Besides the basics of ordering the right product at the right time, much of the battle lies with planogram integrity.
Have we made any headway with stockouts?
Not really. Despite the massive use of technology in the world of retail, the generally accepted out-of-stock rate in the United States for food retail is about 8%. This is the same as it was in 1980, or 1970. Today, shoppers believe the stockout rate is three times that, or nearly 25%. That's largely because the most in-demand products have the greatest likelihood of being out-of-stock. If a top item stops selling, it's likely due to a stockout problem. Unfortunately, the dollar losses from the out-of-stock product itself is only the beginning. Shoppers looking for an out-of-stock item will select a substitute product only a fraction of the time. After two or three incidents, they are likely to start shopping somewhere else. You can't prevent all stockouts; the goal is to fix the top 20% of items that create 80% of out-of-stock losses.
What are some roots of the problem?
A very important one is poor planogram compliance. Beginning with errors in the initial shelf set, to the typical degradation of even a perfectly set planogram over time, planograms are rarely what the home office thinks they are. It's clear that finding ways to protect the integrity of the planogram is key to reducing the out-of-stock problem. Another way to reduce the incidence of long-term out-of-stocks is through the use of sales data. The typical supermarket carries in excess of 40,000 SKUs, but the vast majority of sales (well over 80%) come from just 2,000. By monitoring the top-moving SKUs, and creating an alert when a popular item stops showing movement, a potential problem can be eliminated before it translates into lost shoppers.
How can retailers get planograms and resets done right?
First, assign ownership and accountability for the process. Next, simplify the task at hand, using images instead of words whenever possible. Finally, map the process. Design it like directions for a child's toy. Communications between the headquarters and the store must be consistent, clear, and, most important, allow for feedback from the store.
What are some factors to consider with new or promoted items?
Promotional items should always be supported with secondary displays, and new items are critical to sales and loyalty. Most shoppers will return to the store where they bought a new item when they want to buy it again.
How do you decide who is responsible for doing what at the individual store shelf?
Retail store personnel should always be responsible for what's on the shelf. Vendors, while critical, are just that - vendors. Shoppers will always hold the store responsible, so the store should assume ownership, even in DSD sections. Ultimately, the store manager is responsible. But it's less important who is responsible than making sure that someone is responsible.
What's the case for, and against, backroom stock for frozen and refrigerated foods?
Minimal backstock is preferred, especially given the expense involved in frozen and refrigerated storage. Most out-of-stock studies place the burden of the out-of-stock problem on the store; 75% of any store's out-of-stock problem is because of the way the store manages inventory. The other 25% is a problem with the planogram (not allowing a full case on the shelf, for example), or supply pipeline issues.
Are local planogram deviations a good idea?
There's a strong case for local planograms, but they should be planned for rather than treated as deviations. With current technology, having a unique planogram for each store is possible, and desirable. Allowing one deviation invites more by making it okay. This should be avoided.
What are some best practices for endcaps?
Have a plan, and use the space for fast-moving or new items. Change items frequently, and use signs to promote price. Connect the endcap to the inline stock through signage (on the shelf, let the shopper know that the product is also on the front end of aisle 12, for example). Keep endcaps organized and clear of other products.
What advantages do shelf edge strips with product images, such as your company others, provide retailers in preventing stockouts?
They can reduce set time, ensure the accuracy of resets and help maintain planogram integrity. It's vital to make sure the planogram is set correctly to start, and once it's set to make sure it doesn't change. Shelf strips help ensure that and, ultimately, reduce out-of-stocks.
Jeff Weidauer is vice president of marketing at Vestcom, the leading provider of customized shelf-edge communication for the retail industry, driving sales and reducing costs for the nation's top retailers and their suppliers. Mr. Weidauer can be reached at jweidauer@vestcom.com or 501.663.0100.
