The definition of shelf-space-elasticity is the ratio of additional sales to additional space allocated in retail settings.
Based on a meta-analysis (Elsend, Journal of Retailing, May 2013) of 1,268 estimates of shelf space elasticities, the author found that:
- The average observed shelf space elasticity is .17, which varies across product categories, with the lowest estimates for commodities, followed by staples, and the highest estimates for impulse buys.
- Store size moderates the effect of product characteristics on shelf space elasticity: in large stores, the difference between elasticities for brand versus category is greater than in small stores.
- Shelf space increases results in greater elasticity estimates than shelf space reduction, a finding that emphasizes the application of shelf space variation as a useful marketing tool.
The author does not explicitly state this, but one assumes that the findings apply ‘within reason’. That is; if you increase shelf space allocation by 10%, sales will increase (on average) by 17% - up to a point.
Also please note this does not mean that sales will increase from 10% to 17% - it means that sales will increase by a factor of 17% (and not by 17%).