All about planograms: Usage in Retail

Proper visual merchandising welcomes big sales. A planogram is one of the best solutions to introduce goods to a customer. It covers 2 points:

• helps the customer find the necessary goods and pushes him into the purchase (i.e., the goods location on the trading floor, proximity of the essential categories next to each other, etc.)
• being user-friendly, it increases sales and reduces costs.

This article explains what a planogram is, how to read it, and highlights its importance in retail. We will also share the best compilation practices, visual merchandising techniques, and ideas how to use retail space planning software to increase your retail outlet profitability.

A planogram: what is it?

Planograms in retail operate as a schematic overview of a goods layout plan. It helps retailers collect data from the layout and merchandising changes to boost in-store sales. Points of sale (POS) and the goods layout are highly important.

Handling planograms and floor plans in retail is necessary to maximize sales by placing the goods on a particular shelf (to attract attention, for the shop image, etc.); to create a roadmap for staff.

The customer journey, layout, and storage of goods, as well as points of sale, should be taken into account when designing and organizing layout equipment. Luckily, planograms help sort this out by providing people with a better shopping experience by telling them where to look for specific items in the store.

Planogram Benefits

The planogram maximizes sales and sales space efficiency. Let's take a deeper dive.

Cross-Selling Increase

Planogram helps you place the goods in compliance with cross-merchandising. For example, the goods for one recipe should be placed nearby, wine and cheese, the laid-out look in outlets.

Retailers encourage customers to walk past other goods leading to increased impulse purchases.

Retail Space Usage

You can optimize the retail space utilization with a planogram and proper usage of retail floor planning software. With the merchandising management tool, hot and cold zones can be analyzed, and category placement can be changed to increase the goods turnover. Moreover, the planogram compilation and its constant automatic monitoring ensure the absence of empty space and stockouts.

Better Replenishment Management

An organized merchandising business process simplifies inventory level monitoring. Planogram allows you to calculate the faceting according to the required indicators automatically and helps you choose the right amount of goods, removing the surplus of goods from the shelf and providing the space for better-selling goods. The balance amount and the layout management control result in displaying the goods from the warehouse and their availability for the customer.

Improved relationships with the third parties

Planograms in retail helps you understand whether a product's revenue share matches its shelf share when working with wholesalers and suppliers.

The planogram automation solution and retail space planning software help to zone equipment and automatically fill in the planogram according to the rules you set (ABC analysis, brand and supplier share, etc.). In turn, suppliers use planograms to show how much space they require for different brands based on product popularity and sales.

Maximizing Visual Appeal

60% of all sales are impulse purchases, and they are spot decision purchases influenced by visual merchandising. It is a set of techniques to draw attention to specific zones or goods to leverage all 5 channels of customer information perception.

One of the tools to influence the visual channel is the "color spot" method when goods of the same color palette are grouped. It makes it easier for customers to choose (for example, if a guy is looking for a blue jacket) and move through the stages.

The well-known "golden shelf" rule is worth highlighting when the higher-priced goods are usually located on shelves at an eye level of the target customer. Retailers do this deliberately to optimize sales and goods turnover, especially for perishable goods.

The formula to create an effective planogram is based on visual merchandising knowledge, sales data, and regular retrospective analysis.

Related: Visual Merchandising in the Store. Retailer Rules

How To Work With A Planogram?

1. Collect all parameters

First of all, you need to understand the size and type of equipment and the physical parameters of each SKU to fill the space with goods correctly.

2. Identify products and brands on the planogram

Sort the goods into different types of equipment based on their qualities: frozen, chilled, bulk, loose, etc. Distribute the categories and choose the brand place and quantity. The final planogram displays the results of the work done at this stage.

The layout management could be done with a positional planogram allowing you to clearly understand where the product should be, how much space it takes, and whether it matches the number of faces. Keep in mind, that you manage just the things you can count.

3. Set a task to place the layout and control its fulfillment

The planogram becomes a full-fledged task for the sales floor employee. The central office should control the layout in timely fulfillment and the planogram accurate compliance. Any discrepancy can affect the target product's impact on customers and prevent them from reaching the sales goals.

What to look at when drawing up a planogram

A planogram is a delicate balance of logical organization. Creating one, take into account the following:

• to group products in one category;
• to take advantage of consumer behavior and psychology, introducing them to new or highly profitable products;
• product sales data;
• stock balance information;
• agreements with suppliers;
• principles of visual merchandising;
• hot and cold zones on the trading floor.

Analyzing this information helps increase the average store bill and improve the shopping experience. In addition, employees can use this data to track further retail store layout improvement.

There are no universal rules for planograms.

Do not believe those who share with you the planogram compilation principles that will be profitable. Dozens of parameters affect the layout efficiency. The store profitability is affected not only by the layout but also by hundreds of other nuances. We suggest paying attention to the practices that should be considered when working with planograms and monitoring their fulfillment.

Don't make planograms a routine task

Too many retailers complicate the planogram process and lose momentum in a few months. In other words, if the planogram creation is a time-consuming process, in all likelihood, you will create it less and less.

You can speed up the planogram preparation:

• by automating the planogram creation using a dedicated shelf space management tool and retail space planning software;
• by using format equipment: a type of equipment with a planogram that can be used in several retail outlets simultaneously. Changes made will be displayed in several stores at once.

Training employees

It is worth spending time training store employees on how to use the planogram. Make time for everyone, even those who think they don't need it. It is not enough just to give them a diagram as there are specific visual guidelines they should follow.

Measure Your Plan

Sales reports should be regularly prepared and correlated with the planogram changes.

Get To Know Your Customer

Сustomers want to see products at an eye level. They want not only to touch and feel it but also to interact with it. For some stores, fewer goods on the shelf with more interactivity is the proper technique.

If you don't use planograms, it is time to start. Just as having an "open to buy" system is critical to successful inventory management, visual merchandising based on a planogram is also crucial.

Visual Merchandising Techniques

Planograms in retail aren't just about placing goods in the store, and it's also about engaging the audience, getting them to walk around the store and look at things that aren't on the shopping list. Keep these techniques in mind when creating your planogram.

• Place new and seasonal goods on the right at the store entrance.
• Place bestsellers and themed goods at an eye-level (or on the lowest shelves to catch the kids' attention).
• Place essential goods at the back of the store so that shoppers walk past more interesting "non-essential" goods to get to them.
• Create attention-grabbing "roadblocks" and make customers stop to look closer. Several claddings of the same product, especially bright colors, create a greater visual effect.
• Don't forget about the cash register. This is not only a workplace but also the main (and last) zone of impulse purchases in your store.
• Organize efficient work with planograms and merchandising.

Initially, merchandising seemed like a chaotic process. It is up to you to organize it in a way that increases your retail outlet turnover, reduces the inventory amount and increases sales per square meter.

LEAFIO Planogram Optimization is a solution that:

• Automates the layout creation: it will be created based on sales data, agreements with distributors, ABC analysis.
• Speeds up the work with the assortment throughout the outlet: the functionality helps to speed up the assortment turnover and, in a few clicks, add and withdraw goods from the layout.
• Unifies planogram control: you do not need to train employees for a long time to make the layout. The employee receives the planogram in a special mobile application and works according to the scheme prepared. Then you check it without logging out of the program.
• Helps promptly respond to changes in outlet indicators: the system has an analytics dashboard with the leading critical indicators. There is also a wide reporting functionality for the equipment and goods to understand the efficiency in one place or another.
• Optimizes stock balance: a positional planogram ensures that you and your colleagues do not freeze the balance at the point of sale.

You can learn more about the solution and get a demo presentation by filling out the form.