Shoppers continue to drive the need for a better localized and curated assortment at the shelf. Retailers and suppliers alike are under fire from not just online retailers but the customer who expects a more satisfying shopping experience and a reason to return to the store.
60% to 70% of purchase decisions are made by the shopper when standing at the shelf. The Shelf is the primary sales agent!
The overall shopping experience of your customers is greatly affected by the planogram. The planogram represents the final link in the supply chain and is, in most cases, the moment of truth that converts a shopper into a buyer.
In a recent Wall Street Journal article titled “Grocers Wrest Control of Shelf Space from Struggling Food Giants”, the writer’s assert that big brand manufacturers are losing power to dictate the merchandising strategy of products at the shelf to the retailer due to the retailer’s ability to leverage proprietary research, sales data, and technology to produce planograms that more effectively serve their customer. The retailer owning the merchandising strategy and process also allows them to have more control over the merchandising of high-margin items like private-label and niche products. For example, in 2018, sales of private-label drinks rose 4.9% faster than national brands. The reasoning and benefits of the sales lift in this example is multifaceted.
- Merchandising the private-label product to the right of the national brand
- Better informed shoppers and consumers
- Lower price point and greater margin percentage
So, how does this planogram paradigm shift impact you? Well, if you are a retailer, it means no more “free” labor from vendor partners or brokers to draw planograms or receiving those bottom-line dollars from slotting fees. It also means you will need to implement the right people, processes, and technology to generate effective planograms that return quantitative results. The most successful retailers are investing in a wide variety of technology solutions and data insight providers to assist them in understanding their customers. While it is certainly a wise decision to gather consumer data and shopper insights, it is equally or even more important to respond to the data received and act proactively on consumer trends and shopper behavior.
If you are a CPG company, holding the role of ‘Category Captain’ or ‘Category Advisor’, it means you’ll need to implement processes and leverage technology that proves continued value and confidence to your retail customers. Retailers are looking for an unbiased approach to assortment and product placement. They need to trust that you are providing them with planograms that will best serve their customer with the right assortment, at the right locations, on the right shelf, at the right capacity, at the right price.
The five ‘rights’ of merchandising may read to be cliché but even with all of the advancements in retail technology software and purchasing outlet options available today, the underlying definition of Category Management still holds to be true:
“managing items within a category as one strategic unit, including the determination of product pricing, placement, promotion, and assortment based on a defined retail strategy, the competitive environment, and consumer behavior”
For many years, we have witnessed the evolution of the category management methodology and the role it plays in the merchandising and profitability of retail shelf space. Space Management as a business practice within category management has been in existence for over 30 years now. However, the technology during that time has progressed more rapidly than most expected. While planogram development is still very much a balance of visual art and data science which serves to the call of the category management primary objective, the innovative tools available today provide us the capability to be more proactive with category tactics, respond faster to insights and demand with more sophisticated and scientific methods.
Whether you are a retailer, supplier, or manufacturer creating planograms, implementing a 360° Category Management solution should be the vision. Develop and execute a plan that reduces multiple processes and data silos to create one synergistic, common platform, leveraging automation and optimization to streamline processes, drive sales, increase margin, support store operations, and deliver to established timelines. The transformation to 360° Category Management will enable faster, better macro and micro space decisions. It will provide more accessible data for Category Managers, Floor Planners, Visual Merchandisers, and Assortment Planners to develop better insights and solutions on trends and thought leadership; which in turn drive improved performance, sales, margin, speed-to-shelf, and store-level compliance.
Be realistic with your approach. It is easy to be sold on technology to assist in achieving category excellence (ACE). There are impressive tools available in the marketplace that you can leverage to ACE your retail merchandising objectives. However, implementing best-practice processes and investing in people is equally, or in some instances, even more important than the technology used.
We will discuss these steps in more detail in a future post. In the meantime the world is changing as grocers grab data to make better decisions for their shelf space taking them away from CPG companies. If you are a retailer or a CPG company that needs some outside guidance on any of these areas, please reach out to Plantensive today!
Plantensive consultants are expert category management and supply chain experts. In addition, Plantensive offers a professional planning concierge service that provides staff augmentation and strategic staffing for any type of work within the value chain. To learn more about this service, contact us today!