If you are considering a project in space planning, macro space or micro space, visual merchandising or assortment planning, then this is the blog for you! We’ve got bucket loads of expertise in this area and are here to help you…
First though, ask yourself, what came first the chicken or the egg? You are probably wondering what that has got to do with space planning… You may be surprised but the answer is, quite a lot actually!
More often than not the space allocated to categories, ranges or skus is related to their previous sales performance. Typically poor performers get a smaller allocation whilst better performers get larger allocations, and often in more prominent positions in store. Of course, this then directly affects the future potential performance – something of a self-fulfilling prophecy. Hence the question, what came first…
The range plan informs space allocation and optimal store layouts
In retail your range strategy / range direction gives you the forward view that informs the macro space allocation process to ensure space is divided up on future potential, not on historical performance.
This drives ideal store layouts based on the physical constraints of the stores and the ideal / optimal category adjacencies. In turn this drives the definition of which merchandise fixtures should be allocated to which product groups, thereby determining the maximum possible SKU count by product group on a store by store or cluster by cluster basis.
It’s not surprising then that this process informs the range planning and merchandise planning processes as to what the core range SKU count should be and what the maximum SKU count should be to support the variations in allocated space at store level across the estate for each and every product category.
Optimal Assortments and Planograms that fit!
Moving along the timeline, into the assortment planning part of the process and towards range implementation, actual products become known. At this point store assortments / cluster assortments can be considered based on the ideal calculated SKU count. Then an iterative process between micro space planning and range / merchandising begins to deliver the planogram. Through this iterative process you would generally consider:
- The visual impact of the planogram from a display perspective (number of facings, position on fixture etc
- The minimum credible display quantity (MCDQ) of stock (to achieve the desired display)
- The shelf fill quantity and associated stock investment cost / weeks cover(validate further in the demand forecasting process)
- Ideal adjacencies to other products (to influence cross selling opportunities, and,
- Other relevant visual merchandising and product display methods such as colour blocking, price point groupings etc.
Ultimately the result will be the planogram for each store. That is the visual representation of what the final store assortment / cluster assortment should be, how it should be displayed on the shelf, and inclusive of any other in-store marketing media or customer communications.
Space Planning – The bridge between Range and Commercial
- Those who want to present product to the customer to ultimately drive sales, who aim to present a ‘credible offer’ – consumer choice, appropriate price architecture and ‘range completeness’, and,
- Those who are more focused on the analytics and the pure commercials who simply see the sku-store rate of sale and forecast demand vs. the required minimum credible display stocks as an inappropriate placement of stock for traditional stock turn / stock cover measures.
The final decision is only reached when all of these aspects are considered (customer facing and commercial) and is the decision most likely to be the best possible.
In such decision making it would be appropriate for the space planning function to arbitrate. Those in space planning are able to see the impact on sales, stock and space of planned ranges. They can present the facts and figures to the product and commercial teams for them to deliberate over.
Utilise Space Elasticity to Increase Your Sales and Space Productivity
You can realise the opportunity to explore the relationship of observed demand relative to the quantity (and quality) of space allocated to achieve a greater return on space and a higher level of space productivity. By applying the concept of manipulating space to influence demand we can help you to create ‘space elasticity of demand’ curves.
You can utilise these to really enhance your space performance KPIs as you drive a more profitable assortment into the most productive space – exploiting the relationship between total space, location of the space in the store, and the likelihood of a sale – essentially unlocking the space optimisation potential in your stores.
The Shameless plug🙂
If you have projects on the horizon that impact any of your space planning or visual merchandising processes, if you have KPIs and targets that require you to increase return on space, to optimise space or to increase space productivity, the team of consultants who work for Retail Acumen have vast expertise in this area and are happy to help you! Why not get in touch to find out more www.retailacumen.com