Industry Retail. White Paper. White Paper Get closer to customer with next generation planogram

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1 Industry Retail White Paper White Paper

2 Introduction Today s consumer goods market is flooded with products has given choices to consumer than ever before. And growing customer s exposure to highly fragmented media passes the pressure on retailer as a channel to reach consumers. Retailer also in an attempt to give more choices to its consumer ends up with 1000 s of SKU s on shelves without regards of its operational effectiveness and space productivity. As rule says that only 20% of SKU s generates 80% of business, does it mean that retailer should knock out all SKU s which are not contributing majorly in his business. NO In today s competitive environment where consumer is king, retailer dare not choose to cut choices and feed only with few fast moving SKU s. This 20% contributing SKU s, is the differentiator between retailer and his closest competitor. As research says that 70% of customer s purchase decision are made in the store. Your customers are forced to make an in-store decision in the situation like, If the purchase of one triggers the desire for a related product An out of stock situation of SKU force customer to purchase substitute And consumer s increasing attitude of Try something new also generates desire if they encounter new taste /flavor on the shelf. The growing number of choices available in the market, space availability at store and profit margin are placing significant pressure on retailers for being a customer centric and profitable. A mechanism or solution which can balance between assortment that meets consumer demand, productive space plan, and intact profits is the needs of the hour for most of the retailers. This paper will demonstrate how retailer can use best of his space and inventory through collaborative space planning methodology.

3 Key Features and Benefits Facilitate collaboration Integrate space allocation with inventory, assortment planning and replenishment process, facilitating higher level of collaboration between space planner and merchandising team. Fast and Realistic Generate 1000 s of planogram in significantly lesser time. Tool create virtual realistic planogram with exact specification of fixture/products for feasible implementation of the same. Automated, optimized and store specific planogram Integrate category strategies, merchandise guidelines and space optimization in product placement process. Automatic product positions and space adjustment to achieve merchandise and space objectives Space & Inventory performance analysis Performance report of productive usage of each shelf space based on SKU sale in visual, chart and table options. Calculation of used space VS capacity available for financial performance of shelf space. Financial performance affected for SKU due to availability and visibility Planogram Publishing The Roadblocks to Planogram From the time of local mom & pop store to corporate retailing, Space, Inventory and Labor is most important assets for a retailer and the best use of these three is the most challenging task in all time. Complexity of the situation has risen all time high in recent years when handling 1000 s global store and more than million s of SKU. Achieving maximum utilization of space and inventory is a difficult and challenging task in this scenario due to lack of understanding or limited understanding of store specific needs. This in-turn leads to mis-or non-alignment of corporate driven category and space plan and performance goal with store level executions. The result is failure of store level space compliance. There are many reasons why it is difficult for a retailer to develop an ideal space plan and achieve store level compliance. Improper space allocation Complexity in space allocation due to conflict of limited shelf space availability and the large number of product that needs to be displayed leads to improper space allocation. Labor intensive and time consuming Creating store specific planogram is not an easy and quick task, it requires significant number of resources and 100 s of hour to develop planogram that account store specific customer s product needs and fixture dimension. Planogram generated in tool publish in pdf format Easy to understand for floor staff to implement the same

4 According to a recent study, when customer cannot find the products they need at their choice of store, the cost to retailer can represent as 40% of intended sales. 31% customer will purchase it at a competitor, 15% will delay the purchase, and another 9% won t purchase the item at all. Source: out of stock study funded by P&G, sponsored by FMA, FMI and NACDS and conducted by Thomas W. Gruen, Ph.D., University of Colorado and Dr. Daniel Corsten, IE Business School Madrid Every category is different and should be treated differently When it comes to display on shelves every product has its own characteristic to be sold in distinct manner. Merchandise attribute constraint like adjacencies, facings and sub categories hierarchy makes space management even more challenging and complex. Every store is different Every store is differ by its customers profile so as sale performance of SKU s also differ, it require a very in depth caution in assortment building process that suits store specific needs. Space availability and fixture dimensions also vary store by store cause big challenge for space planner to create store specific planogram. Lack of collaboration and visibility Traditionally, Space planner develops planogram sitting at corporate office in a fairly isolated manner without regards to actual space availability in store and their specific product requirements. The development process lacks inputs from category, manufacturer and store and thus serves no purpose of this initiative. >> Take your space management to next level The industry has come a long way from the days of handdrawn planogram laid out on makeshift of two-by-four shelves in the backroom to systematic diagram.

5 And another recent development in the same direction is that many global retailers are realizing the need to move further from cluster level planogramming to store specific planogram in an attempt to keep the cutting edge in present competitive scenario. But successfully winning over real time challenges and hurdles for store specific planogram is not an easy task without the help of contemporary technology solutions. Moving ahead in the same direction retailer and IT solution provider are working together to win over traditional labor intensive and time consuming planogramming process to automated and integrated space planning. Planogramming is just not a diagram of product placement on shelves; it is the tool which gives reality to corporate category s strategies and plan. And technology s role in this transformation Is unprecedented, has helped many retailers to take their space management to new high and manage store shelves in a better way. In below part of the paper we have explained how retailer can achieve optimization objective of space and inventory by collaborative planning. Become customer centric at shelf level An IDC global retail insight survey indicated that majority of retailers and manufacturer rank customer centricity as a top three success factor. What is customer centricity? How one successful retailer /manufacturer is different from others when we say customer centric? In real term Customer centricity is company s ability to execute its top-level category plan down to individual store s shelves and this ability distinguishes them from its closest competitor. In simpler words it is nothing but keeping merchandise on shelves which match your customer s taste and preferences. It looks simple for few store but complexity multiply when category team has to build store specific assortment for multiple store and for 1000 s of SKU s. With no or little technical capabilities, retailers find it difficult to incorporate multiple store specific customer buying trends into assortment building process leads to improper space allocation and thus defeat the purpose of whole space management. Improve sale and reduce markdown with better matching demand and supply s space planning solution enables the high level of demand and supply coordination. It track the target stock at shelve, its daily movement and quantity required to replenish in the given date. Given the capability of target qty and re-order point tracking, retailer can also generate report or analyze visually and can better monitor the stock movement of SKU placed on planogram. Create the best presentation of merchandise by visual capability Aesthetically well maintained shelves attract customer and influence their purchase decision. It s discovered in various researches on customer and their movement in retail store that customer always tends to spend more time on shelves which attracts them aesthetically. Tec

6 With 3D Visual capabilities retailer can manage realistic planograms that include custom fixtures and curved shelves, as well as slat walls complete with signs and textures. Beyond merchandising aesthetics, the solution helps you match merchandise strategy with the way that consumers shop by brand, flavor, product complement or any other key product attribute. Realize greater agility With the solution s rapid processing speeds, planner can quickly calculate/recalculate and review result of optimal set of space planning as rules and condition are changed. And because it is centralize, strategic changes from the corporate-level can be implemented in all categories across the enterprises in fast, yet precise and control manner. Maximize ROI of every inch of store selling space For a retailer, shelf cost varies from lower for dry shelf to higher for dairy shelf space to exorbitant high for categories like frozen food. And to get the maximum out of every inch of retail space is one of the prime objectives for a retailer. But, complication in space allocation cause great impediment for this objective. On one hand, shelf space is an expensive and scarce resource for retailers. They would prefer not to increase the store size due to the high costs of construction as well as maintenance. On the other hand continuing rise of retailers attempt to diversify their product lines in a bid to lure consumer Space elasticity is the term use by researcher & solution provider to measure the responsiveness of the sales with regards to allocated space or change in allocated space of products and is getting recognition by the industry as a solution of conflict between space and growing number of choices. Determining and analysis capability of space elasticity of SKU in planogram through visual, chart and table option, gives retailers an opportunity to optimize space by shifting product placement or increase /decrease facings of SKU s in planogram.

7 Reduce cash flow blocking by inventory optimization Efficient Cash flow in any business is as crucial as smooth blood circulation in a human body and inventory is one of the most crucial investments for a retailer which every retailer wants to circulate as quickly & efficiently as possible. Inventory optimization has always been in highlights and many solutions have been evolved to counter it efficiently. But controlling and managing inventory effectively on shelves is another effort by solution providers in this direction, in the recent years. This is the first time in history of space management that space planner, merchandiser and replenishment executive are on the same page with regards to inventory and has given complete visibility to retailer and facilitate improve decision making with greater precision in making inventory

8 Planogramming Approach s approach to planogramming and space optimization solution incorporate all merchandising and store specific attributes to facilitate best space planning decision quickly and efficiently. The solution support and incorporate large-scale macro space planning objectives into micro space execution. The above chart clearly shows that how data from various sources flow through the Intactix knowledge database and pass the relevant data. If we can further elaborate in steps approach whole planogramming process will have following steps.: Step 1: Store specific assortment In the first step towards efficient and executable space plan. One needs to know store specific customer profile and their current and future demands. Build assortment specific to local taste and preferences in sync with category objectives and strategies. Step 2: Store specific planogram Next step is automated creation of store specific planogram based on actual fixture and SKU s physical details like (SKU s and fixture size dimension, weight of SKU, weight holding capacity of fixture, multi dimensional pictures of SKU s etc). Also accounts SKU s financial performance and deliverable margins for revenue optimization. Planogram generated meets the three key objectives are space& Inventory optimization, increase revenue and aesthetic appeal to product in line with its merchandise guidelines and best practice. Step 3: Publish and share planogram After successfully creating store specific assortment and planogram, the same will be publishing in easily understandable pdf format and share to stores through web interface.

9 Step 4: Collaborative execution and communication The success of this initiative lies with flawless execution at store level. And to achieve this, it requires collaborative efforts from merchandiser, store execution team and vendor through regular communication in execution process. Step 5: Enhance productivity through regular analysis After flawless execution, it requires performance review of the same at store and corporate office level. With the analysis capabilities, space planner can generate reports in regular interval and analyze space and inventory performance and share with merchandiser, store and vendor. Road Ahead With the leading cutting edge technology capabilities, years of working experience with top global retailers and in-depth expertise of different retail formats and vertical, is committed to provide innovative solution. In precise, s client can place right product, in the right store, in the right position at the right time- every time.

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