SHELF MANAGEMENT AND SPACE ELASTICITY

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 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 impart 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.