Inventory policy for dense retail outlets

A potential retail operations strategy is to have a "dense" store. That is, a store that combines high product variety with a small footprint. Retail management desires smaller stores to provide the strategic benefits of conv enience and speed to customers, but desires larger stores to provide high p roduct variety. Noting the benefits of smaller, more numerous stores, sever al retailers well known for their extremely large store size recently have begun experimenting with a small store format. Traditional retail inventory management policies, however, have difficulty combining high variety and s mall store size. Here, the potential advantages of the dense store type are explored. To facilitate this exploration, inventory policies are developed to help manage small stores by increasing their product density. Results b ased on grocery industry data indicate that the heuristics compare favorabl y to optimality and permit the dense store concept to potentially achieve s ubstantial gains compared to current practice. (C) 2000 Elsevier Science B. V. All rights reserved.