This post is sponsored by Acosta.
Shifting shopper habits and the evolution of omnichannel are changing the grocery retail landscape and investing in shelf management can help retailers maximize sales.
“It has become imperative to shift to a comprehensive approach for shelf management,” said John Clevenger, senior vice president/managing director, Strategic Advisors at Acosta.
“Traditional practices, like slotting fees, still matter, but new technological advances provide game-changing insights and incorporating them can create a competitive advantage for leading-edge manufacturers and retailers.”
From striking the right balance of private and national brands to the applications of simulated eye tracking, Acosta explores the importance of shelf management and the advantages that new technologies in this space offer in its report, Shelf Management: The Value of Getting the Shelf Right. The report outlines why mastering the shelf can unlock bigger sales than the traditional promotion tactics on which many manufacturers and retailers still rely.
Shoppers make decisions at the shelf
While e-commerce is gaining a foothold in grocery retail, most decisions about what ends up in shoppers’ carts are made in-store.
“Shoppers report that more than half of their grocery buying decisions are made at the shelf, proving that influence in-store is crucial for brand success,” Clevenger said.
The deciding factor comes down to price for most shoppers. Of the 55% of shoppers who said they make their decision about which brand to buy while in the store, 22% of those make their decision based on price or value, according to Acosta’s 2018 US Shoppers Survey. One in five shoppers said they have a set of brands they typically choose from and purchase based on what appeals to them at the shelf.
Understanding these and other consumer behaviors can help retailers assemble shelf layouts designed to maximize sales and productivity.
Importance of shelf management eclipses trade spend
Retailers and brands have long relied on price decreases and in-store displays to boost sales but returns on such promotions have been decreasing year after year, according to the report.
From a total store perspective, 66% of units sold are not promoted. This percentage rises significantly in certain categories, such as pet care and bakery, in which 84% and 77% of units sold are not promoted. A promotion may bring a short-term, quantifiable gain, but the impact may be difficult to quantify, return on investment is variable and brand equity may potentially erode if promoted too often or too deeply.
“On the other hand, shelf management can provide a 6% sales lift that continues to pay dividends for the manufacturer and the retailer over the long term, proving that trade spend may not be as effective at delivering return on investment as shelf management,” the report states, citing a 2018 APT Shelf/Planogram Study. Manufacturers stand to benefit from scaling back on trade spending in favor of shelf management, which represents 66% of their sales and 85% of their profit, according to data from Nielsen and Acosta.
A way that retailers can boost profits through shelf management is making sure categories are properly spaced and striking the right balance between private brands and national brands. Many retailers allocate too much shelf space to private brands, and 71% of category leaders are under-spaced, according to the Acosta Space Analysis Tool data from 23 retailers across 19 categories.
Tech tools can help retailers optimize the shelf
Building out the ideal shelf based on how shoppers make decisions as they move through the store is getting easier, thanks to new technologies such as simulated eye tracking. The Trax platform captures what a shopper would see and creates digitized shelf images that can help minimize out-of-stocks.
"Advancements in technology have transformed shelf management from a time-intensive, manual and diagnostic approach to a shopper-centric, continuously monitored and predictive approach,” said Kim Adoerre, research manager, Acosta Strategic Advisors. “We can now track shopper response to changes at the shelf to determine the biggest impact before making a costly in-store investment. Technology has led to more automation and simplification as well, especially for planogram development, which allows for more time to be spent on high value analytics to drive sales.”
If you enjoyed this article, sign up for FMI dailyLead to get news like this in your inbox, or check out all of SmartBrief’s food and travel newsletters, as we offer more than 30 newsletters covering the food and travel industries from restaurants, food retail and food manufacturing to business travel, the airline and hotel industries and gaming.