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Darren Gilbert Jan 11, 2018 4:21:19 PM 8 min read

Why Planogram Compliance is Critical for Retail Management

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It can be argued that the planogram is one of the most important category management tool available to retailers. That’s simply because of its end goal: it helps you to increase your sales and profitability. Simply knowing that should encourage all retailers to observe planogram compliance.

But what is planogram compliance exactly? To understand it, it’s worth breaking the phrase down and considering the word, ‘compliance’ on its own. According to the Cambridge Dictionary, compliance is defined as “the act of obeying an order, rule, or request”.

In the context of retail and more specifically, planograms, achieving compliance is essentially following a set of rules that will ensure that the right products are in the right place on the shelf. More than that, these products have all been given the right amount of space.

The above should be a solid reason enough for you to not only push for compliance but to maintain it too. That said, there are a few more reasons why it’s necessary, which we discuss below. There’s also a little advice after that to help you along your way.

Why planogram compliance matters

          1. Without planogram compliance, you won’t get the results you want

As a retailer, your end goal is to increase sales, improve overall category profitability and become a store that caters for its customer so that they’ll keep coming back. You can do that by creating and implementing planograms in-store.

Of course, simply implementing a planogram is not enough - anyone can look at a planogram and attempt to recreate it on the shelf. You also need to ensure that it’s implemented correctly. After all, your aim is to obtain a result. And the right result at that.

So what happens if you fail to implement planograms properly? More importantly, what are the financial implications of non-compliance? Besides failing to increase your sales and improving your profitability, there are quite a few ramifications.

For one, you’ll struggle to increase your foot traffic. Implementing data-driven planograms allows you to increase traffic because you’re providing your customers with what they want, when they want it, and where they want it.

Then there is the fact that you’ll battle to reduce your stock replenishment costs and out of stocks. Excessive inventory holding is another strong possibility as is the fact that by not maintaining compliance, you’re opening up the door to wasting the selling potential of your shelf space.

          2. If you don’t manage your shelf space, someone else will do it for you

Generally speaking, shelf space allocation has a massive impact on product sales. That’s why it can often be described as a retailer’s biggest asset. That also means that if you don’t manage it yourself, someone else will. Like your suppliers.

And that can happen easily enough. Let’s say you’re opening a new store, and there are two different reps supplying different products but within the same category and they’re busy packing a fridge. There is every possibility that they’ll push their luck to give themselves more shelf space.

That’s not the only instance. You’re also likely to find that many suppliers will have staff going store to store with the aim of manipulating shelf space allocations. If you don’t take full control of your own shelf space, they’ll do it for you to your own detriment.

Of course, it’s perfectly okay to give a product more space on the shelf. But that’s if a supplier can show you how giving more space to their product can improve your bottom line. The problem comes in when you’re persuaded into giving a supplier’s product more space when it isn’t in the best interest of the category as a whole.

Even a small change in shelf space can have a major impact on the overall health of your store. And especially so if you consider the compound effect that occurs when that change is made at more than one store.

          3. By ensuring planogram compliance you can create a culture of accountability

In the retail industry, it’s one thing to say you’re going to do something. It’s a completely different thing to actually do it and do it properly too. That’s why accountability is so important. And especially so when it comes down to implementing planograms.

Remember, we’re talking about the difference between making a sale and losing it.

Let’s take the example of an FMCG retailer. Their Head Office will send out a set of planograms to their stores. A few of their stores happen to be in different provinces so they can’t conduct a spot check to see if everything is as it should be. More about spot checks later.

Of course, you can’t simply trust your stores to get it done - trust is just not possible at this scale as much as you might want it to be. To create a culture of accountability, Head Office needs to instead follow up on the plan they set up to ensure it gets done. Store Communication Software can help here. It can help create an expectation at store level and store managers know they need to be up to date in case Head Office requests an update.

Imagine you’re a customer and you walk into a store that hasn’t observed planogram compliance. You’ll notice it immediately. There will be gaps on the shelf due to out of stocks, products won’t be in the right place, and the whole shopping experience will be unpleasant.

More than that, if you dig a little deeper and ask a few pertinent questions, you’ll probably find that there is no specific person responsible for overseeing the proper implementation of them.

Advice to ensure planogram compliance

          1. Communicate your planograms to roleplayers and stores effectively

Communication is key in everything you do. That’s especially true when it comes to the retail industry. Even more so when it comes to creating and then implementing planograms.

An easy way to do this, and thus ensure planogram compliance, is to set up regular meetings between your buyers and those people who are creating your planograms. It’s up to you to decide how regular these meetings should take place.

Let’s say, for example, you meet every Friday. During the week, you need to be in constant communication about any changes that you might want to see on the planogram. Then, on Friday, you can sit down and talk about the changes that were suggested. It’s during this time where you can also talk about why a planogram looks the way it does and why it will benefit the category.

Besides communicating planograms to the various roleplayers, it’s just as important to communicate efficiently with the stores themselves. After all, your stores need to understand why they need to be set up in a particular way. By communicating, you’ll also have better buy-in from them. Again, your store communication software can play an important role, informing stores of any changes that need to be made in-store.

          2. Conduct regular spot checks

To ensure planogram compliance, there is the possibility of travelling to the actual store and seeing if the shelf looks the same in the store as it does on the planogram.

That said, it must be noted that conducting in-store spot checks is more of an old school tactic. While it might be okay if the stores are close by, it can also be a particularly expensive and cumbersome exercise if you have stores in many different parts of the country.

Just to note, this isn’t about trying to catch people out or throw anyone under the bus. Rather, it’s to ensure that the work that goes into creating a planogram isn’t for nought. There is a good reason why planograms are built a certain way.

An advantage of conducting a spot check is that it’s a direct way of making updates for your stores. If you notice that the planogram looks different to the actual shelf, there is a valid reason for the difference, and it appears to be working for the store, they can make a change to the planogram immediately and then send it off to Head Office for sign off.

          3. Automate proof of planogram implementations

If you don’t have the time to conduct spot checks, another great way to ensure planogram compliance is to automate the proof of their implementation. In fact, between this and spot checks, it’s what we’d recommend.

By that, we mean take a photograph of the shelf in-store and upload it to a central database, where it can be viewed by Head Office and anyone else who needs to be made aware. This includes your buyers and those responsible for creating the planograms. That means that if anything is wrong, the store can be contacted directly.  

Again, this isn’t about trying to catch a store out. It’s rather an attempt to ensure that the store (or stores) are performing to their potential. But it’s worth having everyone involved in getting proof that a store's planograms are compliant.

Conclusion

Planograms are much more than just pretty pictures. There is a considerable value to them. If they are not implemented correctly, you won’t see the true worth of designing them. And the sole purpose of a planogram falls away.

Looking for advice or need a category management solution that can help your business? Visit our online store here for more information or book a custom exploratory consultation.

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Darren Gilbert

With over 10 years of writing and marketing experience, Darren joined DotActiv in 2017 as a content writer where he was responsible for producing blogs, Ebooks and more. He has since worked himself up to the role of content manager, where he oversees all and any content produced by the company. He has a Bachelor of Arts in International Studies from the University of Stellenbosch.