With the help of planograms, retailers can determine precisely when and where to place their products for maximum financial results. Planograms also enable retailers to merchandise their products at the right place and at the right time, allowing for a better shopping experience for customers, which leads to added sales.
But it’s not just about increasing sales - there are also other practical reasons why retailers are turning to planograms.
1. Out-of-stocks
Out-of-stocks occur when inventory has been exhausted. The most visible kind for the consumer is retail out-of-stock. It gives the consumer the impression that a store is neither organized nor able to cater to their needs. In some cases, it may prompt them to go to a competitor.
Out-of-stock is most often caused by inconsistent shelf replenishment practices. This is one of the most significant challenges that retailers face since not using data-driven planograms, results in poor financial performance over the long term.
To avoid the mistake of out-of-stock, retailers put measures in place to achieve even days of supply on shelves - this infographic explains how days of supply work and why it’s such a valuable tool. Planograms allow them to achieve this goal because they give retailers a data-driven visual representation of how long a product will last on the shelf before it must be repacked.
Once achieved, retailers can replenish their gondolas at regular intervals, meaning they’re less likely to run the risk of being out of stock; unless, of course, there is a significant change in consumer demand.
The product replenishment rate is, therefore, both simplified and optimized through the use of planograms; with the bonus of leading to more revenue and better customer satisfaction.
2. Getting more value from data
Retailers without planogram tools struggle to get any real value from their point of sale (POS) data. Yes, the data is there, but they do not know how to interpret or analyze it since it’s isolated. Data is vital since it gives them the information that they need to compete and compete well.
To overcome the challenge of getting more value from their data, retailers can combine their sales data with retail space data through the use of planograms. There are two main ways that retailers can organize their data to gain greater control and understand its real value:
- By combining POS data with inventory data, they’re able to see what is happening at a line item detail level.
- By combining POS data with their retail space data, they can figure out what is going on at a store level.
Thus, it can be used to predict sales or profit changes of an individual product, brand, or an entire category. It can also tell retailers a lot about what they need to do to improve.
3. Understanding shelf space performance
To get more value from their data, retailers need to understand their shelf space performance. That’s because those retailers who don’t make use of data-driven planograms have no way of understanding how their shelf space is performing.
If retailers don’t understand how well a product is performing in relation to the shelf space they are occupying, how can they justify whether or not to allocate more or less space to the product?
They can now turn to planograms to overcome this challenge, as this is the best way to allocate appropriate shelf space allocations to products. Planograms are essential to examine shelf space performance data to exploit the full potential of their data to improve shelf space efficiency.
4. Messy stores
Again, this has a direct effect on the customer. In a cluttered and messy store, retailers have no understanding of where or how to place their products. Thus, there is a high possibility that products aren’t where they’re supposed to be. In addition to being out of stock, being in a messy store adds to the customer’s negative experience.
To alleviate the problem of having messy stores, retailers are using planograms to achieve logical product layouts.
For example, retailers group and merchandise products by category, sub-category, or segment; merchandise products from small to large on the shelf; position house brands next to market leaders, and place their best products at eye-level. This leads to satisfied customers and visually appealing stores.
A correct product layout goes a long way toward helping stores become a success. Planograms also help merchandisers to implement well-designed plans so that the result is a category that is presented in a logical shopper-friendly fashion.
5. Product layout inconsistencies
When retailers don’t use planogram software, they run the risk of having product layout inconsistencies between their stores. The shelves at each store shouldn't be laid out differently as this affects the retailer’s brand identity. More than that, retailers confuse customers who expect to find a similar layout no matter which store they visit. This is what we call “decentralized space planning” i.e. it allows stores to do their own thing.
Retailers are overcoming product layout inconsistencies through the use of planograms by centralizing their space planning management straight from the head office. The result is that consumers experience a similar layout no matter which store they visit.
As stated in a previous article, planograms enable retailers to control the layout of their stores from the head office. They create a foundation for retailers to be consistent in the products they sell and how they are laid out in a store. Consistent store layouts also have a significant impact on how customers perceive a retailer’s brand image and determine whether or not they have an excellent shopping experience.
6. Excess inventory
Excess inventory, or dead stock, is the opposite of out-of-stocks i.e. a retailer has too much stock and they can’t get rid of it. With excess inventory, retailers often find that their capital is held up in their stock and they're making a considerable loss in revenue.
The most common cause of excess inventory is through the decentralized buying method. Through this method, individual stores have total control of the buying process, which is far from ideal, as more often than not, it leads to range bloat.
To reduce the problem of excess inventory, retailers are turning to planograms to centralize assortment planning and buying. Keep in mind that planogramming and assortment planning need to be done in conjunction, as retailers can’t practically choose a range of products without first understanding how much shelf space is available for the category in question.
Through the use of this tool, they can have one central control point where buying and product layout decisions are made; therefore, maximizing their return on shelf space.
