Thesis (Ph. D.)--University of Rochester. William E. Simon Graduate School of Business Administration, 2017.
Retailers aim to maximize pro ts given the constraints of space and existing infrastructure. Retail space is organized into departments or collections of related product categories, which managers administer by allocating their respective locations, sizes and assortments. Category locations, sizes and assortments also affect consumer shopping experiences. This dissertation explores how consumers pay attention in the store and make purchase decisions, and how retailers can use this knowledge to improve their store layouts.We exploit a natural experiment of a large-scale departmental layout change of dairy in a supermarket store location, with two other stores acting as controls. We develop a conceptual framework of how department layout influences consumer attention and, ultimately, shopping behavior. We combine a rare dataset of floor plans and category planograms with extensive shopper panel data to analyze how categories' store contexts affect consumer purchases. In the fi rst chapter, we characterize 7 reset treatments related to location and assortment. Analyzing both aggregate and household-level purchase data, we present descriptive evidence that the reset made a significant (2.1% - 3.7%) improvement in sales. Investigating category-level data, we find that the location and assortment changes affect purchase quantities through the channel of attention/consideration, and induce learning among customers. Harnessing consumers' past purchase information, we classify individual category engagements into four types - focal, secondary, fi ll-in and never bought. We use this heterogeneity in category types to identify spillover effects between adjacent categories. In the second chapter, we specify a structural model of demand that incorporates multi-category consideration, learning, and choice at the individual level.The model enables us to leverage the exogenous variation in location and assortments to identify the effects on attention/consideration and choice. Results indicate that the location of the category within the store layout has a significant effect on consideration. We fi nd that being adjacent to popular categories has a negative "attention-stealing" effect on consideration among customers. Our learning estimates also indicate that consumers perceptions of category match values depend on their past category engagement levels. Customers learn most about secondary and ll-in categories, which have medium to low levels of past engagement. However, customers' preference for never-bought categories is negatively biased with very little uncertainty, indicating low probability for new product trial. In the third chapter, we then study the retailer's layout planning problem, which is to optimally assign categories' location, size and neighbors within the layout. Since category demand are affected by spatial spillovers, the retailer cares about overall layout pro ts and does not maximize pro ts category by category. Our model of category demand and pro ts incorporates effects of location and size, spatial spillovers as well as individual heterogeneity. With this model of demand, we propose a heuristic algorithm that optimizes retailer's total department pro ts and yields an improved layout solution.
