Shelf Management

Shelf management is one of the important issues for supermarket retailers to monitor their store spaces. The shelf is the location where any product meets the consumer, whereas the shelf is also the final inventory location in the retail supply chain. Marketing assumes that the presence of inventory drives demand and therefore requires excellent operations. There have been many empirical studies to estimate the space elasticity, which is defined as the ratio of relative change in unit sales to relative change in shelf space.

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Retailers can not only increase their profit but also decrease cost by managing shelf well. Increasing sales by attracting the consumer’s attention and encouraging consumers to have additional purchase opportunities can be implemented by proper management of shelf space allocation and products display. An increase in shelf space for an item induces more consumers to buy it. This occurs because of its visibility, popularity or variety. Conversely, low stocks of certain baked goods might raise the perception that they are not fresh. Therefore, demand is often inventory-level dependent.

Tesco was founded in 1924, when T. E. Stockwell, a partner in a firm of tea suppliers, and Sir Jack Cohen came together. Legend has it that Sir Jack Cohen used his gratuity from his Army service in the First World War to start selling groceries in London’s East End markets in 1919. The brand name of Tesco came from the initials of T. E. Stockwell and first two letters of Cohen. The first Tesco store was opened in 1929 in Burnt Oak, Edgware. By the early 1960s, Tesco had become a familiar name. As well as groceries, the stores sold fresh food, clothing and household goods.

Tesco introduced the concept of the superstore in 1967 when it opened a 90,000 square feet store in Westbury, Wiltshire. The ‘superstore’ was a new concept in retailing and the term was first used when Tesco opened its store in Crawley, West Sussex, in 1968. By 1970, Tesco was a household name, its reputation built on providing basic groceries at very competitive prices. During the 1980s, Tesco continued to build new superstores, opening its 100th in 1985. In the 1990s, the company built on its success by developing new store concepts and new customer-focused initiatives.

Tesco broke new ground in food retailing by introducing, in 1995, the first customer loyalty card. Today, Tesco have moved from being the number 3 domestic retailer to being one of the top three international retailers in the world with 2,318 stores and 326,000 people. Sainsbury’s was founded in 1869 by John James and Mary Ann Sainsbury. They opened their first small dairy shop at 173 Drury Lane, London. By 1882 John James Sainsbury had four shops and had plans to expand his business further. It was also in 1882 that John James opened his first branch in the prosperous suburb of Croydon.

This shop sold a wide range of ‘high-class’ provisions and was more elaborately decorated than the earlier shops. In the late Victorian period competition from large national multiple retailers such as Lipton’s posed a serious challenge to small regional chains like Sainsbury’s. John James found it necessary to step up his rate of expansion so that he could buy goods as competitively as these companies. Between 1890 and 1900 the number of Sainsbury’s branches trebled from 16 to 48. The early 1970s, Sainsbury’s had reached a scale and stature that warranted public status.

The company’s public flotation in 1973 was at the time the largest ever flotation on the Stock Exchange, with a 45-fold oversubscription for shares. Preference was given to small shareholders in the allocation of shares. During the 1980s and early 1990s expansion into the north-east of England, Scotland, north Wales and Northern Ireland extended the company’s trading area to become national in scale. By the end of Sainsbury’s 125th year, the company had 355 stores in a trading area stretching from Truro to Edinburgh.

The company’s most easterly store, an off-licence at Calais, opened in April 1994 and soon developed a local clientele as well as earning the accolade of Cross-Channel supermarket of the year. At March 2004 J Sainsbury plc operated 583 supermarkets and 50 in-store banking centres. Sainsbury’s has continued to support local communities, the environment and charities. In the past financial year Sainsbury’s Supermarkets donated  6 million through cash and ‘in-kind’ donations, and customers and colleagues raised a further  5 million through our stores and business centre. J Sainsbury plc employs around 150,000 people.

Appendix 3: Brief layout of Tesco and Sainsbury’s store in Guildford During the research process picture was not allowed to be taken in both of the stores. Therefore, sketch of the layout of the two stores were drawn to provide an brief idea of how have they configured and manipulated their space. The red writtings on the sketch is to introduce the products on each shelf, purple writtings represents the place where discounted and promoted products were placed.