Shelf Health: Identifying and Fixing Retail Store Brand Sales

Is there anything more disheartening for a retail brand manager than to tour a store and discover a bare shelf or indifferent facing for his or her product? Solving shelf issues like these is a daunting task. Data alone often reveals little. What about adjacencies? Shelf position? Days of supply? Implementing planogram best practice may go beyond appeals to the store manager’s goodwill.

Shelf Health: Identifying and Fixing Retail Store Brand Sales
Shelf Health: Identifying and Fixing Retail Store Brand Sales

This article offers ideas, insight, facts, and expert commentary to help guide your decision-making on retail store initiatives. See what support and resources you should invest in to maintain or accelerate brand sales in a fast-evolving shopping environment:

  • Learn the 6 warning signs of failing shelf health
  • Discover how top brand marketers engage retail store partners to minimize execution gaps
  • Discover effective alternative strategies to live, in-person audit checks of shelf placement, stocking and facing

Table of contents

The importance of shelf health
The changing consumer and the effect on shelf health
Complexities in recognizing shelf health
Problems beyond the shelf
Identifying shelf health issues
Tackling execution gaps

Brands can’t always be in the stores where their products are sold, so they must rely on retail-store data to show how brand sales are progressing. Although sales data can tell brands the “what” about sales, it can’t tell the “why.”

Beyond knowing the number of units sold at what price, and perhaps some customer data collected by the retailer’s CRM, brands need deeper insights that indicate opportunity costs and areas of strength. These insights often show up in the stores and how the products physically appear on the shelves and in displays.

Some large brands may use merchandiser representatives who go into stores to check displays and product placement. As necessary as this is, not all brands can afford this, especially when they have products on retail shelves across the country. Advertisers spend millions of dollars on marketing each year. With that amount, even a small percentage dedicated to in-store marketing can be a hefty investment. Not knowing if that investment is paying off can lead to lost sales and a waste of the marketing budget.

The importance of shelf health

Brands need to know if the shelves their products are on are healthy. But what does that mean? “Shelf health is measured by a combination of factors that, when examined holistically, can give brands insight to their overall performance in-store,” said Julie Terrazzino, senior category manager of shelf-stable beverages at KeHE Distributors. These factors include out-of-stocks, days of supply, assortment to support shelf strategy, pricing, adjacencies, and position on the shelf, she said.

A lot of aspects can go wrong within those factors, especially with fast-moving goods, said Tom Vieira, director of product, in-store, Wiser Solutions. Do the products have the right number of facings? Do those facings match the planogram? Is the product placed next to a trending product — or conversely, next to a well-established competitor? Are the products at the preferred shelf level so they can be seen or reached? Are items easy to access? Retailers may house expensive items in a locked box to prevent theft, but this makes it more complicated for consumers to add the item to the shopping cart.

These factors affect how well a product moves on the shelf, but when brand managers look at disappointing sales numbers, they may have no idea where the problem starts. “When looking at a product’s overall shelf health, brands can struggle with a lack of store-level data, not having eyes in the stores to see out-of-stocks and actual merchandising execution,” Terrazzino said.

When looking at a product’s overall shelf health, brands can struggle with a lack of storelevel data, not having eyes in the stores to see out-of-stocks and actual merchandising execution.” – Julie Terrazzino, senior category manager of shelf stable beverages at KeHE Distributors

The changing consumer and the effect on shelf health

The effect the store and the store shelf have on product sales cannot be emphasized enough. This is especially apparent as changes in consumer shopping behavior affect brick-and-mortar stores. When customers go into stores these days, they are less likely to browse: They’re on a mission. They may want to repurchase a familiar product or pick up one they’ve already researched online, and they want to find the product quickly.

In the last year, with some companies having product shortages and supply chain complications, shelves can be empty. Although consumers may have their favorite brands, they have also quickly adjusted to grabbing a competitor’s available product as a substitute, which can become a new favorite.

Another problem surfaced as consumers purchased different sizes than in the past. “COVID-19 changed consumer buying patterns very quickly, and many brands struggled to keep up with production demand,” Terrazzino explained. Not only did shoppers decrease the number of trips they made to the store, but they also increased the size of their purchases, buying multipack/ multi-serve items.

With this added demand, many brands lacked the shelf space at retail, she said. “Brands rely on stores to order enough products and keep shelves stocked. If they are not able to forecast effectively or do not have space on the shelf to keep up with this new demand, it will hurt their shelf health and could also result in lost sales for the retailer.”

When a store doesn’t have robust shelf health, it causes missed opportunities with long-term implications, such as losing brand loyalty when customers can’t find their favorite brands, so they select a competitor or shop at a different store. “Retailers right now are taking a hard look at what brands have been able to keep up and are rewarding them with additional space or positioning, while the brands that have struggled are losing space,” Terrazzino said.

Complexities in recognizing shelf health

Making sure a product is on the shelf (and not in the stockroom), accurately labeled, and attractively displayed is critical to increasing sales. But the details about shelf health and availability are not usually found in a store’s sales report, making it difficult for a brand to identify and correct any issues.

“As a brand, you can’t know how the product is executing in retail until you’re literally in the store in front of the shelf,” said Dan Ray, customer success at Shelvspace. An item could be out of stock on the shelf or out of stock in the back room. Maybe the promotion never ran, or a display never got put up, or an SKU tag is missing, or the store or distributor had inventory inaccuracies. “There are one hundred different ways that a product that should be selling and selling well isn’t because of these execution issues that the sales data alone isn’t going to tell you,” he said.

Monitoring shelf space is essential for all products, but especially for new ones. As an example, Vieira said that as a men’s body-care line planned to expand its retail footprint, it was critical to have insights into execution across channels. Customers said they couldn’t find the products on store shelves, even when the stock was available. “Without visibility at the store level, out-of-stocks can negatively impact revenue by as much as 25% when sales are lost due to noncompliance,” he said. Loss of new user adoption also occurs when the SKU isn’t available and customers opt for a different brand, he added.

Problems beyond the shelf

The shelf isn’t the only place in the store that can affect product sales or brand reputation. Another area is point-of-purchase displays. If product packaging is damaged upon delivery or brand guidelines are not followed, the branding or marketing statement’s efforts can be defeated.

Supply chain issues can also play a role, Vieira said. “With some CPGs and electronics, a product could be located in so many different places inside a store, but not where a customer would intuitively look for it.”

With some CPGs and electronics, a product could be located in so many different places inside a store, but not where a customer would intuitively look for it. – Tom Vieira, director of product, in-store, Wiser Solutions

Even if a product is accessible and looks appealing on the shelf, other aspects can influence a customer’s decision to buy. Sometimes, when customers aren’t sure about a product, they will ask a sales associate for advice. A brand may provide retailers with product training, but if sales associates don’t convey that knowledge to customers, sales may suffer.

Identifying shelf health issues

Determining what problems a product might have on a shelf may sound complicated, but it doesn’t have to be, Ray said. Several root problems contribute to most of the issues:

  • Stocking problems on the shelf
  • Problems with planogram compliance
  • Delivery issues
  • Supply chain problems

Retailers give brands store data, but that doesn’t tell the whole story. It can be difficult to know where the trouble lies without in-person visits.

Gaining customers’ perspectives firsthand is invaluable in understanding what problems exist in retail stores and identifying how to replicate success in other stores.

“To get around the challenges of having boots on the ground in-store, syndicated data purchases is one way to help get a fuller picture of what is happening at the store level,” Terrazzino said. Brands can also request that retailers share their brand data and hire a merchandising team to be the eyes and ears at the store level, she added.

Field teams can be invaluable in getting in-the-moment perspectives of how a product is, indeed, placed on a shelf and talking with store personnel, Terrazzino said. When brands have identified a problem, field teams should prioritize gathering information from the highest opportunity places, Vieira advised. Two stores may have the same issue, but if one has more ROI for the brand, fix that one first, Vieira suggested.

Another tool for problem-solving is social media, Terrazzino added. “Pictures, comments, and reviews all help identify in real-time what consumers are seeing and reacting to.”

Tackling execution gaps

Once brands look at all the execution data, they can get an accurate assessment of how a product performs on the shelf, Vieira said. “They can paint a picture of the cost of execution gaps. They can tell where blind spots are at the store level and SKU level, or why sales dip at some stores or with a particular SKU, but not for others.”

“When brands understand shelf health, they can implement strategic shifts to drive sales, improve brand perception and increase margin,” Terrazzino said.

Once a brand has identified critical areas to fix or build upon, approach the retailer with data-supported strategies and suggestions to improve the issues. If you complain, whine and moan, retailers will stop listening, Ray said. “You have to support your argument with better insights, resources, and tools.” Executional percentages, shelf-availability percentages, and photos of how products are placed on shelves provide necessary backup.

It’s a partnership opportunity, Terrazzino said. “If the retailer can see the benefit of correcting this issue for their overall category or store health, then the buy-in should be easy. Offering detailed solutions and a sales-dollar opportunity is a key to selling the retailer on adjusting their current order process or shelf placement. Don’t forget corporate hierarchy, and present your selling story to the audience responsible for making the permanent change.”

Even though assessing shelf health can fix problems, the benefits don’t end there, Vieira said. It’s also for finding growth opportunities. Brands can look at their shelf health and use their positioning as a strong argument to the retailer to get more space. “The thinking is not just how do we meet the bar, but let’s use data to raise the bar,” Vieira said.

Brands spend a significant amount of marketing dollars to reach the in-store consumer. By identifying the factors that can affect shelf health, developing strategies to address those factors, and partnering with retailers to implement those strategies, brands can ensure their marketing efforts are effective at the store level, where the customer makes the purchase.

When brands understand shelf health, they can implement strategic shifts to drive sales, improve brand perception and increase margin. – Julie Terrazzino, senior category manager of shelf stable beverages at KeHE Distributors

Source: Wiser Solutions

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