CHICAGO -- By maintaining planogram integrity, independent retailers can increase unit sales by 21%, sales by 12% and gross profit by 7%, according to the retail coverage study being conducted by Food Distributors International.
Preliminary results of that study -- concerning planogram implementation and speed-to-shelf procedures -- were discussed here during a workshop session at the Food Marketing Institute's annual convention. The complete study results are scheduled to be released in September at the Mid-year Executive Conference of Food Distributors International, Falls Church, Va., which commissioned the study.
According to Brian Harris, chairman of The Partnering Group, the Marina del Rey, Calif.-based consulting firm that is conducting the study, the 21-12-7 formula is based on an analysis of 105 weeks of information on 20 categories in 90 stores.
"Those improvements can be achieved without any massive investment," Harris said.
While noting that some categories maintained high planogram integrity -- including salad dressings, bake mixes and canned fruits -- Harris said the potential improvements were particularly noticeable in some lower integrity categories studied -- for example, household cleaners, napkins, packaged dinners, coffee, tea, shelf-stable juice, charcoal, ice cream cones and toppings and non-directly store-delivered snacks.
In assessing the effect of speed-to-shelf of new items, Harris said, the study found that it took chain stores 3.6 weeks to stabilize distribution of a new item, compared with 4 weeks at drug chains, 4.1 weeks at mass merchandisers and 7.2 weeks for independent retailers, "which represents a lot of missed opportunities."
"What we found was the annual benefit per store of new items is $115,000 in sales and 30,000 gross profit points, and those numbers are slipping through the cracks because of poor distribution practices," Harris said.
In one example, he said, it took a new ketchup item 15 weeks to reach maximum distribution at 90% of stores, at which point it was selling 135 units per store per week -- "a very successful product launch," he noted.
"But stores that had the item within four weeks saw unit sales rise 118%, dollar sales rise 115% and gross profits rise 150%, while those that did not have distribution until seven weeks out saw unit sales up only 57%, dollar sales up 55% and gross profit up 42%, which represents a lot of lost business."
The speed-to-shelf results were based on analyzing 1,600 new items between January and June 1999 at 415 independent stores, Harris indicated. The study measured sales and profits of each item and benchmarked the results against those of other studies, he said.
Based on interviews with 115 store managers, the study found "significant gaps" in implementation of planograms, Harris said. "Planogram implementation was not seen primarily as the store's responsibility," he noted.
"What we found is that the processes of managing and measuring performance of implementation are inadequate, and there's little time given to formal training to implement planograms."
Joining Harris on the workshop panel was Sandy Brawley, co-chairman of the study and director of customer development for Clorox Co., Oakland, Calif. Brawley said he is encouraged by the findings.
"When we first looked at the results, the numbers looked pretty aggressive in terms of lost sales and profits. But the numbers also indicate that 10 stores can pick up $1 million in sales opportunities and $300,000 in profits without any investment, so the opportunities are significant.
"The reality is, if a retailer can achieve only half of what's possible, then the potential for broad-scale, longterm growth is significant -- and that doesn't even include improved consumer satisfaction," Brawley said.
According to panelist Dale Instefjord, general manager of Blue Goose Super Market, St. Charles, Ill. "The study data indicate these are our shelves to own, and the measurements indicate there's enough potential to indicate that our commitment is important.
"The independent needs to change his mind-set. He must reach out to his partners in the distribution channel and form strategic alliances. And he must assign responsibility and hold everyone accountable for following through on those policies."
Added Harris, "We all recognize the need for better in-store implementation, but today's infrastructure is not good enough. I believe the final study will provide a roadmap to capture additional benefits."