Abstract A retailer assortment is deined as the mix of products carried by a retail store. Assortment planning (AP) is a process of selecting types and number of product to be kept from a given product line and also to determine the optimal level of inventory of these products. The assortment optimization problem in the literature varies because of the type of demand models considered by the authors or because of the context of the problem considered. Various authors have developed models in past that cater to various objectives associated with shelf-space allocation and assortment decisions. It has been observed that the demand estimation in any assortment planning problem mostly considered shelf-space and substitution parameters. In the current work, the assortment planning problem dealt by various researchers primarily with shelf-space and substitution effect consideration will be reviewed. Keywords: Assortment Planning, Demand Models, Shelf-space, Substitution. A Literature Review on Demand Models in Retail Assortment Planning Alok Kumar Singh*, Rohit Kapoor** Introduction A retailer assortment is deined as the mix of products carried by a retail store. The purpose of selecting a subset of products from the available products is to maximize the retailer’s objective e.g. proit, under consideration of constraints like limited space available for display, deined budget for the number of products and their SKUs, inventory to be carried to meet a desired service level, and last but not the least to fulil the ever changing needs of the consumers. As stated by Quelch and Kenny (1994), the number of products in the market for sale are increasing at a faster rate than the realized sales of the products. It is understood that the assortment selected by any retailer has a greater impact on its gross margin or sales and hence the assortment planning decisions play an important role in retail management. Assortment planning (AP) is a process of selecting types and number of product to be kept from a given product line and also to determine the optimal level of inventory of these products. The critical issue faced by the retailer in the process of AP is to estimate the demand for each product. Further by using these demand estimates, developing a proit function and choosing the best array of products to maximize proit under various constraints (Rajaram, 2001). Assortment planning is relatively a new ield for both the academicians as well as practitioners in terms of specialized models for optimizing assortment. Though assortment planning always remained a point of concern for the retailer, the development of scientiic methods is limited in this ield. Assortment planning has been the focus of numerous industry studies. Taylor (1970) was among the irst few who stressed upon the importance of assortment planning in retail sector. It is very important for any retailer to eficiently manage the process of assortment planning. Poor assortment planning may lead to markdown costs due to excessive inventory of un-demanded products and lost sales due to rapid sell-outs of popular products. In the perspective of retailer, category management allows them to establish good category assortment plans as well as to make better decisions on shelf space allocation and prices and promotion in order to improve sales and proits (Arkader and Ferreira, 2004). * FPM Participants, Indian Institute of Management, Indore, Madhya Pradesh, India. E-mail: f09aloks@iimidr.ac.in ** Assistant Professor, OM and QT Department, Indian Institute of Management, Indore, Madhya Pradesh, India. E-mail: rohitk@iimidr.ac.in