Comments on: The Economics of Supermarket Shelves

By: Brand Power? : Farnam Street

Brand Power? : Farnam Street — Sun, 21 Aug 2011 23:37:29 +0000

[...] modeled behavior blog offers something sensible but I don’t think it fully explains what’s happening: The [...]

By: zbicyclist

zbicyclist — Mon, 08 Feb 2010 19:08:09 +0000

Inventory carrying cost [minimize]
Delivery time [external]
Case pack [external; "they come 12 to a box"]
Safety stock [minimize consistent with service level]

All these factors mean the shelf space for an item is not, and should not, be proportional to its sales.

By: Adam Ozimek

Adam Ozimek — Sun, 07 Feb 2010 18:48:15 +0000

Thanks for that heads up Scott, their explanation is very interesting.

By: Scott

Scott — Sun, 07 Feb 2010 16:33:23 +0000

The best response i’ve seen so far was here

I think there are multiple factors at work here: In times of stress our brains turn towards familiarity (Bias from stress-influence encourage us towards the availability bias). If we’ve had a good experience with Kraft Dinner in the past and we know a storm is coming we don’t want to take a chance on a store-brand (uncertainty avoidance). We are also creatures of habit– if we normally buy Kraft Dinner and it sells out, we do what we normally do which likely doesn’t lead to buying the store brand (we substitute with something else). There is also an element of scarcity — subconsciously we know national brands will be more desirable to others so we desire them more. And then there is signaling. After the national brands noticeably start selling more there is also an element of social proof that comes into play (KD is selling quick, everyone is buying it, i need to buy it…).

http://bit.ly/cXakRy

By: Katy

Katy — Sun, 07 Feb 2010 03:16:53 +0000

I used to work selling wine into supermarkets for big brand name Gallo wines. They are masters at manipulating this concept. Consumers buy more of wine x when there is more space allocated to it because it gives them confidence amidst the bewildering array of wines to choose from. If a wine has more space it is obviously popular and therefore good, right? But stores may prefer to try to get them to buy more expensive wines, wines that support them with additional promotional spend, wines that have not been selling and which they want to get rid of, or own brand wines with higher margins. Also, the selection of wines available says something about the credibility of the store and means high spending connoisseurs are more likely to visit.

By: Funky J

Funky J — Sat, 06 Feb 2010 23:16:05 +0000

@ Morten

I thought Adam was talking about popular brands, not so much product. So why does the “popular” brand sugar sell out before the generic brand sugar, when they’re both the same product?

By: Morten Josefsen

Morten Josefsen — Sat, 06 Feb 2010 18:01:46 +0000

I think we have a much simpler explanation. Popular stuff need to get reshelved more frequently. It is not efficient to stock each product in the same proportion as sales. Think of salt and sugar. In a given store 100kg of sugar (say) is sold per 1kg of salt, but it is not efficient to stock 100 times as much sugar as salt. During a blizzard, sugar will run out first. Even so there is no fancy space elasticity or whatever.