Inaugural lecture of newly appointed professors: How big should my store be?

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Prof. Joern Meissner, PhD

Professor of Supply Chain Management and Pricing Strategy

Kühne Logistics University - KLU

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On Wednesday, 21 September, 2011, Jörn Meissner, Associate Professor for Supply Chain Management & Pricing Strategy will give a lecture on the topic "How big should my store be? On the interplay between shelf space, demand learning and assortment decisions". The lecture is open to the public. Space is limited, so please register ahead of time.

Abstract:

We consider the operations of a "fast-fashion" retailer. Zara and others have developed and invested in merchandize procurement and logistics strategies that permit lead times as short as two weeks. This has resulted in flexibility that allows retailers to adjust the assortment of products offered on sale at their stores quickly enough to adapt to popular fashion trends. In particular, firms can chose from a large number of potential styles to produce and offer for sale, and then use weekly sales data to renew their estimates specific items’ popularity. Based on such revised estimates, they then weed out unpopular items, or else re-stock demonstrably popular ones on a week-by-week basis.

In sharp contrast, traditional retailers such as Marks and Spencer face lead times of several months as a result of trying to realize cost savings by producing in countries with lower wages in Far East. Consequently, these retailers need to predict popular fashions months in advance and are allowed virtually no changes to their product assortments over the course of an entire sales season, which typically is only several weeks long. While providing procurement cost benefits, this approach often results in substantial unsold inventories at the end of a sales season while missing to identify other high selling styles.

In view of the great deal of a-priori uncertainty in the popularity of a new fashion and the speed at which fashion trends evolve, the fast-fashion operations model is emerging as the de-facto standard operations model for fashion retailers and other vendors of seasonal consumer goods.
 
In this context, we focus on the assortment decision of the retailer with regard to his/her most valuable resource: shelf space. Particularly in high street fashion retailing, stores are usually located in high-street venues with high rent, which is more or less proportional to the available shelf space. An important result of our search for assortment strategies is insight into the marginal value of shelf space. This information will assist managers in selecting the most profitable store size for their business. [Joint work with Kevin Glazebrook and Jochen Schurr.]

To register please send an email to: beate.linnenberg(at)the-klu.org

The Lecture Series

The KLU Lecture Series is a forum for scientists and practitioners to talk and discuss on state-of-the art topics related loosely to logistics and entrepreneurship.