Retailers and wholesalers are staking out more profitable ground on store shelves by tapping into the emerging science of cluster-based and store-specific computerized planogramming.
By using data such as point-of-sale scanning histories, consumer demographic studies and product performance in various marketing areas, retailers are now able
to group stores more effectively into specialized clusters, each with its own specific planogram.
Cluster planogramming is resulting in more targeted promotions and reduced inventories and out-of-stocks. It also is setting the stage for the ultimate goal of many retailers: designing planograms specifically for each store.
Sobey's, Stellarton, Nova Scotia, already has made a substantial investment in cluster-based planograms, and is relying on a wide variety of data base analytical tools for making space management decisions.
"We look at the point-of-sale data, the profitability of items and item movement, while seeing if we can meet the labor constraints at store level," said Bernie Mitchell, shelf space coordinator.
Design of the retailer's cluster planograms also is influenced by data culled from its frequent shopper program. Consumer demographics, whether gathered by third-party or in-house research, also have played a key role.
Before any new store opens, "we do a full evaluation on all the areas within a two- to three-mile radius of the store, so we know basically who our customers are and what type of products we need to put in there," he said.
Increasing the sophistication of its planograms already has yielded substantial results for Sobey's. "We're making sure all full-case product can fit on the shelf, [which has] cut down on damages," Mitchell said. Reduced inventories "have cut the amount of labor needed for bringing back leftover stock."
One large Western retailer, who wished to remain anonymous, has seen improved product sales by creating specific planograms for demographically similar stores.
For instance, when designing a grocery planogram for a cluster targeting young, affluent consumers, the retailer puts more health-conscious merchandise on the shelves, he added.
Harvey's Supermarkets, a 39-store chain based in Nashville, Ga., has enhanced its shelf management accuracy just by clustering its planograms by store size.
"We have seen an improvement in our inventory management, a decrease in the levels of our inventories, and we are able to deliver new items to our customers faster," said Barry Robinson, executive vice president.
Associated Grocers, Seattle, also groups store planograms by size, but plans to increase the use of demographic and store-level data to enhance its system in the next few years.
Jerry Gregory, frozen food category manager, said data on merchandise performance in other markets and in other classes of trade is particularly valuable.
"You could be building a beautiful section but if you're missing the second-best and third-best-selling items in the category, you wouldn't even know it unless you had some third-party data," he said. "You need to analyze the marketplace."
The wholesaler's planograms used to be "based more on what the movement of the item was," Gregory said. "Now we're looking at profitability. By using [space management] technology, we've gone from using warehouse movement to using retail-based information as our guide."
As computer space management gains momentum at the cluster-level, retailers plan to upgrade technology in stores and the corporate office and encourage more involvement from their stores.
The Western retailer creates planograms by clusters while allowing individual stores to make whatever adjustments are needed.
The next step, he said, is to upgrade store hardware so that officials in each store can take an even more active role in planogram creation.
"We're thinking about giving each store a space management tool that can read planograms" from a centrally located computer system, he said. Currently the retailer mails cluster-based planograms to its stores.
Along with access to the planogram design, the tool would enable store-level officials to tap into financial and demographic information that influenced the corporate-level designers. "It will give them an idea why the decision was made," the retailer said.
Harvest Foods, Little Rock, Ark., plans to enhance its store-to-corporate communication loop so store personnel can have more direct access to corporate-generated planograms.
The retailer currently creates its planograms at headquarters, but the data is not available at the store level, said Fefe Cabe, space management coordinator. Moving the planogram data base onto the corporate mainframe, which stores already have links to, would allow stores to access planograms as soon as they are finalized.
"Stores could maintain the section to what corporate level wants it to be," Cabe added. "For any new item [introduction], a store could just pull up that planogram, see where we've worked it in and go and put that new item up on the shelf."
Eventually, Harvest plans to create space management programs customized for each store. "We're trying to work toward being more store-specific," Cabe said.
Genuardi's Family Markets, Norristown, Pa., which soon plans to invest in a computer planogramming system, sees store-based involvement as crucial to its ultimate success.
"You can have custom planograms for every one of your stores," said Frank Puleo, director of nonperishables marketing. "Every store can have a separate planogram on a computer file that can be easily filed, pulled up and generated."
Using computer-generated planograms would represent a vast labor savings for Genuardi's. Currently, the chain sets up a shelf set, takes a photograph and then distributes it to individual stores, Puleo said.
Other retailers agreed that store-specific planograms, while labor-intensive at the corporate level, are a way to further improve store shelf sets.
"We would have much better [planogram] execution if they were done directly at store level," Sobey's Mitchell said.
"If you have a person on staff in every store to handle the implementation," sending planograms from the corporate office could become a routine electronic data interchange function, he added.
