How to build a sustainable and effective merchandising strategy in retail

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  • Apr 19, 2023
  • 9 min read
Cover: How to build a sustainable and effective merchandising strategy in retail

An integrated approach and automation of merchandising operations is the basis for improving the performance of any retail store chain. This is especially true if managers are still creating planograms manually in an Excel spreadsheet or using illustrator tools – retailers realize that employees spend too much time creating, implementing, and optimizing planograms.

With the LEAFIO Shelf Efficiency solution, the merchandising process can be automated and quickly coordinated across departments and stores. And most importantly, it is based on sound data, eliminating the disadvantages of manual management and human error.

The LEAFIO Shelf Efficiency tools cover the main stages of merchandising from the moment of creating a planogram to its implementation and receiving a task fulfillment report from the store. The solution also allows you to monitor the effectiveness of the implemented changes with the help of an informative analytical block. The retailer can clearly understand which SKUs are on the shelves and in what quantity, and most importantly, the reasoning for their placement on the shelves.

The result of automating and implementing an effective merchandising strategy is an improvement in the company's KPIs. These are the average results achieved by LEAFIO’s customers after implementing the solution: 7% sales boost, 16% fewer overstocks, 10% better inventory turnover, and 90% faster and more convenient planogram creation.

6 stages of building an effective merchandising strategy with a cutting-edge solution 

STAGE 1. Standard and non-standard equipment planning

The creation of equipment is an important element in the micro space planning of a sales floor. Often, chains use atypical equipment or it differs from store to store. In this case, the process of forming a planogram becomes more complicated, since the creation of equipment should be based on individual parameters.

LEAFIO Shelf Efficiency provides for the use of various templates for the formation of both standard and specific equipment according to individual parameters. For example, atypical containers to be used as separate equipment in the store or placed on shelves, or racks of non-standard sizes. You can add shelves manually or fill them with standard ones of different shapes and sizes.

If you need to add standard equipment, you can use the "autofill" function, clear the default settings, and create shelves. After that, the shelves can be moved and edited, allocating the necessary space for each SKU.

The generated equipment is saved in the library so that you can reuse them to create new planograms. While working on the planogram, you can change the placement of equipment and shelves, edit their parameters, and ensure optimal layout of products on the store model. After creating the equipment, you can place the products on the shelves and visualize how they will look in the store.

STAGE 2. Setting up the sales floor

Within the macro space module, you can create operating and draft plans of the sales floor, arranging and changing the position of the created equipment. You can also analyze the impact of the changes made, including with the help of a heat map that clearly shows the "hot" zones in your store and the efficiency of equipment placement.

If the company previously designed the layouts of the sales area in Autocad, existing files with old layouts can be downloaded and an interactive floor plan can be made based on them within the LEAFIO system. Interactivity means that any equipment and layout on the plan can be opened and all the necessary parameters can be viewed, including data on each individual SKU.

Related: A merchandising department in a retailer's organizational structure: What is the most beneficial option?

STAGE 3. Create planograms based on analytics and data of each SKU

In the planogram creation mode, you can view the packaging and general appearance of the products on the shelves, as well as evaluate the planogram model in 3D. The retailer has access to data about each specific product with a unique SKU: dimensions, number of packages, number of shelves, price, availability of goods in the warehouse, compression ratio, etc. All this information is not available when you manually create a planogram in Excel – in this case, you only see a "picture" but do not understand what data and indicators are behind it.

The LEAFIO system allows you to create a planogram using three methods:

  • Manual. First, select the required category of goods in the system and manually drag certain SKUs to the shelves. After that, you can work with the dimensions, increase the number of facings, and rotate the product in different ways. The amount of face-up in depth is calculated automatically (based on the parameters of the shelf, the system calculates how many products can be placed on it).
  • Data copying. Information can be copied from Excel to the system where the planogram is generated. The file should contain the SKU of the product, the number of facings, and other basic data.
  • Automatic. The system can create a planogram independently if you set the necessary parameters. To do this, you should select the product category and brands, set the layout logic (vertical or horizontal), and set the necessary filters. The system will automatically generate a planogram based on the specified metrics. All settings can be customized according to the needs and requirements of the retailer.

A planogram can be created individually for a particular store according to the parameters entered (equipment size, assortment, sales figures, etc.). You can also create a standard planogram – a "format" – for specific types of stores (changes in such planograms will be simultaneously displayed in all locations). If necessary, you can copy unique equipment and planograms from one store to another, which saves time and effort.

STAGE 4. Monitoring the display of goods in stores

Controlling the display of goods is important not only for the retailer but also for manufacturers and brands: they need to understand whether their goods occupy the specified area and whether they are displayed correctly. The LEAFIO Shelf Efficiency mobile application is used to monitor the fulfillment of display tasks on the sales floor. This tool allows the retailer or manufacturer to keep up to date with the current display in the store and the correct presentation of promotional products or specific brands.

As soon as the planogram is created or changed, the retailer can send it directly to the retail store. Employees receive a notification on their mobile app (available for iOS and Android), implement the necessary changes, and send a photo of the finished shelf through the mobile app to the head office for verification.

The use of a barcode scanner can help speed up the task. After scanning the product, the store employee instantly sees all the information about the product and where it should be placed in their mobile application. Data about a specific SKU includes dimensions, stock availability, cost, supplier name, and other parameters. This is a useful tool to speed up the optimization of shelf space, the effectiveness of which has already been tested on many LEAFIO projects. 

"Previously, we had a problem finding SKUs that were not only in the warehouse but also on the sales floor in the store. But now, with the LEAFIO planogram optimization mobile app, we scan the product barcode and see on which shelf the SKU is currently and should be," Chudo Market, Deputy Commercial Director.

STAGE 5. Collecting data and analyzing the effectiveness of the layout

When creating planograms, special attention is paid to analytics, which helps to evaluate the actions performed and assess their effectiveness. The analytics block in LEAFIO Shelf Efficiency allows you to analyze the merchandising process performance. The system allows you to select the period for which you need to analyze sales, download data and study the results of the layout implementation.

LEAFIO Shelf Efficiency regularly receives sales data from the accounting system. Based on this information, the solution evaluates the effectiveness of each SKU according to the ABCD model. The results will be displayed as clearly as possible, for example, highlighting in bright red means high sales, and gray means no data or 0 sales.

The system offers various types of reports in an Excel format, which can be customized to suit the specifics of the retailer. The data can be printed directly from the system, and you can also automatically receive regular reports to your email. 

Shelf Efficiency also has an in-depth analytics module that provides access to an additional 8 visual reports, such as LFL, balances, assortment, display structure, etc. In addition, from this section, you can get recommendations for changes in the layout and a report on its economic efficiency, allowing you to  directly see whether your display is profitable.

STEP 6. Making changes and optimizing shelf space

For a retailer, analytics provide an opportunity to properly fix mistakes.  Therefore, the last stage of the cycle is to process the results and make the necessary changes. Which SKUs are not sold in the right volume? What areas of the sales floor are overlooked by store customers? The answers to these and other questions will be provided by the analytics data.

Based on the conclusions drawn, the retailer can make changes at any time. To speed up the process, there is a group management function where you can add and remove SKUs from the assortment of the entire retail chain at the same time and in just a few clicks. You can also detail the existing planogram at any time and change the parameter settings in the system.

After making changes, store employees will receive a notification on their smartphones, fulfill the task, and send a photo report to confirm completion.

A seamless merchandising cycle with LEAFIO Shelf Efficiency

LEAFIO Shelf Efficiency is a comprehensive solution that covers the full cycle of the merchandising process in a retail chain, from creating a planogram to receiving a report and analytical data.

What are the benefits of LEAFIO Shelf Efficiency for business?

  • Centralized management. All stages are controlled and executed from the central office. The retailer can build planograms, instantly send them for implementation, monitor progress, quickly exchange data with store employees, and analyze performance.
  • Automation, which allows you to build and manage planograms and sales floors more quickly and efficiently based on sales data, turnover, etc. It is also possible to add and remove products from the assortment in all stores of the chain simultaneously.
  • Up-to-date analytics with various types of reports and a user-friendly dashboard that allows you to find the correlation between sales and changes in planograms, as well as track employee performance.
  • Optimization of product categories. Effective shelf space management, which ensures that the SKU presence on the shelf corresponds to the share of profit.

Fast and intuitive design process

LEAFIO Shelf Efficiency provides a comprehensive approach and improves the chain's performance at every stage. The solution centralizes the management of merchandising operations, establishes constant communication between stores and the central office, and most importantly, creates all the conditions for the continuous functioning of this system. The result of the cyclical nature of the merchandising strategy is the improvement of key business indicators and the systematic growth of the chain's revenues.

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