An Analysis of Retail Display Space: Theory and Methods

The growth of self-service retailing during the post-World War II period coincident with the proliferation of new products has encouraged retail management to be increasingly sensitive to the opportunity costs of their relatively scarce display areas. Many retail stores have experienced a rapid increase in the number of new items stocked and a decline in the average selling space devoted to specific goods. In supermarkets, for example, the number of items stocked per square foot of selling space increased from 0.380 in 1956 to 0.545 in 1965 (Supermarket Institute 1965). The significance of product display area in self-service stores stems from the importance of physical product exposure as a sales stimulus. Most retail stores employ product displays to attract the attention of potential buyers and stimulate their demand for goods. This strategic role of shelf space in merchandising has caused one author, Cairns (1962), to define the retailer as a merchant of product display area. Given the importance of display exposure as a stimulator of sales, and hence the pressure from manufacturers for more of it, it has become necessary to develop statistical methods which would enable retail management to evaluate the profitability of alternative shelf-space assignments. One of the most significant short-run decisions of retail management is to assemble a portfolio of product brands and determine the shares of display area which should be assigned to each. This paper develops a theoretical model of the relationship between brand market shares and share of product display space, given a profile of consumer brand preferences. An empirical measure of market-share elasticity, suggested by the theory, is statistically evaluated using experimental data. These developments are used as part of an integrated theory of the profit-maximizing allocation of product display space.