Influencing Competition Through Shelf Design

Francisco Cisternas, Wee Chaimanowong, Alan Montgomery and Timothy Derdenger

Papers from arXiv.org

Abstract: Shelf design decisions strongly influence product demand. In particular, placing products in desirable locations increases demand. This primary effect on shelf position is clear, but there is a secondary effect based on the relative positioning of nearby products. Intuitively, products located next to each other are more likely to be compared having positive and negative effects. On the one hand, locations closer to relatively strong products will be undesirable, as these strong products will draw demand from others -- an effect that is stronger for those in close proximity. On the other hand, because strong products tend to attract more traffic, locations closer to them elicit high consumer attention by increased visibility. Modifying the GEV class of models to allow demand to be moderated by competitors' proximity, these two effects emerge naturally. We found that although the competition effect is usually stronger, it is not always the dominating effect. Shelf displays can achieve higher profits by exploiting the relative influence on competition from shelf design to shift demand to higher profitability products. In the paper towel category, we found profitability differences of up to 7\% and displays with 3\% higher gross profits over the best shelf design present in our data.

Date: 2020-10, Revised 2024-03
New Economics Papers: this item is included in nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2010.09227 Latest version (application/pdf)

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:arx:papers:2010.09227

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().