Joint determination of rack configuration and shelf space allocation for a retailer

Uttam Karki, Bradley Guthrie and Pratik J. Parikh

International Journal of Production Economics, 2021, vol. 234, issue C

Abstract: For brick-and-mortar retailers to be successful, it is critical for them to optimize their rack layout and product placement to draw the attention of shoppers. Recent studies show that racks placed at a non-90° angle along the shopper's path or rack heights positioned below a shopper's eye-height can provide improved visibility of products on those racks. While this can increase the likelihood of a shopper entering that aisle for an impulse purchase, the increase in floor space and restocking costs cannot be ignored. To address these tradeoffs, we propose the Joint Rack Configuration and Shelf Space Allocation (JRC-SSA) problem that jointly determines rack decisions (orientation and height) and product decisions (placement and number of locations) in order to maximize the retailer's impulse profit. We propose an optimization model for JRC-SSA and solve it using a Particle Swarm Optimization based algorithm. Results indicate that a retailer can realize up to 10.1% increase in profit through the JRC-SSA compared to a traditional 7 ft high rack placed at 90° orientation. Acute-angled racks appear to increase impulse profit over 90° racks at low space costs; shorter racks appear prominent for low restocking costs. We also notice that product location and allocation on the rack were altered substantially; high impulse products were often switched from the front to the back face (or vice-versa) to maintain high visibility in different rack orientations. Retailers can use these findings to redesign store sections for enhanced product visibility, which would not only increase their revenue, but also improve shopper experience.

Keywords: Retail design; Rack orientation; Shelf space allocation; Impulse profit (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:234:y:2021:i:c:s0925527320302966

DOI: 10.1016/j.ijpe.2020.107943

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