An Unbelievable Amount Is Lost to Poor Shelf Placement
Physical retail stores remain overwhelmingly dominated by guesswork when it comes to product placement. Managers make decisions on where to put items based on instinct. While it might work for some lucky stores… most suffer for it.
Ill-considered shelf placement costs retailers billions each year. Cashiers ring through thousands of lost sales every month simply because popular items are out of stock or buried on shelves. Valuable retail space sits empty because no one bothered to plan properly.
Retail layout software puts an end to decades of educated guessing. Business owners can now access concrete data about how to optimise shelf placement for higher profits. Want to know how it works? Keep reading.
Here’s what we’ll cover:
- Why Guesswork Fails
- How Does Shelf Planning Software Work?
- Does Placement Really Affect Sales?
- What to Look For In Shelf Management Software
- Getting Started With Optimised Product Placement
Why Guesswork Fails
Imagine walking into a store and seeing absolutely nothing on the shelves.
Pretty ridiculous right? But that’s essentially what your sales teams are doing every day when they manually plan stores.
Retail shelf space is precious. It’s an opportunity to earn more money. When no plan is in place for where every product sits on that shelf… your business is literally leaving money on the table.
Globally, retailers lose an estimated $1.75 trillion every year due to empty shelves. A large percentage of that is directly attributable to poor shelf allocation. The best selling items are unaccounted for while dead stock gathers dust.
All stores are different. Each SKU has its own sales velocity. Even within the same retail chain customer behaviour can vary widely from location-to-location.
That’s why shelf planning applications like scorpion software allow retailers to create customised, data-driven planograms. Accounting for individual product sales performance, shelf dimensions, and stock levels. It’s the difference between tossing products on shelves and strategically placing them.
Guessing where to put inventory costs companies real dollars. There’s no magic formula, but data comes close.
How Does Shelf Planning Software Work?
Retail shelf planning apps (a.k.a. planogram software) help retailers map out exactly where every item sits on their shelves.
…but that’s just scraping the surface.
Today’s leading planogram applications integrate directly with existing POS systems. Sales data flows in real-time allowing teams to immediately react to changes in product performance. Powerful visualisation tools show exactly what each shelf will look like before anyone heads into store to set it up.
Let’s break down the process:
- Collect sales data for every item in a category
- Feed that data into the software tool
- The software determines the optimal placement for each item based on past sales velocity
- Teams use the digital planogram to arrange shelves in-store
- Monitor results and repeat for continuous improvement
The whole process is data-centric. Plans are built entirely around actual sales performance versus gut feeling.
Does Product Placement Affect Sales?
If you’re still on the fence about shelf placement software… let’s take a look at what happens when your products aren’t strategically placed.
Up to 62% of revenue in grocery stores comes from impulse purchases alone. Decisions made in the moment have a massive impact on how much your customers spend.
The crazy part?
Approximately 80% of impulse purchases are made in physical stores. Online browsing doesn’t hold a candle to what customers see while standing in your aisles. If your best product isn’t facing forward at eye level… you’re leaving money on the table.
Planning your shelves wisely can impact your bottom line by:
- Increasing Impulse Buys. Eyes are naturally drawn to products facing forward when looking at shelves. Planogram software knows exactly which locations are worth fighting for and which ones aren’t.
- Reducing Out-of-Stocks. Proper shelf planning accounts for product sales velocity. Higher selling items get more facings reducing the chance that shelves will go blank before restock.
- Encouraging Add-ons. Did you know that placing complementary products next to each other increases basket size? Modern shelf planning tools can identify these opportunities.
Many retailers have seen dramatic sales increases simply by going from manual shelf planning to a digital approach. And the best part? It’s relatively painless to implement.
What to Look For In Shelf Planning Software
Before you start reaching for that mouse and keyboard there are a few things you should know about retail shelf planning software.
While most modern shelf management tools offer something similar… there are features that stand out from the rest.
First and foremost is a sales data integration. The best shelf planning tools pull information directly from your POS or inventory management system. Manual entry is not only time consuming but prone to errors.
Another biggie is 3D visualisations. Walking into a store and seeing that the shelves look drastically different than the layout you were given is frustrating. 3D plans give your teams visual tools to accurately set shelves the first time.
Your solution also needs to be scalable. One size does not fit all in retail. If the software can’t handle multiple stores with different sizes and layouts then it’s time to look elsewhere.
Lastly, look for tools with analytics capabilities built-in. You wouldn’t drive a new route without first mapping it out. Analytic features allow retail managers to track shelf performance over time.
Getting Started With Shelf Planning Software
So you want to take your store from guessing to great shelf planning? Excellent. Here are some simple steps to help you get there.
- Use your current shelf layout in one category or department.
- Gather sales data for every item in that department
- Load up your shelf management software and generate your digital planogram
- Head to store and follow your new shelf layout
- Track category performance for 4-6 weeks and compare to previous periods
Once the results validate where inventory should be placed it’s time to go bigger. Implement data-driven placement across your stores.
Just remember to take things one step at a time. There’s no need to tackle every category at once.
Wrapping It Up
Effective retail shelf management is about making sure the right products are put in front of your customers at the right time. Software allows teams to leverage sales data when planning shelves.
To recap…
- Guesswork = bad shelf management
- Shelf planning software uses sales data to help teams intelligently place products
- Optimised shelf placement = more impulse purchases and less out-of-stocks
- Start with one category. Scale when you see results.
Not every software solution will list these features directly on their websites. If you’re unsure about what you should be looking for don’t hesitate to reach out to sales teams. Ask questions and make sure you understand everything that you’re getting before signing any contracts.
