4 Cost-saving benefits of data-driven product layouts
By Kyle Dorfling - CMO at DotActiv - Sep 17th 2018, 09:44
The fact that South Africa has entered a technical recession for the first time since 2009 makes for disquieting news. It’s a concerning prospect for anyone who works in the retail industry. With the South African economy under pressure, retailers and their suppliers need to find ways to enhance efficiency and maximise resources. That includes looking after one of the most valuable and sought-after retail assets: shelf space.
It's not just South African retailers that are working to maximise every last square centimetre of their shelf space. Our international customer base, which spans over 22 countries, are all just as focused on efficiency.
With our home ground being in Bedfordview and Cape Town, we naturally have a strong focus on the South African retail market - some of our local customers include Clicks, Dis-Chem, Food Lover’s Market, Pick n Pay, Shoprite, Lindt, L’Oreal, Makro and others. In our experience, one of the most straightforward ways for retailers to save money and drive efficiency is through data-driven product layouts.
A product layout is best displayed via a planogram which is a data-driven visual representation of how products should be merchandised on shelves to maximise sales and efficiency. The data needed to build an effective layout includes sales data, syndicated data, SKU information, fixture information and product attributes to name a few.
What are the cost-saving benefits that retailers are seeing in this method of merchandising their products? Further, what do suppliers have to gain by getting involved? The points below are not an exhaustive list but they should help give you a better idea:
1. Shelf replenishments are more efficient
From a space planning perspective, Days of Supply (DoS) speaks to the number of days it will take for a product to sell out on shelves. This is based on the number of products on the shelf and the recent sales for that product.
With a data-driven product layout, retailers can merchandise their shelves in such a way that they achieve an even DoS. As a result, shelves are replenished at regular intervals. This practical approach results in reduced shelf replenishment costs because it’s no longer a haphazard exercise.
A bonus of achieving even DoS is that it also means a reduction in out of stocks. By having a firm grasp of the shelf inventory replenishment intervals, store staff are more likely to know exactly when to restock their shelves before any gaps appear.
Besides the practical implications of shelf replenishment, there is also the broader subject of inventory replenishment to consider.
The last thing any retailer wants is to order too much of any particular product. Since the planogram stores shelf capacity, DoS and other critical information it is an absolute necessity for making intelligent inventory replenishment decisions. In fact, many of our customers feed planogram data directly into their inventory replenishment systems to supplement the automated inventory replenishment process.
Finally, the planogram aids in managing the product lifecycle by considering what stock is still available in storerooms and Distribution Centre (DC’s) before removing the item from the planogram. Just because a product is no longer listed doesn't mean that it should be removed from shelves right away. The wastage involved in not getting these concepts right is significant.
2. Store openings are more efficient
Data-driven product layouts help retailers with opening orders for new store openings. More specifically they allow retailers to ensure that they order the precise amount required to fill the shelves to capacity. This reduces the risk of under or overstocking.
Secondly, they help retailers to allocate the ideal amount of space to each of their products by basing these space allocations on stores which are likely to be similar. The key with store openings is that retailers should be looking at data gathered from similar stores to set up their product layout, thereby taking any unnecessary guesswork out of the equation.
Thirdly, it allows retailers to merchandise their categories faster. Because each product grouping has an exact plan for how the products should be merchandised, the job of doing the initial merchandising is a simple case of following the planogram to completion.
Lastly, by using exact plans, retailers can order the correct retail fixtures for their store openings. With the planning options available, it is no longer necessary to place incorrect fixture or product orders for store openings.
3. Maximise the selling potential of shelf space
Planograms enable retailers to control the layout of their store’s from their Head Office. That means that any category tactics that have been decided on at Head Office can then be realised at store level when implementing the planogram.
They can also help retailers with logical product positioning and grouping. Shoppers expect to find certain products together, and without a planogram, which represents these groupings along with merchandising principles, the category is likely to be difficult to shop. Thus, by understanding their product groupings and merchandising principles, retailers ensure that products are positioned in the correct place on the shelf so that it’s easy for customers to shop.
Finally, a retailer can understand their shelf space performance so as to maximise the selling potential of their shelf space. A data-driven planogram is the best way to allocate appropriate shelf space to products since their sales and syndicated data helps calculate the ideal space allocations for each product.
4. Retailers can enlist the help of their suppliers
It is common practice for suppliers and retailers to combine their resources, knowledge and strengths - working together to achieve optimal space planning is no exception. Suppliers often create planograms on behalf of retailers with the aim of growing the categories overall sales and in so doing, gain an advantage for their own products in the process. Retailers benefit from this because the suppliers absorb the cost and share their expertise around the category.
For suppliers, it’s just as beneficial to get involved in creating these product layouts because it affords them the opportunity to gain influence where their products are merchandised along with how much space they get on shelves.
Whether you are a retailer looking to improve shelf space and inventory efficiency or a supplier looking to gain influence over how your products are merchandised - planograms are a must. At DotActiv we have the specialised software, support, training and services you need to get real results.
Feel free to reach out to me on LinkedIn or learn more about DotActiv.
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