A Theoretical Model for Testing New Product Sales Velocity at Small Format Retail Stores

The present study proposes a theoretical model to test sales velocity for new products introduced in small format retail stores. The model is designed to distinguish fast moving products within a relatively short period. Under the proposed model, the sales of a newly introduced product are monitored for a prespecified period T , e.g. , one week, and if the number of items sold over T is equal to a prespecified integer k or more, the product is considered a fast moving product and is carried over to the following sales periods. A slow moving product could be quickly replaced with alternative merchandise in order to make best use of shelf space. The paper first presents definitions of fast and slow moving products, and then a proposed sales test policy based on the model is formulated, where the expected loss is to be minimized with respect to the integer k . Numerical examples based on actual data collected from a convenience store in Japan are also presented to illustrate the theoretical underpinnings of the proposed sales test model.

[1]  Glen L. Urban,et al.  A Mathematical Modeling Approach to Product Line Decisions , 1969 .

[2]  David C. Schmittlein,et al.  Counting Your Customers: Who-Are They and What Will They Do Next? , 1987 .

[3]  Timothy L. Urban.  An inventory-theoretic approach to product assortment and shelf-space allocation , 1998 .

[4]  M. Shimaguchi.  Marketing channels in Japan , 1978 .

[5]  Steven M. Shugan.  Product assortment in a triopolgy , 1989 .

[6]  Dhruv Grewal,et al.  Planning Merchandising Decisions to Account for Regional and Product Assortment Differences , 1999 .

[7]  John F. Magee,et al.  Physical Distribution Systems , 1967 .

[8]  Pierre Hansen,et al.  Product selection and space allocation in supermarkets , 1979 .

[9]  Fred S. Zufryden,et al.  New Computational Results with a Dynamic Programming Approach for Product Selection and Supermarket Shelf-Space Allocation , 1987 .

[10]  I. Png,et al.  Manufacturer's Return Policies and Retail Competition , 1997 .

[11]  Sheldon M. Ross,et al.  Introduction to Probability Models, Eighth Edition , 1972 .

[12]  Evan E. Anderson,et al.  A Mathematical Model for Simultaneously Determining the Optimal Brand-Collection and Display-Area Allocation , 1974, Oper. Res..

[13]  M. Czinkota,et al.  Unlocking Japan's Markets: Seizing Marketing and Distribution Opportunities in Today's Japan , 1991 .

[14]  P. McGoldrick.  Retail Marketing, McGraw-Hill, 1990 , 1990 .

[15]  Fred S. Zufryden,et al.  A Dynamic Programming Approach for Product Selection and Supermarket Shelf-Space Allocation , 1986 .

[16]  Roger M. Heeler,et al.  Modeling Supermarket Product Selection , 1973 .