I n the retail industry, backroom inventories are typically associated with higher labor costs and greater operational complexity. Thus, retailers look for ways to eliminate backroom inventories. A heuristic used for this purpose is the pack-and-a-half rule which suggests that the shelf space allocated for a product should be at least 50% larger than the case pack quantity in which the product is delivered. Despite its popularity among retailers, the pack-and-a-half rule has been ignored in the academic literature. We introduce the pack-and-a-half rule, assess its impact on a retailer's profits, identify cost, demand, and product characteristics driving this impact, and propose a modification. Based on an analysis of data obtained from a retailer on 1,986 SKUs in 20 categories, we find that the pack-and-a-half rule decreases a retailer's profits, on average, by 10% when applied uniformly across all SKUs. Further, this decrease is significantly affected by product depth, product width, demand elasticity, case pack quantity, and inventory carrying cost. Finally, we develop a set of modifications based on these variables where the pack-anda-half rule is applied selectively and in a stepwise fashion. These modifications limit the decrease in a retailer's profits to a range between 6% and 7%.