Spatial Externalities in Product arrangements on Retail - shelves : Empirical Investigation and Associated Heuristic
By Prakash Satyavageeshwaran, Sudhir Voleti
Journal of Retailing.
DOI
www.journals.elsevier.com/journal-of-retailing
Citation
Satyavageeshwaran, Prakash., Voleti, Sudhir. (2017). Spatial Externalities in Product arrangements on Retail - shelves : Empirical Investigation and Associated Heuristic Journal of Retailing. www.journals.elsevier.com/journal-of-retailing.
Copyright
Journal of Retailing., 2017
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Abstract
A product's position on the shop shelf relative to other products in the category is an important yet understated factor affecting product demand. We present a parametric demand model that interprets the location of shelf facings as a set of (potentially irregular) lattice data and thereafter deploy spatial econometric techniques to (a) jointly estimate shelf position-dependent demand parameters for all the stock keeping units (SKUs) in the focal category, and (b) develop an understanding of the nature of position-effects on SKU sales. In particular, we empirically investigate the (a) existence, (b) source, (c) range, (d) directionality, and (e) monetary value of spatial externalities in product demand. Using one year’s sales data on 4 different planograms from 25 stores in a regional grocery chain in the frozen chicken category, we find that Spatial externalities exist; operate at a ‘global’ range (i.e., extend beyond items immediately adjacent to the focal item); act through both correlated predictors and correlated error terms; are multi-directional; act differently in type-blocked versus brand-blocked product arrangements and have substantial sales impact (of the order of 12% of sales, on the average).

Sudhir Voleti is an Associate Professor of Marketing at the Indian School of Business (ISB), where he is also a distinguished faculty member in Business Analytics. A renowned researcher in the fields of marketing research and business analytics, he has previously served as Associate Dean of Faculty Alignment and the Registrar's Office (FARO) at ISB.

Professor Voleti holds a PhD in Marketing and an MS in Applied Statistics from the University of Rochester, a PGDM from Indian Institute of Management (IIM) Calcutta, and a BE from the Birla Institute of Technology, Ranchi, along with years of industry experience.

Professor Voleti is recognised as one of India's leading data science academicians. His research focuses on combining data with econometric and statistical methods to explain phenomena of marketing interest such as evolution in the equity of brands across time, valuation of brands using secondary sales data, the sales impact of geographic and abstract distances between products and markets, and the performance, productivity, and benchmarking of salesforce organisations.

Professor Voleti has published numerous research articles in leading academic journals such as Management Science, Journal of Marketing, Journal of the Royal Statistical Society, the International Journal of Research in Marketing, and the Journal of Retailing, as well as book chapters and articles in the popular media. He also serves on the editorial review boards of numerous journals. Some of his significant works include "Impact of Reference Prices on Product Positioning and Profits", "The role of big data and predictive analytics in retailing", "Why the Dynamics of Competition Matter for Category Profitability", "A Bayesian non-parametric model of residual brand equity in hierarchical branding structures", and "An Approach to Improve the Predictive power of Choice - Based Conjoint Analysis".

Sudhir Voleti
Sudhir Voleti