Managing Variety on the Retail Shelf: Using Household Scanner Panel Data to Rationalize Assortments

Ravi Anupindi, Sachin Gupta and M.A. Venkataramanan
Additional contact information
Ravi Anupindi: Department of Operations and Management Sciences, Stephen M. Ross School of Business, University of Michigan
Sachin Gupta: Johnson Graduate School of Management, Cornell University
M.A. Venkataramanan: Indiana University

Chapter Chapter 7 in Retail Supply Chain Management, 2008, pp 155-182 from Springer

Abstract: Abstract We propose a model for the rationalization of retail assortment and stocking decisions for retail category management. We assume that consumers are heterogeneous in their intrinsic preferences for items and are willing to substitute less preferred items to a limited extent if their preferred items are not available. We propose that the appropriate objective function for a far-sighted retailer includes not only short-term profits but also a penalty for disutility incurred by consumers who do not find their preferred items in the available assortment. The retailer problem is formulated as a constrained integer programming problem. We demonstrate an empirical application of our proposed model using household scanner panel data for eight items in the canned tuna category. Our results indicate that the inclusion of the penalty for disutility in the retailer’s objective function is informative in terms of choosing an assortment to carry. We find that customer disutility can be significantly reduced at the cost of a small reduction in short term profits. We also find that the optimal assortment behaves non-monotonically as the weight on customer disutility in the retailer’s objective function is increased.

Keywords: Retail Assortment; Substitution; Heterogeneity; Scanner Data; Integer Programming; Optimization (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-0-387-78903-3_7

Ordering information: This item can be ordered from
http://www.springer.com/9780387789033

DOI: 10.1007/978-0-387-78902-6_7

Access Statistics for this chapter

More chapters in International Series in Operations Research & Management Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().