brand with higher rate of return would be placed at the best placement. For example, a retailer buy two brands of chocolates from the chain supplier, one of chocolate is easy to melt which makes it costs more on transport than the other, and it's not popular as the other one. So it will be placed at the bottom or top of the shelves. The relationship between brand and shelf space effect retailer's 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[edit]

The use of direct product profitability (DPP) and retail shelf-space allocation models has been used in 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[edit]

  • Product management


  1. "Cambridge English Dictionary".
  2. 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. 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.
  4. 8. Cairns JP (1962) "Suppliers, retailer and shelf space". Journal of Marketing 26:34–36
  5. Fannin, R (1988). "Planograms: friend or foe? (shelf-management systems)". Academic OneFile. Marketing & Media Decisions. p. 48(4).
  6. 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.
  7. 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. 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. 9.0 9.1 Huang, S (August 2014). "A multi-data mining approach for shelf space optimization: Considering customer behaviour". p. 89–95.
  10. Hansen P, Heinsbroek H (1979) "Product selection and space allocation in supermarkets". European Journal of Operational Research 3:474–484
  11. 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
  12. 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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