Retail category managers tell us that pressure on shelf space continues to mount due to SKU proliferation, pace of innovation and space needs from other categories.

These aren’t the only issues retailers face, but they’re among the most intractable because pressure continues to grow, making shelving and assortment as difficult and as important as ever for retailers to manage efficiently.

This is why retailers invite value added support from vendors in the form of research, shopper insights and best practices implementation. Despite the open invitation, retailers tell us that most of what they get is appreciated, but "just not very useful."

The more shopper-driven insights that thought leaders can bake into their assortment analysis and recommendations the more ‘next level’ they become.  Shopper insights from quantitative and even qualitative research provides valuable input to create more strategic recommendations that leverage shopper-driven insights, data, analytics and quantification.

Let's take a look at a few examples.

True Opportunity Cost of Out of Stocks

  • In 1996 the Coca Cola research council conducted a cross category study showing that average retail out of stock rate was 8.2%.
  • A 2007 study by P&G in conjunction with GMA, NACDS and FMI updated the average CPG out of stock rate at 8.3%.
  • Compounding this, we often see ‘virtual’ out of stocks for products located on top or bottom shelves that have been sold down to just one or two SKUs against the back of the shelf which many consumers don’t see and can’t reach.
  • We’ve also seen ‘phantom’ out of stocks in larger categories that had become so cluttered by SKU proliferation without shopper driven organization or shelf navigation that in one shelf observation study we saw 26% of consumers leave an aisle without finding or buying what they were looking for when the product was there all along.  They just didn’t see it.

Mathematics can calculate the probability of out of stocks.  Shopper research provides the inputs needed to understand true opportunity costs including the effects of switching dynamics to arrive at a more accurate net impact of out of stocks.  Shopper insights also help thought leaders to develop ways to maximize shopability which in turn helps to minimize both ‘virtual’ and ‘phantom’ out of stocks.

Beyond Ranking SKUs by Sales

Traditional assortment analyses often rank sales or calculate market coverage to look for competitive levels of distribution before reaching a point of diminishing returns.  This may be useful, but hardly unique.  Factoring in retailers’ carrying costs provides  better direction on whether to add or reduce items in the assortment.  The real key is the  analytics to determine which items to add or delist.  As we stated in a LeadingEdge article back in 2008:

“sometimes less can be more, and sometimes less is just less”

Knowing the full impact of assortment decisions  net of first, second and subsequent switching interactions is one of the keys to maximize retail shelf productivity. This approach to ‘next level’ assortments helps clients provide thought leadership and value-added support for their retail partners to improve both efficiency and effectiveness at the shelf.

To learn more, contact us at 973 644 9788 or ijr@edgewoodcg.com.

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