Two of the most challenging tasks that retailers face are identifying the best products to feature in-store and establishing ideal planograms to effectively merchandise these products. Unfortunately, these tasks, which are central to driving profitability, are often done inconsistently.
It’s a significant undertaking, which explains why it’s frequently neglected. So, how can you optimize your shelves without the associated headaches?
Unfortunately, there’s no magical fix. However, embracing a series of best practices can streamline the process.
When talking with retailers, I often encourage them to think of themselves as real estate managers. You have a series of square footage on your shelves that you are offering to the brands you carry. In fact, many retailers routinely track sales and profit per inch of space in each of their categories. Do you know which categories give you the most profit per inch?
Category Captains
Consider appointing a category captain for each store section. This should be a brand that not only leads the market but also possesses extensive knowledge to advise on optimal shelf arrangement. While brands have their agendas and can be self-serving, posing the right questions will encourage them to be holistic in their approach to helping you build out the perfect product set with a variety of brands. A competent category captain can leverage tools, such as retail scan data and consumer market research to justify each product’s placement.
Products Need to Earn Their Space
Unlike online retailers who can afford extensive inventories thanks to massive warehouses, drop-shipping and third-party fulfillment, physical stores must be more selective. Each product should earn its place.
Developing a standard checklist can help determine which products to stock. Here are some starter questions; some might have simple yes/no answers, or you could use a scoring system:
Will this product appeal to a wide range of consumers, or just a few?
Focus on items that fulfill a need for as many consumers as possible. Consider implementing a threshold—for example, “I will only carry products that will appeal to 20 percent or more of the customers who walk through my door.”
How unique is this item? Do I already have a product that solves the same consumer need?
Adding multiple solutions to the same problem can create redundancy and confusion for the consumer when shopping.
Is this brand an ally of my store? Do they enforce fair pricing policies, participate in co-op programs, and have solid sales rep support?
You have an innate ability to work with the brands that you want to work with. Encourage your brands to not only be partners in selling-in a product to you but also selling-through the products of theirs that you choose to carry. Is this brand a driver or a follower within their category?
Imitation always follows innovation, and rarely do innovators flex their marketing muscle to build a product’s awareness-they ride on other’s coattails, often undercutting the market leader’s prices because they aren’t making the same investments in consumer education. Be wary when a brand says, “I have the same thing as Brand X for $5 cheaper.”
Implement a Category Review Program
Many large retailers maintain category review schedules, assessing new product pitches, auditing existing stock, and refining planograms annually or semi-annually. This keeps each category fresh and focused and can be synchronized with staff training and marketing efforts.
They do this for a series of reasons, but it brings a sense of order to their store, empowers buyers to focus on specific categories at specific times, and sets expectations with brands for when to bring them innovation.
While independent retailers can (and should) be much nimbler, a category review/reset calendar is a good idea.
In tandem with the category review calendar is a category reset calendar, meaning that you give yourself a set amount of time to evaluate the category, and then a deadline to implement the new planogram.
However, category reviews also have one downside. Typically, it means that the retailer will miss out on a new and innovative item for months because they must wait until the category reset.
Celebrate Newness
If you’ve implemented category reviews, you don’t have to miss out on new items. Instead, build a dedicated new item destination planogram within your store. This should feature bold signage and be welcoming to consumers. Often, market research indicates that seeking trends and newness is one of the top reasons to shop in a brick-and-mortar store instead of online.
If you have a “New Products” destination, be disciplined in how you manage this space. Each item that goes in this space should have a limited amount of time to prove its worth—perhaps three to four months. Put energy behind these items, make sure staff are pushing them with their best efforts, and if it proves a success, only then should you include it in its home category as part of your review/reset schedule. If it hasn’t proven itself during this time, kick it out of your store.
Don’t Just Release New Items – Launch Them!
It’s not just enough to have a new item on the shelf and hope it will sell. You should have a dedicated playbook within your store for how you launch different types of items.
This playbook should include things like displays, sampling, staff education and marketing support.
While every store has to make a profit, don’t be tempted to hoard discounts with a new product launch. Pass on the discounts you receive from manufacturers in full at this stage because you want to capture as many customers to the new product as possible. Once a customer base is established for a product, then wean down your discounts and enjoy that extra margin.
Evaluate the On-shelf Shopping Experience
Walk up to any category within your store and ask yourself if you have the right items at eye level. If you’re particularly tall or short, adjust your impressions for “typical” eye level. Most adults are between 63 and 69 inches tall, placing the average human eye level at around 5 feet.
Another consideration when looking at height is the typical consumer for the product. For example, don’t put products intended to alleviate joint pain down on the bottom floor where an older customer may have difficulty bending over to reach for it.
Accept that some products are commodity products. Aloe, as an example, can very comfortably live on a lower shelf. Consumers who want it will seek it out wherever it is, and it shouldn’t take up prime real estate.
Identify the “subcategories” within your category. For example, within digestive health, you likely have multi-enzyme, food intolerance, heartburn, anti-gas, nausea/indigestion formulas, and possibly cleanse and detox. You should block products together into these subcategories to make it easier for the consumer to shop. Don’t split up food intolerance products on four different shelves, for example. Consolidate.
Then, within each subcategory, ask yourself if each product has a dedicated purpose for being in its ability to solve a problem for a consumer. For example, do you have DGL from six different brands? If so, why? They are all solving the same problem. You’re simply adding confusion to the consumer, and more often than not, a confused consumer will walk out rather than making a purchase. Or, they’ll jump on their phone and place an online order based on reviews.
It isn’t to say that you should never have duplication of an ingredient. Instead, make sure each product is differentiated. This could include:
Difference of potencies—have high, medium and low
Difference of price points—have a value product and a “best” product
Difference of delivery systems—a chewable tablet, a liquid and a gummy.
Choose a hero product for each subcategory and feature it with multiple sizes and facings. Multiple facings may seem redundant, but it signals to the consumer that it is a product that you stand by and will significantly increase sales.
Pay Attention to the Flow of Your Store
A planogram can only be as perfect as the location in which it is situated. Whenever you look at a category, consider what percentage of your customers would benefit from the products on that shelf.
For example, if a category is somewhat niche, it is OK to tuck it away in a corner. If it is a high-volume category that the vast majority of your customers would benefit from, make sure that category is in a high-traffic part of your store.
Many retailers will place their highest-volume products far back in the store to encourage consumers to discover other products on their way to the item (for example, milk at the back of a grocery store). At the same time, newness should always be positioned as close to the entrance as possible or in your highest-volume area, as newness becomes an annuity to grow your business forever more.
Get Customer Feedback
Often, we survey customers at the very end of their shopping experience as they are leaving or even when they are at home. Don’t be afraid to grab a customer “in the moment” and ask them what they think of the shelf set. Is it easy for them to understand? Is it confusing? You could even have a simple one to three question survey that you periodically rotate throughout the store to ask about different shelf areas.
Get Out of Your Store!
Visit your competitors. Audit what they are doing and then benchmark yourself against the customer experience at the shelf level. For example, mass market retailers like Walmart devote 30-plus feet to the heartburn category. Your store may have less than 2 feet. Should you consider more? By getting out of the four walls of your store and looking around, you’ll ask yourself questions that could inspire a better experience for your customers.VR
Ryan Sensenbrenner leads marketing at Enzymedica, Inc. His expertise spans a range of marketing fields, from retail to ecommerce, and he maintains a special emphasis in branding and customer centricity. He has worked with retailers across the country to help them better market the strengths of their businesses, driving increased revenue and brand recognition within their communities. In addition to his role at Enzymedica, Sensenbrenner serves on SENPA’s Board of Directors, and is currently completing the Chief Marketing Officer certification program at Northwestern University’s Kellogg School of Business.
