Photo: RetailWire
Why is shelf management getting short shrift in supermarkets?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
My new favorite statistic comes from Acosta, who figured out there are approximately 14,000 miles of shelf space across 20,000 supermarkets in the U.S. That’s the equivalent of an aisle that stretches from New York to L.A. — five times.
But, according to the report, most grocers aren’t investing nearly enough in one of their biggest, most visible assets.
While manufacturers allocate about $100 billion to trade spending each year, says Acosta, shelf management gets only about $300 million — or about 0.3 percent of the amount given to trade spend. That’s despite the fact only 66 percent of total units sold are not promoted.
More important, those items deliver a disproportionate 85 percent of profits compared to 15 percent from promoted items.
In addition, lifts associated with all promotional tactics continue to decline year after year, falling from 29.8 percent in 2015 to 26.7 percent in 2017. So, “while spending on trade often results in declining returns, ‘fixing the shelf’ achieves a six percent sales lift,” according to the report.
And it gets better.
Although the percentage varies by category, Acosta’s research indicates a whopping 55 percent of grocery buying decisions are made at the shelf, especially in segments like, say, ice cream where consumers might look for the best deal or peruse a set of brands they typically choose from for an interesting or appealing flavor.
The Acosta report also revealed that store brands are getting more shelf space than they deserve — 11 percent more, on average — which can have a negative impact on productivity and lead to out-of-stocks of top-sellers. Indeed, notes the report, 71 percent of category leaders are under-spaced relative to the number of units they drive.
So, why the heck are retailers and manufacturers not reallocating resources toward shelf management? Resistance to change, lack of time, difficulty quantifying the impact, stubborn attachment to old ways of doing things — take your pick. Okay, money probably has something to do with it, too. Although costs have come down, new technologies that support shelf management like video mining, simulated eye tracking and virtual shopping don’t come cheap. But neither does bankruptcy.
Discussion Questions
DISCUSSION QUESTIONS: Why do you think grocers spend comparatively small amounts on shelf management? Which technologies hold the most potential when it comes to shelf management?
Poll
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
John Karolefski
Editor-in-Chief, CPGmatters
I believe that shortcomings in grocery shelf management are due to the human factor in maintaining shelves stocked. Servicing vendors do not always do a good job of understanding the velocity of key items. Store associates don’t always look at the rear of the lower shelves, where product is sitting — invisible. Last, it may be due to inappropriate use of planogramming software, or the lack of discipline to adhere to the replenishment calculations. In these times, this doesn’t sound like rocket science.
The reasons for lack of action are not new. This research highlights the importance of the “longest yard.” Somehow the focus shifted from managing the shelf to figuring out online. While no one disputes the emerging importance of online, what’s happening in stores, particularly at this critical nexus of customer decision making, can no longer be ignored. The technology is available, what’s missing has been the commitment and resourcing.
Shelf management is the skulduggery of retail — it takes hard work to delve into the details and manage effectively on an on-going basis. Yawn! This despite the fact that the majority of sales happen on shelf. Perhaps it’s more exciting to negotiate pricing and get trade allowances. Or maybe given that “center store is dying” it’s not worth the effort to deal with. It could be that it’s just a pain in the ass to reset the shelves often. Regardless, the biggest opportunity in retail – and, perhaps the most bang for your buck – is getting the shelf right (this includes assortment and keeping items in stock). Not sure you need new technology like eye tracking and heat maps as much as getting the shelf fundamentals right by having the right tools to understand real-time data and then planning to optimize.
I’m in the business of numbers and facts. These statistics are revealing in so many ways. The numbers suggest that retailers are too busy extracting trade dollars from CPG brands before the products actually are placed on the shelves. As the numbers suggest, they should be listening to their customers and the data — between the two sources, retailers could optimize those 14,000 miles to benefit their shoppers and their profits!
Much of the data for shelf management already exists. The biggest opportunity lies in leveraging the existing data — planogram, POS, inventory, PIM, and shopper traffic. Of course this is all for naught if the retailer doesn’t act on the data. I, for one, will use shelf management and these statistics to support the design and measurement of in-store customer experiences.
Since the dawn of time, shelf management has taken a backseat to just about everything else. Now that newer technology capabilities are taking center stage, attention once again is getting diverted. Shelf management may not be exciting, however COGS is the largest controllable expense for grocers. And with out-of-stocks as well as store-level overstock costing millions in lost revenue, multiple labor handlings, product loss and customer frustration, now might just be a good time to walk a few of your stores and see the erroneous methods we employ at the shelf. For example, in most stores 80 percent of SKUs move less than a case per week per store. Why then do those items get the same shelf allocation that fast-moving items get? Sure there are some great technological tools to leverage today, however, leadership needs to acknowledge some fundamental, perennial missteps in this area first.
Many store systems link shelf location to items and ultimately sales of those items but even with dramatic advances in technology many don’t. Even if data availability is an option, managing the shelf locations accurately is time intensive. Most likely, grocers aren’t able to easily pull sales reports by locations, compare that data with items that aren’t selling and then quickly make decisions to enhance displays. Sure, the reports exist for some of this analysis, but going beyond the reports, the more important piece is suggesting what to do next. Limited time, limited resources, limited capital and no immediacy to proving return all add up to the notion “it’s a cost, not an investment.”
It is true that shelf management is not one of the sexy areas of retail technology, but it certainly does deliver. However, this article is only part of the story and it’s time for grocery retailers to take the next step, which will make shelf management both sexy and productive.
By linking shelf management to supply chain, retailers can significantly improve the efficiency of their operations as well as sales and profitability. Unified retail or space-aware supply chain is the next major development in retail efficiency and will enable retailers to make their traditional store retail outlets more productive, efficient and profitable. This in turn enables competition with online, happier customers, less waste and happy management.
Imagine if the supply chain knew what is on shelf, what the rate of sale is and therefore when stock of each item needs delivering and in the right mix and sequence to be efficiently stacked on shelf? The saving in staff time is enormous, the disruption to customers is significantly reduced and service levels increase resulting in better sales.
Using the single forecast to run both supply chain and shelf management is one thing. The exciting results and massive return on investment from linking it all together gives retailers the incentive they need to boost their shelf management processes.
Perhaps it’s because most grocers have already gone through the SKU rationalization process of the 2000s. Changes we make to the shelf now are less likely to have a big impact. We still show only 15 percent win-wins for brands and their categories when we test new layouts and/or assortments. Retailers need to push for new ideas – manufacturers have little incentive in category management unless they are being grossly underrepresented in a chain.
Too much time and money is spent on all the components of e-commerce, which — of course — is important. But more important are the results of a recent survey saying that 87 percent of consumers prefer grocery shopping in stores. They say they want a satisfying shopping experience. That surely includes product availability, which is the result of efficient and consistent shelf management. That is where grocers should be devoting more time and money.
Basic shop-keeping is still the core of any retail business…grocery, CPG, tech or apparel. And yet how many retailers are really good at it? I find the range of execution to be wider in apparel than grocery. American Eagle is always immaculate and pristine in its presentation. Sears is always a mess…always. And I don’t think it’s about some new fancy technology. It’s about where on the overall list of priorities that shop-keeping lives.
Restocking is a labor cost that store managers are asked to control. It is sometimes hard for marketers and technologists to recognize the very analog reality of the shelf, whether on the store floor or in a warehouse. The plan-o-gram is the agreed upon ideal. How long does it last? On a busy day, not long…
All absolutely RIGHT ON! (I’m about halfway through writing a much broader perspective about what will actually happen!)
It’s a blindspot for many retailers — they accept (more or less) shelf management as-is and focus on promo, packaging, etc. It’s kind of like putting on a new outfit every day but never going to the gym. Sure, it does improve it, but the biggest gains come from impacting what’s underneath. Shelf management tools like ShelfBucks, Perch, Bossa Nova, SmartAisle, Globalworx, AWM Smartshelf, Pensa, Focal Systems and many others start to get at the core of what’s happening in-store and can have an outsized impact.
In the world of vendor managed shelves, do the retailers even need to spend money managing the shelves? I know VMS is not that prevalent today, but I believe allowing vendors to “buy”, “maintain” and “manage” shelves at retail outlets would take the whole mall concept to a new height and would open a whole new vista of opportunities.
Where’s the sparkle? Where’s the sizzle? For grocers, the shelf is not the main concern because they’ve been optimizing it for hundreds of years. The fact that it’s not doable in real time has limited data accuracy and metrics beyond t-logs and misses the “profitability” factor when optimizing makes it ever more difficult.
Few stores have aisle resets more than once or twice a week, and resources are scant when it means operating the store or managing a line at the registers. Add to that the tiny margins grocers have now, it becomes clear why dynamic planogram technologies just haven’t taken off. Lastly, most tech being used for shelf mgt has yet to prove its weight — especially on an enterprise scale across thousands of stores. The few examples I have seen are in optimizing point of purchase displays, which is less shelf mgt and more marketing spend mgt.
Shelf management has been around for a long time, but it is a boring block and tackle task that is also labor intensive. As retailers shift online and try to make stores more efficient, the work on shelf management gets short shifted. I wonder if the next generation smart shelves will be designed with storage in the middle and space allocation will be done mechanically 🙂 We can always dream.
Grocery store managers get their bonus money based on revenue and man hours. They are not taught or encouraged to go beyond that. The merchandising and ordering is largely left to employees that have no practical understanding of consumer needs or wants. Executives make store closing decisions with almost no information about store inventory relevance and what does exist always points to store management instead of inventory management.