RETAIL SHELF SPACE ALLOCATION ANALYSIS USING SYSTEM DYNAMICS APPROACH

Shelf space is a limited and expensive resource as a large number of brands compete for it in a retailing store. These brands compete with each to obtain maximum shelf space to get exposure to the customer. Objective of the retailer is to allocate shelf space to each brand in such a combination that maximizes profit of the retail store. This paper uses data, part collected and part hypothetical, based on interviews and sales record to study the shelf space allocation decision in a retail store using system dynamics approach. The system dynamics model considers the retail store specific parameters and demand pattern of the considered brands to find out the optimal shelf space allocation. The study finds that shelf space allocation decision is sensitive to demand behavior of individual brands as well as the retail store specific demographic characteristics. The system dynamics model aims to provide a pragmatic and manager friendly platform for evaluating various shelf space allocation scenarios. The paper sets down a foundation study towards the application of system dynamics approach in taking shelf space allocation decisions.