Initial Shelf Space Considerations at New Grocery Stores: An Allocation Problem with Product Switching and Substitution

Managing limited display areas is an increasingly challenging task in the grocery retail industry, especially given the current high levels of product proliferation. The decision of how to best allocate and manage shelf space is critical to grocery retail profitability. Moreover, this decision is escalated for initial shelf space considerations at new grocery stores. Without loss to generality, this paper presents a new approach to the shelf space allocation problem that could be applied to new grocery stores for determining their initial shelf space consideration by incorporating consumer behavior actions based on the consumer’s decision process.