A theoretical model for testing new product sales velocity at small format retail stores

Sandoh, Hiroaki; Larke, Roy

RAIRO - Operations Research - Recherche Opérationnelle, Tome 36 (2002) no. 2, pp. 157-172.

The present study proposes a theoretical model to test sales velocity for new products introduced in small format retail stores. The model is designed to distinguish fast moving products within a relatively short period. Under the proposed model, the sales of a newly introduced product are monitored for a prespecified period $T$, e.g., one week, and if the number of items sold over $T$ is equal to a prespecified integer $k$ or more, the product is considered a fast moving product and is carried over to the following sales periods. A slow moving product could be quickly replaced with alternative merchandise in order to make best use of shelf space. The paper first presents definitions of fast and slow moving products, and then a proposed sales test policy based on the model is formulated, where the expected loss is to be minimized with respect to the integer $k$. Numerical examples based on actual data collected from a convenience store in Japan are also presented to illustrate the theoretical underpinnings of the proposed sales test model.

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