Friday, May 17, 2013

Shelve Old Ideas About Shelf Space Allocation

What are the best ways to allocate your store’s shelf space? The classic study addressing this question was published almost two decades ago, so you might think some of the assumptions need revision. Research over the past few years by German researchers confirm the value of that thinking. Here are findings from those studies—at European University Viadrina and Catholic University Eichstätt-Ingolstadt—and other research:
  • Across overall product categories, the biggest sales growth comes from expanding the shelf space allocated to impulse buy items. The elasticity is smallest for expansion with commodities and staples. There is substantial interchangeability among commodities and staples. As a general rule, if your particular favorite isn’t out on the shelves, you’ll settle for a close substitute. Impulse items have more individualized personalities. The more there are, the greater the urge to splurge. 
  • An increase in shelf space allocation will have a greater impact on sales than will a decrease in shelf space for a product category. This means you could progressively build sales by rotating which product categories get more space. Behind this effect is that consumers are feeling overwhelmed by the number of purchase alternatives available to them. They’re attracted to a store by an abundance of variety, but are relieved when the filtering task is easier. An increase in space allocation attracts shoppers. A decrease in space allocation for a category can relax shoppers. 
  • The nature of the shelf space makes a difference in the sales effects of allocation changes. End caps—shelves at the end of aisles or racks and facing perpendicular to those other shelves or racks—draw extra attention and stimulate extra sales. 
  • Items which convey values have higher shelf space elasticities. Increase the shelf space for organic and nonorganic items, and the increase in sales will be greater for the organic set. 
  • For many merchandising tactics, what large footprint retailers do can be a useful model for the smaller retail operation. You watch how a successful Big Box changes relative allocations of shelf space and then parallel those changes in a scaled-down version in your store. However, there is one way in which what works for the big doesn’t work the same way for the small: Large stores do well to pay attention to the different effects of changing allocations to product categories versus brands within the category. Smaller stores should not pay as much attention to this. 
For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Organize Organic Item Assortment/Promotion

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