Leading-edge retailers are expanding their use of space-management systems, from computer-generated "pretty pictures" of one section's shelves to storewide analyses, sometimes incorporating consumer and financial data.
The performance measures from space management, which include return-on-inventory investment, sales per square foot, days of supply and gross margins, are also being put to wider uses, including category management efforts.
These ambitious efforts are raising expectations for what space management efforts can achieve. One retailer anticipates that implementing such a program will lead to an increase in sales per category of 3% to 5%, as well as cut out-of-stocks by as much as 50%.
"The basic trend in space management is to move away from a section-by-section approach to a total-store planning approach," said Tim Springer, manager of financial analysis at Kroger Co.'s Indianapolis division. "The tools to do this are just now becoming available."
Clemens Markets, Kulpsville, Pa., is investigating the possibility of integrating its frequent-shopper database, currently managed by a third-party provider, into planograms created by its space-management system. John Kelly, director of merchandising, said the company would like to have this project "moving along fairly well within the next six months to a year."
"I think that will be one of the major shifts," Kelly said. "Instead of simply analyzing product, we now will be analyzing customers and what they want, and the planograms will begin to reflect the contribution of the customer who is buying the stockkeeping units within that planogram."
He added that by managing the space in this way, items with the lowest value to the consumer, not necessarily the lowest movement in the planogram, get discontinued. "We are not able to do this on every single decision yet, but that's where we'd like to get to," Kelly said.
Doug Taylor, corporate director of space planning at Randalls Food Markets, Houston, said the chain has just started using a system that analyzes the performance of the entire store.
"If you were to take the top off the store, you would see all the gondolas and all the departments and their sections," Taylor said.
He added that the system allows integration of store-specific information with the schematic database. "We're going to get lots of factors in that database plus the schematic information," Taylor said.
Pat LaManna of SMSB Consulting Group, Melville, N.Y., which provides space and category management solutions for retailers and manufacturers, said "integrating consumer information into space management can be critical for new store openings where retailers don't really know what the performance is going to be and they need to know the consumers shopping in that area."
The Randalls system is on its wide-area network so that space analysts and category managers for stores in Houston, Dallas and Austin, Texas, can communicate to update the schematics.
The space analysts who work at Randalls are from the manufacturer and broker community. The chain currently uses space-management systems to create planograms for categories such as cereal, salty snacks, heavy-duty laundry, wine and carbonated beverages. In cereals, for example, it completed a category plan late last year and has just begun implementing the new sets, according to Jim Nickelson, category manager. At Randalls, category managers work with space analysts in analyzing and creating the sets for its stores.
Other retailers are also ramping up their efforts in space management to get a better handle on performance and profitability.
Within the last two to three months, one grocery retailer has started developing systems and procedures to measure section performance and profitability. Future plans are to measure these variables across all departments within the store. This retailer currently uses scan movement data when developing its schematics for grocery and nonfoods in its stores.
Minyard Food Stores, Coppell, Texas, is exploring the possibility of using item movement for the majority of the SKUs in its stores in conjunction with its space management system. Gary Price, vice president of category management, said having this capability would allow it to put the most efficient assortments into its planograms.
Currently, space-management systems are used for dry grocery, health and beauty aids and some general merchandise at Minyard. The systems create planograms that indicate item placement; these are sent to the store managers for execution.
John Porter, vice president, planning at Fairway Foods, a division of Holiday Cos., Bloomington, Minn., said it is currently evaluating new space-management software packages that have an emphasis on ease of use coupled with enhanced reporting capabilities, such as graphical presentations of information and color-coded highlighting of problem areas. These features allow the users to respond to the information more quickly and in different ways.
"As we get more deeply into category management, we want more internal users working with the space-management software," Porter said.
At the same time, Fairway is expanding category and space management into cheeses, and possibly salad dressings, cereals, jams and jellies and peanut butter, having already implemented them in refrigerated juices and beverages.
By the end of 1997, Fairway intends to have completed category reviews in 10 to 15 categories and roll them out to its retailers.
Meanwhile, other supermarkets are jumping into space management with their own plans.
Prescott Supermarkets, West Bend, Wis., will begin a pilot with space management at its Oshkosh, Wis., store this month.
Prescott's began this project by tracking sales in the cereal, toaster pastry/granola, liquid laundry detergent/powdered laundry detergent, cookies/crackers, frozen family dinners and chilled juices categories to collect six weeks of data.
Its intention is to compare these numbers with sales information it obtains after implementing planograms developed from a space-management program over a similar time period. The space-management system was provided as a service by its wholesaler, Roundy's, Pewaukee, Wis., said Ralph Prescott, director of special projects.
"One of the numbers that Roundy's space management team believes we can achieve is an increase in sales per category of 3% to 5%," Prescott said.
Out-of-stocks is another area where Prescott's hopes to see improvement from implementing planograms generated by space-management systems. "I would like to think out-of-stocks could be cut by 50%," Prescott said.
Nob Hill Foods, Gilroy, Calif., will be testing the impact of planograms developed from space management systems across all categories in the new store it will be opening in July. Previously, Nob Hill Foods relied on planograms from brokers.
By developing planograms in-house, "I would hope that we could increase our efficiency in getting items on the shelf by 50%," said Terry Hall, vice president of distribution, who also runs the schematic department.
King's Super Markets, West Caldwell, N.J., started cranking up its space-management systems for grocery, dairy and frozens within the last year, according to a source familiar with its plans.
