Retail Category Management: A Review on Assortment and Shelf-Space Planning Models

Retail Category Management addresses a series of questions and demands decisions for category managers on critical issues such as product assortment and shelf-space planning. Product assortment planning involves listing decisions based on consumer behavior and substitution effects. Shelf space allocation involves facing and replenishment decisions based on space elasticity effects and constraints of limited shelf space and restocking capacity. The complexity of these questions has grown significantly in recent years due to product proliferation and various consumer choice effects in the retail environment. It is an increasingly difficult task for category managers to find an effective assortment due to consumer preferences instability and the extremely large number of possible assortments. This chapter presents an updated review on scientific models that deal with assortment and shelf space planning and other related topics, such as consumer response to stock-outs and consumer perceptions of assortment variety. One of the main objectives of this literature review is to show that shelf space allocation models do not clearly and comprehensively address assortment selection, neglect substitution effects between products, and ignore the stochastic nature of demand. Assortment planning models on the other hand mostly ignore shelf space constraints and neglect space depend demand.