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An Introduction on the Effect of Shelf Management on Sales

 

Retailers can increase profits either by decreasing costs or increasing sales.

The "cost reduction" opportunities are of an operational nature --- they depend on efficient stock management, personnel management, and exploiting technology.  The "sales increase" opportunities are market-driven, and can be divided in two categories: (a) out-of-store tactics and (b) in-store-tactics.  With out-of-store tactics the retailer works to bring more consumers into the store, either by attracting new consumers

or inducing current patrons to shop at their store versus the competition more often.  With in-store tactics the retailer attempts to extract more surplusfrom consumers once they are in the store.

In this article, we focus on a subset of these in-store tactics.  Specifically, we study how retailers (and manufacturers) can boost sales by better managing existing shelf-space through store-level shelf management, what is sometimes referred to as micro-merchandising.

Shelf management is a difficult task in which rules of thumb rather than good theory and hard evidence tend to guide practice.  Through a series of field experiments, we measured the effectiveness

In this article, we focus on a subset of these in-store tactics.  Specifically, we study how retailers (and manufacturers) can boost sales by better managing existing shelf-space through store-level shelf management, what is sometimes referred to as micro-merchandising.

Shelf management is a difficult task in which rules of thumb rather than good theory and hard evidence tend to guide practice.  Through a series of field experiments, we measured the effectiveness of two shelf management techniques: "space-to-movement", where we customized shelf sets based on store-specific movement patterns; and "product reorganization" where we manipulated product placement to facilitate cross-category merchandising or the ease of shopping.  We found modest gains (4%) in sales and profits from increased customization of shelf sets and 5-6% changes due to shelf reorganization.  Using the field experiment data, we modeled the impact of shelf positioning and facing allocations on sales of individual items.  We found that location had a large impact on sales, whereas changes in the number of facings allocated to a brand had much less impact as long as a minimum threshold (to avoid out-of-stocks) was maintained.

 

Source: www.xdreze.org

 

 

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