IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v127y2024ics0305048324000410.html
   My bibliography  Save this article

Omnichannel product selection and shelf space planning optimization

Author

Listed:
  • Chen, Yajing
  • Wu, Zhimin
  • Wang, Yunlong

Abstract

As the retail industry is evolving toward an omnichannel paradigm, we study a product selection and shelf space planning problem faced by omnichannel retailers. We aim to maximize aggregated profits across channels by determining the optimal product offerings for the offline and online channels while optimizing the allocation of limited shelf space to these products in brick-and-mortar stores. Furthermore, the showroom effect of physical stores on online sales is also taken into account. We propose a corresponding model that jointly optimizes these decisions. To solve the nonlinear nonconvex model of practical scale, we first reformulate it into a mixed integer quadratic programming by exploring the structural properties. Next, we use the reformulation linearization technique to further improve the computational speed. Our numerical studies validate the efficiency of the proposed solution approach. In addition, we derive some managerial insights, including that retailers should adopt joint optimization and consider how the involved effects and parameters may influence their profits and decisions.

Suggested Citation

  • Chen, Yajing & Wu, Zhimin & Wang, Yunlong, 2024. "Omnichannel product selection and shelf space planning optimization," Omega, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:jomega:v:127:y:2024:i:c:s0305048324000410
    DOI: 10.1016/j.omega.2024.103074
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048324000410
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.omega.2024.103074?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tan, Baris & Karabati, Selcuk, 2013. "Retail inventory management with stock-out based dynamic demand substitution," International Journal of Production Economics, Elsevier, vol. 145(1), pages 78-87.
    2. Hansen, Jared M. & Raut, Sumit & Swami, Sanjeev, 2010. "Retail Shelf Allocation: A Comparative Analysis of Heuristic and Meta-Heuristic Approaches," Journal of Retailing, Elsevier, vol. 86(1), pages 94-105.
    3. Schäfer, Fabian & Hense, Jonas & Hübner, Alexander, 2023. "An analytical assessment of demand effects in omni-channel assortment planning," Omega, Elsevier, vol. 115(C).
    4. Fei Gao & Xuanming Su, 2017. "Online and Offline Information for Omnichannel Retailing," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 84-98, February.
    5. Kuo, Chia-Wei & Xiong, Hui & Chen, Ying-Ju & Chang, Ting-Kai & Wu, Shining & Chang, Yung-Hsun, 2024. "Vertical product line extension when online retailers serve as mom-and-pop stores’ suppliers," Omega, Elsevier, vol. 122(C).
    6. Fei Gao & Vishal V. Agrawal & Shiliang Cui, 2022. "The Effect of Multichannel and Omnichannel Retailing on Physical Stores," Management Science, INFORMS, vol. 68(2), pages 809-826, February.
    7. Singh, Reema & Rosengren, Sara, 2020. "Why do online grocery shoppers switch? An empirical investigation of drivers of switching in online grocery," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    8. Park, Jisoo & Dayarian, Iman & Montreuil, Benoit, 2021. "Showcasing optimization in omnichannel retailing," European Journal of Operational Research, Elsevier, vol. 294(3), pages 895-905.
    9. Kalyan Talluri & Garrett van Ryzin, 2004. "Revenue Management Under a General Discrete Choice Model of Consumer Behavior," Management Science, INFORMS, vol. 50(1), pages 15-33, January.
    10. Murray, Chase C. & Talukdar, Debabrata & Gosavi, Abhijit, 2010. "Joint Optimization of Product Price, Display Orientation and Shelf-Space Allocation in Retail Category Management," Journal of Retailing, Elsevier, vol. 86(2), pages 125-136.
    11. Eisend, Martin, 2014. "Shelf space elasticity: A meta-analysis," Journal of Retailing, Elsevier, vol. 90(2), pages 168-181.
    12. Bianchi-Aguiar, Teresa & Hübner, Alexander & Carravilla, Maria Antónia & Oliveira, José Fernando, 2021. "Retail shelf space planning problems: A comprehensive review and classification framework," European Journal of Operational Research, Elsevier, vol. 289(1), pages 1-16.
    13. Joseph Geunes & Yiqiang Su, 2020. "Single-period assortment and stock-level decisions for dual sales channels with capacity limits and uncertain demand," International Journal of Production Research, Taylor & Francis Journals, vol. 58(18), pages 5579-5600, September.
    14. Zhang, Chu & Zheng, Xiaona, 2021. "Customization strategies between online and offline retailers," Omega, Elsevier, vol. 100(C).
    15. David R. Bell & Santiago Gallino & Antonio Moreno, 2018. "Offline Showrooms in Omnichannel Retail: Demand and Operational Benefits," Management Science, INFORMS, vol. 64(4), pages 1629-1651, April.
    16. Yang, Guangyong & Ji, Guojun, 2022. "The impact of cross-selling on managing consumer returns in omnichannel operations," Omega, Elsevier, vol. 111(C).
    17. Yang, Lu & Li, Xiangyong & Xia, Ye & Aneja, Y.P., 2023. "Returns operations in omnichannel retailing with buy-online-and-return-to-store," Omega, Elsevier, vol. 119(C).
    18. Daria Dzyabura & Srikanth Jagabathula, 2018. "Offline Assortment Optimization in the Presence of an Online Channel," Management Science, INFORMS, vol. 64(6), pages 2767-2786, June.
    19. Zhao, Ju & Zhou, Yong-Wu & Wahab, M.I.M., 2016. "Joint optimization models for shelf display and inventory control considering the impact of spatial relationship on demand," European Journal of Operational Research, Elsevier, vol. 255(3), pages 797-808.
    20. A. Gürhan Kök & Marshall L. Fisher & Ramnath Vaidyanathan, 2015. "Assortment Planning: Review of Literature and Industry Practice," International Series in Operations Research & Management Science, in: Narendra Agrawal & Stephen A. Smith (ed.), Retail Supply Chain Management, edition 2, chapter 0, pages 175-236, Springer.
    21. Andrade, Xavier & Guimarães, Luís & Figueira, Gonçalo, 2021. "Product line selection of fast-moving consumer goods," Omega, Elsevier, vol. 102(C).
    22. Wang, Mengmeng & Zhang, Xun & Li, Xiaolong, 2023. "Multiple-purchase choice model: estimation and optimization," International Journal of Production Economics, Elsevier, vol. 265(C).
    23. repec:dau:papers:123456789/1757 is not listed on IDEAS
    24. Lee, Richard J. & Sener, Ipek N. & Mokhtarian, Patricia L. & Handy, Susan L., 2017. "Relationships between the online and in-store shopping frequency of Davis, California residents," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 40-52.
    25. Hense, Jonas & Hübner, Alexander, 2022. "Assortment optimization in omni-channel retailing," European Journal of Operational Research, Elsevier, vol. 301(1), pages 124-140.
    26. Hübner, Alexander & Schaal, Kai, 2017. "A shelf-space optimization model when demand is stochastic and space-elastic," Omega, Elsevier, vol. 68(C), pages 139-154.
    27. Hansen, Pierre & Heinsbroek, Hans, 1979. "Product selection and space allocation in supermarkets," European Journal of Operational Research, Elsevier, vol. 3(6), pages 474-484, November.
    28. repec:ags:aaea22:335965 is not listed on IDEAS
    29. A. Gürhan Kök & Marshall L. Fisher, 2007. "Demand Estimation and Assortment Optimization Under Substitution: Methodology and Application," Operations Research, INFORMS, vol. 55(6), pages 1001-1021, December.
    30. Schaal, Kai & Hübner, Alexander, 2018. "When does cross-space elasticity matter in shelf-space planning? A decision analytics approach," Omega, Elsevier, vol. 80(C), pages 135-152.
    31. Irion, Jens & Lu, Jye-Chyi & Al-Khayyal, Faiz & Tsao, Yu-Chung, 2012. "A piecewise linearization framework for retail shelf space management models," European Journal of Operational Research, Elsevier, vol. 222(1), pages 122-136.
    32. Xu, Xianhao & Shen, Yaohan & (Amanda) Chen, Wanying & Gong, Yeming & Wang, Hongwei, 2021. "Data-driven decision and analytics of collection and delivery point location problems for online retailers," Omega, Elsevier, vol. 100(C).
    33. Warren P. Adams & Hanif D. Sherali, 1986. "A Tight Linearization and an Algorithm for Zero-One Quadratic Programming Problems," Management Science, INFORMS, vol. 32(10), pages 1274-1290, October.
    34. Xianhao Xu & Yaohan Shen & Wanying (amanda) Chen & Yeming Gong & Hongwei Wang, 2021. "Data-driven decision and analytics of collection and delivery point location problems for online retailers," Post-Print hal-03188219, HAL.
    35. deHaan, Ed & Li, Jiacui & Watts, Edward M., 2023. "Retail bond investors and credit ratings," Journal of Accounting and Economics, Elsevier, vol. 76(1).
    36. Juan M. C. Larrosa & Leandro Meller & Juan I. Uriarte & Gonzalo R. Ramírez Muñoz de Toro, 2023. "Retail coffee pricing dynamics in Argentina," SN Business & Economics, Springer, vol. 3(8), pages 1-21, August.
    37. Hübner, Alexander H. & Kuhn, Heinrich, 2012. "Retail category management: State-of-the-art review of quantitative research and software applications in assortment and shelf space management," Omega, Elsevier, vol. 40(2), pages 199-209, April.
    38. Dimitris Bertsimas & Velibor V. Mišić, 2019. "Exact First-Choice Product Line Optimization," Operations Research, INFORMS, vol. 67(3), pages 651-670, May.
    39. Andrew Lim & Brian Rodrigues & Xingwen Zhang, 2004. "Metaheuristics with Local Search Techniques for Retail Shelf-Space Optimization," Management Science, INFORMS, vol. 50(1), pages 117-131, January.
    40. Caprara, Alberto, 2008. "Constrained 0-1 quadratic programming: Basic approaches and extensions," European Journal of Operational Research, Elsevier, vol. 187(3), pages 1494-1503, June.
    41. Hübner, Alexander & Schaal, Kai, 2017. "An integrated assortment and shelf-space optimization model with demand substitution and space-elasticity effects," European Journal of Operational Research, Elsevier, vol. 261(1), pages 302-316.
    42. Holzapfel, Andreas & Hübner, Alexander & Kuhn, Heinrich & Sternbeck, Michael G., 2016. "Delivery pattern and transportation planning in grocery retailing," European Journal of Operational Research, Elsevier, vol. 252(1), pages 54-68.
    43. Marcel Corstjens & Peter Doyle, 1981. "A Model for Optimizing Retail Space Allocations," Management Science, INFORMS, vol. 27(7), pages 822-833, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bianchi-Aguiar, Teresa & Hübner, Alexander & Carravilla, Maria Antónia & Oliveira, José Fernando, 2021. "Retail shelf space planning problems: A comprehensive review and classification framework," European Journal of Operational Research, Elsevier, vol. 289(1), pages 1-16.
    2. Hense, Jonas & Hübner, Alexander, 2022. "Assortment optimization in omni-channel retailing," European Journal of Operational Research, Elsevier, vol. 301(1), pages 124-140.
    3. Ostermeier, Manuel & Düsterhöft, Tobias & Hübner, Alexander, 2021. "A model and solution approach for store-wide shelf space allocation," Omega, Elsevier, vol. 102(C).
    4. Alexander Hübner & Kai Schaal, 2017. "Effect of replenishment and backroom on retail shelf-space planning," Business Research, Springer;German Academic Association for Business Research, vol. 10(1), pages 123-156, June.
    5. Schäfer, Fabian & Hense, Jonas & Hübner, Alexander, 2023. "An analytical assessment of demand effects in omni-channel assortment planning," Omega, Elsevier, vol. 115(C).
    6. Schaal, Kai & Hübner, Alexander, 2018. "When does cross-space elasticity matter in shelf-space planning? A decision analytics approach," Omega, Elsevier, vol. 80(C), pages 135-152.
    7. Alexander Hübner & Fabian Schäfer & Kai N. Schaal, 2020. "Maximizing Profit via Assortment and Shelf‐Space Optimization for Two‐Dimensional Shelves," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 547-570, March.
    8. Kateryna Czerniachowska, 2022. "A genetic algorithm for the retail shelf space allocation problem with virtual segments," OPSEARCH, Springer;Operational Research Society of India, vol. 59(1), pages 364-412, March.
    9. Hübner, Alexander & Schaal, Kai, 2017. "An integrated assortment and shelf-space optimization model with demand substitution and space-elasticity effects," European Journal of Operational Research, Elsevier, vol. 261(1), pages 302-316.
    10. Kim, Gwang & Moon, Ilkyeong, 2021. "Integrated planning for product selection, shelf-space allocation, and replenishment decision with elasticity and positioning effects," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    11. Mou, Shandong & Robb, David J. & DeHoratius, Nicole, 2018. "Retail store operations: Literature review and research directions," European Journal of Operational Research, Elsevier, vol. 265(2), pages 399-422.
    12. Gecili, Hakan & Parikh, Pratik J., 2022. "Joint shelf design and shelf space allocation problem for retailers," Omega, Elsevier, vol. 111(C).
    13. Düsterhöft, Tobias & Hübner, Alexander & Schaal, Kai, 2020. "A practical approach to the shelf-space allocation and replenishment problem with heterogeneously sized shelves," European Journal of Operational Research, Elsevier, vol. 282(1), pages 252-266.
    14. Masoud Rabbani & Navid Salmanzadeh-Meydani & Amir Farshbaf-Geranmayeh & Vahed Fadakar-Gabalou, 2018. "Profit maximizing through 3D shelf space allocation of 2D display orientation items with variable heights of the shelves," OPSEARCH, Springer;Operational Research Society of India, vol. 55(2), pages 337-360, June.
    15. Hübner, Alexander & Hense, Jonas & Dethlefs, Christian, 2022. "The revival of retail stores via omnichannel operations: A literature review and research framework," European Journal of Operational Research, Elsevier, vol. 302(3), pages 799-818.
    16. Flamand, Tulay & Ghoniem, Ahmed & Haouari, Mohamed & Maddah, Bacel, 2018. "Integrated assortment planning and store-wide shelf space allocation: An optimization-based approach," Omega, Elsevier, vol. 81(C), pages 134-149.
    17. Caglar Gencosman, Burcu & Begen, Mehmet A., 2022. "Exact optimization and decomposition approaches for shelf space allocation," European Journal of Operational Research, Elsevier, vol. 299(2), pages 432-447.
    18. Hübner, Alexander & Schaal, Kai, 2017. "A shelf-space optimization model when demand is stochastic and space-elastic," Omega, Elsevier, vol. 68(C), pages 139-154.
    19. Tsao, Yu-Chung & Lu, Jye-Chyi & An, Na & Al-Khayyal, Faiz & Lu, Richard W. & Han, Guanghua, 2014. "Retailer shelf-space management with trade allowance: A Stackelberg game between retailer and manufacturers," International Journal of Production Economics, Elsevier, vol. 148(C), pages 133-144.
    20. Bianchi-Aguiar, Teresa & Silva, Elsa & Guimarães, Luis & Carravilla, Maria Antónia & Oliveira, José F., 2018. "Allocating products on shelves under merchandising rules: Multi-level product families with display directions," Omega, Elsevier, vol. 76(C), pages 47-62.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:127:y:2024:i:c:s0305048324000410. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.