Using T test to understand shelf placement decisions

Lets consider a simple scenario.

Say ABC retail is setting up a new store in Frazer town area

Pre store launch catchment area/competitive store analysis helped in deciding store format and product mix to display

The store in Frazer town, the following categories are relevant for the consumer ( Mangloreans, Muslims,Goans )
Non veg food items
Hair care
Basmati Rice
Atta
Kerala Parottas

The store manager of Frazer town branch wants to optimize the 12000 sq ft of shelf space he has

He wants to know which “Hot” shelves and he has a few hypothesis based on experience which he wants to test

A/B Multivariate testing can come handy to discern which shelf combination maximises revenue and minimize inventory carrying cost Or if the product is moving slow ( it becomes a slow moving item and a promotion /advertising may be required to stimulate sales )

HOW DOES A STORE MANAGER DECIDE SHELF PLACEMENTS TO MAXIMIZE STORE REVENUE AND MINIMIZE SHELF SPACE INVENTORY ?

Store metric - Shelf alignment index

Definition of shelf alignment index

Shelf alignement index is a simple metric which stores can use to check if the merchandise displayed on their shelves is in alignment with shopper behavior at the store. For example lets say

Input data required to calculate shelf alignment index

1. POS transactions ( SKU, Store, date, um, qty, value )
2. Shelf space audit ( Category, date, shelf area in sq ft, relative share of shelf )

How does one calculate shelf alignment index

1. Rank all categories ( soaps , shampoos , vegetable, ice creams ) based on the relative number of units sold per month.

2. Rank all categories on share of shelf

3. Calculate difference in rank = Rank(Sales)-Rank(Share of shelf)

4.
Example of shelf alignment index


Application of shelf alignment index to optimize store operations