Every single space planning decision you make affects your shelf capacity in some way or another. It can be as small as increasing a single facing or as large as removing a product from the category altogether. Regardless of the reason for making the change, each will have a significant impact.
When and why shoppers become confused
From one angle, giving your customers the opportunity to choose from a wide variety of products sounds like a great idea. And it is. It’s also an advantage for you if you’re a retailer looking to edge out your competitors. That said, there does come a point in time where all this choice starts working against you.
It’s a problem that is well documented and is known as decision paralysis. Essentially, it’s when your customers have too many options available to them, and as a result, they can’t make a decision without feeling distressed or frustrated. Alina Tugend addresses this topic in more detail in The New York Times.
Of course, there is only so much space available on your shelf. Knowing this, it’s why shelf planners rely heavily on gondola congestion percentage as a measure.
If, for example, you’ve given each of your products on the planogram a single facing and you find that your shelf is full, your gondola congestion percentage would be 100%.
Just to note, you should never aim for maximum congestion since it’ll result in too many options, and thus, decision paralysis or shopper confusion as already mentioned. Also, in offering too much product on your shelf, you’re making it that much harder for your customers to shop your stores.
What is an ideal congestion percentage?
Since a high shelf congestion can leave your shoppers confused and agitated, it’s important to set an ideal congestion percentage. But what is an ideal congestion percentage?
Essentially, it’s about finding the balance between visual impact and product range. In doing so, your gondola will be both visually appealing and have enough product to please your customers.
That said, it also depends largely on the size of the products in your category. Your larger products can get away with a higher congestion percentage (as much as 80%) whereas your smaller products would do well to aim for a much lower gondola congestion.
And there are other factors that play a role, including your Days of Supply (DOS). If you planogram is under a lot of pressure (a low DOS), you’d want to eliminate some of the range to free up any congestion.
Below are three factors worth considering to help you manage your shelf capacity in a way that will avoid shopper confusion, and increase your sales.
1. Focus on getting your floor plan right
When it comes to monitoring your shelf capacity, it all begins with your floor plan.
Why? It’s pretty simple: when planning your floor layout, you need to give each of your categories the right amount of space to ensure it performs at its best. The amount of drops is calculated according to a variety of factors, such as number of sales, units movement and profit.
For example, let’s say that the Baby Diapers category does 30% of your sales, 25% of your unit movement and 35% of your profit. That’s 30% if you average them out so you should give your category 30% of your space. If you have 100 drops, that’s 30 drops. You can follow the same principle for all of your categories.
That said, as part of this, it’s also recommended that you do a cross-category analysis. A cross-category analysis is defined as an “assessment across two or more categories to explore relative strengths or weaknesses”. By conducting such an assessment, you can analyse and compare each category with respect to their sales, profits, returns and so on. With that retail data at hand, you’re better placed to determine how much space your different categories deserve.
Just a note of warning here: if you give the wrong category too much space, you’ll end up with range bloat. We’ve already mentioned the problem of range bloat in a previous article around inventory value.
On the other hand, if you decide to keep your range small, you waste your store space. The result is that while your category range remains the same size, it will receive a smaller space allocation. Congestion, invariably occurs.
Also, you’d be placing unnecessary pressure on your other categories. If you’re interested in finding out which store layout best suits your store, read this article.
2. Ensure you’re ranging the correct products
We’ve already mentioned the problem of offering too many products to your customers. It leads to confusion and frustration. On the other extreme is the problem that can come about as a result of either not ranging the correct products or ranging too few.
The best, of course, is to find a balance between the two. How can this be done? That’s where your localised assortment planning strategy comes into play. You must ensure you have sufficient products to meet the needs of your target demographic and local market. If you’re trying to bring in a range that isn’t for them, you’re simply stocking your store with products that won’t sell.
Before you know it, you’ll have a congested store and customers confused as to who you are attempting to target. By covering all the ranges aimed at your specific target market, instead, you won’t overwhelm them. More importantly, it’ll help you to lower your congestion and make the shopping experience that much more enjoyable.
That said, when ranging your products it’s also worth ensuring that your range is connected to your space. That way, you’ll know both your minimum stock order and your capacity stock order.
3. Set up a target congestion percentage which makes sense
As already indicated, your target congestion percentage varies according to the size of the products in your category. That means, for example, the target congestion percentage for Baby Diapers will be completely different to that of your Men’s Deodorant category.
Of course, that doesn’t mean that two categories can’t have the same target congestion percentage. It’s based on the size of your product rather than the type of category. But, when setting up a target congestion percentage, it’s important to look at one that makes sense to that category.
Let’s take the Baby Diapers category as an example again. Since the products within this category are generally larger in nature, it’s possible to have a higher congestion percentage. On the other hand, a category such as Men’s Deodorants, where products are smaller, a high congestion percentage wouldn’t be a good idea.
A target congestion percentage for this category would thus be lower (meaning more facings) to ensure shopper satisfaction. Mind you, any congestion percentage that you do follow needs to fit into your overall retail strategy.