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Store-Wide Shelf-Space Allocation with Ripple Effects Driving Traffic

Tülay Flamand¹; Ahmed Ghoniem²; Bacel Maddah³

¹ Department of Economics and Business, Colorado School of Mines, Golden, Colorado 80401; · ² Department of Operations and Information Management, Isenberg School of Management, University of Massachusetts, Amherst, Massachusetts 01003; · ³ Department of Industrial Engineering and Management, Maroun Semaan Faculty of Engineering and Architecture, American University of Beirut, Beirut, Lebanon

How Product Locations Drive Traffic Throughout a Retail Store In “Store-Wide Shelf-Space Allocation with Ripple Effects Driving Traffic,” Flamand, Ghoniem, and Maddah develop a framework for deciding where to place products in a store, in addition to apportioning the shelf space among products, in a way that maximizes impulse profit, a phenomenon that may account for 50% of transactions. By analyzing a large data set of customer receipts from a grocery store in Beirut, the authors develop a regression model that estimates traffic at a shelf based on its location and the “attraction” from products allocated nearby. The traffic model is embedded within a mixed-integer nonlinear program, which they solve via specialized linear approximations. For the store in Beirut, a 65% improvement in impulse profit is anticipated, and the location of products is found to be significantly more important in driving store-wide traffic than the relative shelf-space allocation.

DOI

10.1287/opre.2023.2437

Volume

71 (4)

Pages

1073-1092

Language

en

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