Drogerie stores merchandising: specifics, challenges, and solutions

trends
  • Mar 30, 2023
  • 13 min read
Cover: Drogerie stores merchandising: specifics, challenges, and solutions

The main feature of drogerie stores is their assortment. Unlike health & beauty stores, most drogerie chains offer not only cosmetics and healthcare products but also household cleaning products, over-the-counter drugs, and dietary supplements. In European stores, about 20% of the assortment comprises nutritional supplements and medicines.

The variety of product categories makes it difficult to work with planograms and organize storage space. Nevertheless, merchandising tasks, from equipment zoning to product display, should be solved quickly and systematically because any delays in updating or incorrect combinations of products on the shelves will negatively impact business performance.

Considering the specifics of the assortment and target audience in drogerie retail, we will consider the main tools for optimizing merchandising processes that will increase the efficiency of each retail outlet.

Optimize your layout based on the product categories in your chain

Let's review the key features of displaying goods on the drogerie shelves:

Beauty products layout

  • Follow the logic of seasonal layout. In the warm season, the most accessible shelves should be occupied by allergy remedies, insect repellents, SPF products, etc. In winter, there should be thick creams, lip balms, holiday cards, gift sets, etc. For seasonal product groups, it is worth setting up separate stands, baskets, and visually distinguished shelves.
  • Popular products help to increase sales of other products located nearby that are less attractive.
  • Placement within the group can be done in horizontal or vertical layouts. According to the appearance of the packaging or the product, you can immediately determine what type of display it belongs to. The goods should be placed near the edge of the shelf or on hooks in a straight line.

Household cleaning products layout

  • Don’t place products that have opposite purposes next to each other. For example, Coronet floor brushes and Fackelmann kitchen utensils, or Dove body wash next to Domestos toilet bowl cleaners.
  • Related products that complement and help promote the main assortment actively impact sales—for example, dishwashing sponges and detergents.
  • Perforated equipment is used to display some household goods. For example, rags, gloves, etc., are often hung on hooks.

Vitamins and dietary supplements layout

  • Dietary supplements are a popular product group in drogerie stores that customers are often interested in. They should be visually accessible and occupy a separate area in your planogram.
  • Vitamins and dietary supplements usually occupy 4-5 shelves, while hygiene products – 7-9. This division is fundamental because it affects the aesthetics of the sales floor.
  • This product group is quite commercially-driven: suppliers actively launch advertising campaigns about their products. In all outlets, you need to quickly create a display that corresponds to the supplier's marketing strategy.

The assortment of drogerie products is mostly the same in all branches of the same chain. For example, at Schlecker, 75% of the 4000 SKUs can be found in all stores under this brand name. Rossmann has 8000 items out of 9000 in all its branches. The rest is used to fill the shelves in the largest stores.

Thus, modern drogerie stores have many product items, each requiring special attention. Retail outlets must strictly control the assortment and create individual displays for all product groups. To do this, you need a clear merchandising guidebook that outlines how to make a display in your chain. 

You can create planograms according to the parameters you need (taking into account stocks/sales/turnover, etc.) automatically or semi-automatically using the tools in the LEAFIO Shelf Efficiency solution, which helps to digitize the layout and monitor its implementation. The planogram you create is automatically displayed to store employees, who create it on the sales floor and send you a photo to confirm the work done.

Consider the needs of your target audience

Up to 90% of drogerie's sales come from regular customers that live within a two-block radius of the store. 95% of the target audience are women aged 25 to 50. They run a household and usually have children. This demographic uses most of the products in the store's assortment daily and needs to replenish their supply regularly.

The priority of market research is to analyze the behavior and preferences of this demographic. Valuable data can be obtained by analyzing customers' interactions with your closest competitors – supermarkets and pharmacies. The advantage of drogerie over supermarkets is a broader assortment and the emotional component over pharmacies. This demographic does not perceive a pharmacy as a place to get brand impressions, so they often buy dietary supplements and vitamins in a drogerie.

Other drogerie chains can also "pull" customers to their side. In this case, customer loyalty is the main factor in their choice: you must understand what attracts customers and creates an emotional connection with the brand.

The research results should be used to maintain customer loyalty, including by improving the layout. Monitor customers' behavior in the store and arrange products so that they fill their baskets consistently and intuitively. 

Through demographic analysis, you can implement cross-merchandising mechanisms based on customer needs and create effective product combinations that increase sales. This can be achieved by creating analytics-based planograms unique to your store or format planograms created for a specific store cluster in LEAFIO Shelf Efficiency.

Draw attention to private labels and your own imported products

One of the main trends in the drogerie sector is to increase the share of proprietary and exclusive brands in its range. Proprietary goods play a significant role in sales – products that the chain imports itself. As a rule, such goods are difficult to find on the shelves of competitors. These are unique offers that attract customers to your store.

Private labels are products made under the store's brand name that provide the main profit. According to one study, in 2022, there was rapid growth in the private label segment. Customers were drawn to potential savings in an unstable inflationary climate and switched to more affordable products en masse.

When inflation reached its peak in October 2022, sales of retailers focused on the low cost of their products jumped by 10%, accounting for 42% of consumer goods sales. At the same time, private-label CPG (Consumer packaged goods) sales now account for 19% of total sales globally and almost 15% in the US.

Pay special attention to private labels when creating planograms. To gain the customer loyalty that well-known brands already have, you need to create the most attractive layout possible. As with promotional products, this can be done through POS materials (wobblers, shelf talkers, etc.). Although the best locations in the store are usually acquired by brands, it is necessary to ensure that private labels are placed in a favorable way.

At LEAFIO Shelf Efficiency, you have a wide range of tools to present your brands in a favorable way:

  • Understanding the “hot” and “cold” zones of the sales floor to place the product in the ideal place;
  • Percentage allocation of shelf space for your private label;
  • Auto-facing and auto-positioning of goods;
  • SKU analytics by sales and many other parameters.

Create a display taking into account the interests of the store and well-known brands

Drogerie chains are not as dependent on popular brands as health and beauty stores. However, there are brand-dependent product groups, among which it is challenging to promote private-label products and new, less popular brands. These include skin and hair care products, professional cosmetics, children's hygiene products, and perfumes. For example, according to Danone, 62% of buyers of children's hygiene products will buy them in another store if they do not find the brand they want in yours.

While drogerie stores profit from private labels, they receive cash back from the brand owner company when selling branded goods. But global names attract customers to the store because consumers are loyal to familiar and well-known labels.

Most brands enter into a contract with a chain and rent favorable shelves and separate stands for their products, which provides additional profit for the store. Renting specific locations provides brand owners with analytics on current and passive goods, customer behavior, etc. At the same time, zoning helps the store to track the percentage of the brand on the shelf.

Often, manufacturers can control the display of their products on rented shelves. The store has to strike a balance between its own aesthetic principles and brand requirements, as well as between displaying its proprietary goods, all with the needs and convenience of customers in mind.

The LEAFIO Shelf Efficiency software allows you to create an optimal product layout and organize your space according to store and brand guidelines. With the platform, you can create and fill in planogram zones based on selected characteristics, such as brand or distributor.

Zone the store space based on the psychological and physiological aspects of consumers

The store space is based on the principles of merchandising and the psychological characteristics of consumers. To present goods in a drogerie store in the most profitable way, you should not neglect the following rules:

  • Promotional and seasonal goods are placed near the entrance and next to the cash registers, and a place is organized for displaying goods at exceptional prices. This takes up a fairly large area, as regular promotions and seasonal sales are one of the principles of drogerie retail.
  • It is also worth placing goods in attractive small packages near the entrance and cash registers: face masks, mini shampoo bottles, etc.
  • The most popular products are placed at the end of the hall, away from the cash registers. This way, the customer has to walk through the entire store, making several impulse purchases along the way.

Next to the cash registers, you can place a small assortment of food products, such as chocolate bars, candy, soft drinks, etc.

Particular attention should be paid to store zoning. Separate zones are allocated for beauty products, household goods, dietary supplements, vitamins, etc. There are also additional parameters that should be taken into account when choosing equipment and organizing the space in the store. For example, divide products by purpose, gender, and age of users: separate men's shaving products from women's, foot products separately from anti-aging creams.

If possible, you can divide products by more detailed characteristics, such as skin or hair type. The specifics of product zoning directly depend on the geolocation of the outlet, which forms the ethnic cross-section of the demographic.

Organize the space in the store based on data about customer behavior, sales, “cold” and “hot” zones in the sales area. Combine research results using modern technological algorithms of the LEAFIO platform.

Organize shelf space based on deliveries and stock levels

Sales in drogerie stores are aimed at maximizing customer satisfaction, which is ensured by a full range of goods (at the 95% level). However, this feature is complicated by the limited warehouse space typical for such chains. Therefore, it is very difficult to maintain the availability of all SKUs on the shelves: you need to carefully consider the logistics, system and supply volumes.

However, the advantage of a drogerie in terms of assortment is that there is no need for special storage conditions. The shelves are stocked with goods with a long or no shelf life, so the risk of material loss in case of expiration is minimal.

But every delay in the delivery and display of new goods means empty space on the shelves, which inevitably leads to lost sales. Therefore, it is important to automate the system and maintain the availability of all items.

AUTOMATED SHELF SPACE PERFORMANCE IMPROVEMENT

Fast and intuitive design process

The LEAFIO Shelf Efficiency tools help you to create a layout that takes into account the supply chain and other aspects. An effective shelf space management system minimizes losses due to delays in product refreshment.

Find a balance between product attractiveness and safety

Petty theft is a common phenomenon for drogerie chains. There are certain products that are stolen from the shelves most often:

  • Razor blades;
  • Compact size cosmetics;
  • Relatively expensive personal care products;
  • Popular and expensive perfumes;
  • Pharmaceuticals.

Therefore, when creating planograms, it is better to place these products in areas that are most closely monitored by staff. For example, closer to the cash registers or in the most spacious sales space with constant security supervision.

With the help of LEAFIO Shelf Efficiency tools, you can optimally organize your space and choose a location for popular products that is both safe and attractive to customers.

Don't put passive products in favorable positions in planograms

The store space should be organized considering the potential profit from certain products. If you give certain dietary supplements or laundry detergent favorable shelf space, will you really get the most profit from them? Or will another product in the same place eventually bring in more money? To understand this, it's important to experiment and make sure that your planograms don't contain passive products and that your assortment meets the needs of your customers.

Analyze the sales of specific products: create a report on outlets and see how long the stock is staying in the warehouse. Calculate the real profit from these products and change the strategy if the result is not satisfactory.

Automate merchandising processes in your chain

With LEAFIO Shelf Efficiency, you can systematize the work on creating planograms and control the display at each outlet. The software allows you to automate or partially automate most of the processes and increase the efficiency of the display based on detailed analytics.

LEAFIO Shelf Efficiency tools that significantly expand your store's capabilities:

  • Creating a display based on sales statistics, product turnover, and other data.
  • Unification of the display across the entire chain with the help of format planograms: "unified" planograms assigned to a specific group of stores.
  • Creation and auto-completion of planogram zones based on the product attributes you select (brand name, distributor, etc.). This allows you to zone equipment and planograms, allocate a percentage of the shelf to a particular brand/group of products, etc. It also makes the shopping process more convenient for the customer.
  • Analysis of “hot” and “cold” zones on sales floors with the macro-spacing function. You will clearly see where you should pay more attention to the layout, where to adjust the flow of customers, or change the placement of goods/categories on the sales floor – these are parameters that directly affect your sales.
  • Planogram analysis: using the multifunctional analytics module, you can see what actions of the planogram manager have brought certain changes in the business performance of the store/chain, as well as monitor the level of planogram "health" (based on the data, you can see which brands/products can be presented more widely on the shelves, or, conversely, which should be reduced).
  • Control over the implementation of the layout by store employees through a convenient mobile application. You will always know whether the display in the store is neat and whether promotional items or your brand are correctly presented.
  • Rotate the assortment and replace one item with another as quickly as possible with just a few clicks in the system.

Let's summarize

When creating planograms, you should take into account the nuances of promoting each product group both separately and in conjunction with other categories. Experiment with the layout and placement of goods in the store, based on profit indicators, consumer behavior on the sales floor, and their preferences.

LEAFIO technology solutions will help you systematize your work. The user-friendly software automates most of the processes to improve the work of store employees, manage the assortment, create effective planograms, and promote products. As a result, business processes become more efficient and the chain's profits increase.

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