Because space is limited, fighting for shelf space in supermarkets has always been fierce. In some cases, shelf space is getting harder to find as supermarkets trade shelf space for in-store cafes and demonstration spaces to make in-store experiences more inviting. Now a new shelf-space battle has erupted. Annie Gasparro (@Annie_Gasparro) and Jaewon Kang (@_jaewonkang) report, “The biggest U.S. food makers, already dealing with increased competition and shifting consumer tastes, now face an additional threat: supermarkets are taking away prime shelf space.” The reason supermarkets are taking away shelf space may surprise you: analytics and private labels. Gasparro and Kang explain, “Grocers are relying on their own proprietary research to decide how and where to shelve certain products, rather than relying on companies that sell well-known brands to tell them what to put on what shelf at what price. The shift is resulting in less space for traditional supermarket staples from companies … in favor of niche items and store brands that deliver higher margins and are often in higher demand.”
The importance of planograms
Planograms are maps used by retailers and manufacturers showing how a section in a store should be set up and laid out. Even after securing valuable shelf space, item placement can have significant impact. Historically, products placed near eye-level sell better than products placed at other heights. Also, the first products consumers see when entering an aisle (the “major”) can help entice consumers to shop that aisle. Unfortunately, not everything can be placed at eye-level or in a major position. As retailers are learning, analytics can help determine the best placement of items failing to gain pride of place. Gasparro and Kang observe, “Retailers such as Kroger Co. and Walmart Inc. are using increasingly sophisticated software to decide where to place items and which products to shelve next to one another — factors that can move sales up or down several percentage points — according to food-industry executives. The software, which can incorporate video-surveillance and other data, helps them create so-called planograms of the products on their shelves. Grocers are incorporating into the software’s algorithms such metrics as ‘walk rates,’ which measure how much time a typical customer is willing to spend looking for certain products before giving up and leaving without buying anything. High-selling products with short walk rates get to be in the ‘strike zone,’ just below eye level, where retailers often put products they want consumers to notice.” A few percentage points in sales can translate into millions of dollars across the industry. They go on to explain some of the variables algorithms use to recommend products placements. They include:
Vertical blocking. “Similar items are organized vertically so customers don’t need to walk down the whole row to find items.”
Top Shelf. “Moving a popular brand from a corner spot to a focal point can boost the category’s sales by 3.4%.”
Strike Zone. “Prime placement for products that retailers want consumers to notice, a bit below eye level.”
Store Brands. “Stocking private-label brands next to name brands increases sales.”
Buy Level. “Retailers often place staples that shoppers know and look for about waist high.”
Lower Shelves. “Kids’ brands do better on the bottom shelf because that is eye level for children.”
This is an area in which my company, Enterra Solutions®, is deeply involved. Enterra’s Planogram solution uses data science to provide insights into shelf-placement and assortment-related decisions to drive category growth. The retailer is ultimately responsible for all planogram decisions, so it is important every decision be both a win for the manufacturer and the retailer, especially if the manufacturer is also the category captain. The Enterra Planogram Optimization Solution attempts to answer the following questions:
• How much aisle space should be allocated to each sub-category (e.g., shampoo, conditioner, coloring, hair sprays, mousse, serums, ethnic, etc.)?
• Within a sub-category, how much space should each brand receive?
• What is the right mix of new versus returning products?
After those answers are determined, the planogram’s sections must be allocated. Retailers usually section by either brand or sub-category. Either way, the questions are the same:
• What section should be the major and minor (the section opposite the major) of the aisle?
• Do any sectional adjacencies seem to make a sales difference (positively or negatively)?
Once the section layout of the aisle has been determined, product placement selection, number of facings, and case capacity issues become the focus. Obviously, not all products can be placed in the strike zone (about 1/3 of products can meet that criteria). As result the following placements decisions need to be made:
• The best mix of products given the sales per linear facing inch performance.
• The number of facings allocated to avoid running out of stock. Duplicate product facings aimed at avoiding frequent shelf-restocks must be balanced against the need to have more product variety.
• The best mix of high, eye-level, and low shelf-placement based on how much sales of each product is expected to decrease when not placed at eye-level.
• Where to place new products.
• Placement of high-sale items. When considering out of stocks for higher velocity products, it may make sense to have some of the product at eye-level, but the remainder higher or lower.
The Enterra Planogram Optimization Solution can address all these questions and provide insights helping retailers make better placement decisions.
Gasparro and Kang note the power of category captains has diminished in recent years as has reliance on manufacturers product placement advice. They explain, “Retailers once relied on big consumer-goods companies when making decisions about allocating shelf space because the companies were the experts in their respective food categories. … Grocers also didn’t want to invest in consumer insights, and they were happy to take the hefty slotting fees big brands pay for prime space. Now, retailers are more focused on doing what it takes to maximize sales growth even if it means giving up some of those fees by stocking more of their store-branded products.” Planograms have been around for decades, attesting to their importance in the retail sector. The Enterra Planogram Optimization Solution brings the planogram planning process out of the Industrial Age and into the Digital Age.
 Annie Gasparro and Jaewon Kang, “Grocers Wrest Control of Shelf Space From Struggling Food Giants,” The Wall Street Journal, 19 February 2020.