Liquor stores' merchandising and space planning specifics

The alcohol retail market is growing and developing worldwide. The growth of the urban population, changes in cultural habits, and the pandemic of recent years are just some of the factors that have influenced changes in the quantity and quality of consumption of this product. It is not surprising that liquor stores – specialized stores where you can buy not only alcohol but also all related products - are becoming widespread.

Today you can find several formats of liquor stores: 

• small convenience wine stores;
• specialized warehouse stores;
• branded stores of professional spirits importers;
• a combination of several formats. 

Experienced retailers know that proper and adequate product display is an indispensable tool for managing customer attention and, as a result, sales and turnover. Regardless of the format, liquor stores have merchandising management features that need to be considered if you want your chain to be profitable. 

We’ve identified these features and determined what should be paid attention to by liquor store managers when building planograms and organizing the display of goods on the shelves. 

1. Shelf balance

For the chain to operate effectively, the sales share of certain items must correspond to the share of their shelf representation. The shelf space efficiency depends directly on such factors as the price and sales of products for display and how much shelf space they take. These factors must also be taken into account when creating planograms. In short,  the more profit the product brings, the more its facings should be presented on a shelf.

In addition to the amount of profit certain products bring, when forming a planogram, it is essential to take into account how fast a product sells. The higher the sales speed is, the more stock is on the shelf. A display organized this way allows you to optimize and reduce the number of store employees required to replenish the display.

At the same time, even the most well-planned solution can be ineffective  by poor-quality implementation. Therefore, the retailer needs to ensure that the store layout matches exactly the developed planogram. This can be only achieved with properly built communication between the main office and store employees, as well as efficient control methods. In other words, whether your product will sell well or fall into dead stock depends not only on a balanced planogram but its implementation in the store and constant monitoring of compliance. 

“We used to manage our merchandising with Excel. It took a significant part of the time of both the store staff and the central office managers. That is why the decision to implement specialized planogram management software Leafio Shelf Efficiency has become vital for further scaling of the business,” says a representative of Alcoretail Group, a large premium spirits chain.

2. Efficient store assortment management

The impulsive desire of liquor store managers to expand their assortment often generates a dramatic amount of low-selling products. The more such items you have, the more the facings negatively affect sales. To avoid this, chain representatives should regularly analyze the ABC-parameter display, pay special attention to slow-movers analyze the profit per foot/meter of the sales floor. 

In our experience, it’s not the retailer with the broadest range who wins the battle for profit, but the one who manages to meet customer demand and optimize shelf space best.

3. Related products

Alcohol is rarely an independent purchase. For example, gin is often purchased with a tonic, beer comes with snacks, and cheese goes well with wine. But that's not all one has to know about cross-selling. As you know, every customer who comes to the store has not only explicit but also hidden needs. This is something that they might not initially think about when going shopping, but they will be happy to buy it if you help them realize this need. It can be water, regular or specialty snacks, accessories, wine glasses or beer mugs, travel-sized items, table games, and other goods that are not the main product of liquor stores. That is why cross-merchandising, if used correctly, is a good tool for increasing the chain's profit. An effective layout helps to increase the average sales of related products. And vice versa, an improperly organized display of such goods can lead to their damage, write-offs, or result in “dead stock.”

To make sure that related and additional goods are in the right place at the right time for the client is not just a useful skill, but an essential for success and profitability of a retail business.

4. Lack of storage space and importance of availability

The liquor stores often lack warehouse facilities. When creating planograms, they need to consider the products’ sales and display accurately. It is also important to remember that presentation stocks are a buffer and irreducible inventory level, which is important to consider when placing orders. Moreover, you can calculate the stock for display, taking into account the lead time, so that it is enough until the next delivery. Thus, the shelves won’t be empty, but at the same time not overloaded and will look presentable. Nevertheless, if there is a temporary shortage of an in-demand SKU, then it is important for the retailer to provide the analogue within the buyer’s view. That will prevent lost sales and disappointed customers. 

And again, we would like to draw attention to the importance of forming planograms, taking into account the product’s sales, which will help to avoid both empty and overloaded shelves.

Wine stores also may have a “cold warehouse” – a selling space where spirits drinks are displayed and sold in packages. For example, this way of organizing a sales space is quite popular in the USA.

5. Own imports and private label

When a chain has its own imports or house brand goods, it is undoubtedly an advantage for the buyer. Thus, they have the opportunity to purchase quality goods at an affordable price, which also means an increase in their loyalty to the chain. In turn, for the retailer, it is not only a way to attract customers with exclusive products, but this is one more factor for optimizing business processes. As mentioned, liquor stores often have limited areas and no warehouses. Goods of own import are usually imported in batches; at the same time, the remains of the previous batch are still in stores. They can be sold for a long time, so there would be no place for incoming SKUs. This means that the balance between demand and display must again be observed. 

Concerning private label products, they often compete with more established brands where a lot is spent on advertising and promotion. A chain may not have such marketing budgets, so competent merchandising, in this case, should become the main driving force behind its brand products. Some retailers place the house brand products between more expensive popular brands before cheaper products. Thus, your product will be associated with both quality and reasonable price, which can guarantee more intensive sales.

It is important to add that it’s an incredibly useful practice for a retailer to create a brand zone from their own imports and house brand goods in order to advantageously present the assortment, since it is from these categories that the chain often makes the highest profit.

6. Promotion management

In Europe, wine stores regularly practice promotions for visitors to stimulate sales of the remaining goods and introduce a new batch of spirits into the range. The proper organization of space for promotional goods is another important task for the retailer. In addition, when building planograms, it is important to take into account the simultaneous holding of promotions among products of different brands and categories. Promotional items must be accessible to the buyer, while the display should not interfere with the shopping experience and the sale of other products.

However, for US alcohol retailers, there is no need for many promotional activities. Goods are purchased right from suppliers, so retailers immediately set an attractive price so that products do not stay on the shelves for a long time. But in this case, it is still vital for retailers to monitor order quantity and display efficiency.

7. Seasonal layout compliance

There are three main types of seasonality: intra-week, general, and holidays. This phenomenon can also affect space planning and merchandising. In the case of intra-week changes in demand, they are not reflected in planograms in any way. Placing seasonal and holiday items on the shelf is worth considering in advance, and perhaps allocating additional displays for them on pallets or gondolas. Also, it should be kept in mind that several seasonal displays can be presented simultaneously, for example, with winter drinks and festive ones. Anyway, all this needs to be соnsidered in advance and taking into account the possible range expansion and increase in goods quantity for the high season. 

8. The store’s location

The location of the store affects both the assortment and the layout. Depending on the location, people have different needs for the purchased product. So, for example, in residential areas, more attention should be paid to the representation of low-alcohol drinks and unpretentious strong alcohol. Also, the chain manager must take into account the local preferences of the population of a particular ethnic segment. It is better if you cluster stores by area, ethnicity, or other characteristics. Thus, you will save a lot of time in the future by creating a format planogram for each of these clusters.

9. Attention-grabbing display

Depending on the goals, such a layout can perform the following functions: promotion of a new brand or product, sale of over-stocks, and formation of a brand awareness for a certain product, for example, premium drinks. This type of display should be presented on separate equipment (refrigerator, stand, etc.), or separate POS materials accompany it.

“Already in the first months of Leafio Shelf Efficiency implementation, you will be able to see tangible changes in key performance indicators. That is up to: 12% increased sales; 17% reduction of lost sales; 80% faster planogram generation process,” says Lana Panasenko, Product Director Leafio AI Retail Solutions.

10. Influence of additional characteristics on display

For the layout in wine stores, not only is their sales data taken into account, but also the convenience for the buyer. It is easier to choose a product when it is categorized according to a specific parameter. Therefore, it is important to create a layout considering the brand, country, type, blend and other features. It is easier for the customer to navigate the goods they need and the likelihood of a purchase is higher than if you had not done so.

In addition, in the alcohol category, one should not ignore the generally accepted product placement rules. For example, place heavier items on the bottom shelf because this makes it easier for customers to reach them.

Lighter and more expensive items should be placed on the top shelves. The placement of these products on the top shelf also hints that they are premium.

Eye-level items are meant to drive sales, so put goods you want to sell here. For example, here, you can place a new product that you want to introduce into the assortment, so it is more likely that customers will notice and buy it. To understand which products and for how long they should be at eye level, the retailer needs to constantly analyze sales and display efficiency, which is a rather labor-intensive process if you do not have specialized software.

Related: Toy retail merchandising: appeal to children and sell to parents

How to manage liquor stores’ merchandising with Leafio Shelf Efficiency software?

With the LEAFIO shelf space management tool, you can:

• Automatically generate planograms based on the available assortment, taking into account seasonality and promotional displays;
• Instantly make changes to format planograms in different stores;
• Ensure that sales and product presentation on the shelf are consistent;
• Rotate the assortment based on the conducted ABC analysis, replace the sold-out items with analogues and goods from fresh batches, change the  seasonal display;
• Build effective communication between the main office and employees in stores to control the compliance of the planogram with the layout and receive timely feedback;
• Zone the shelves according to the selected feature or combination of features – by price, country of origin, category, type, variety, blend, brand, etc.
• Analyze the layout in real-time and its impact on sales and other parameters important to you and make appropriate adjustments.

The mobile application that is available as a part of the Leafio Shelf Efficiency solution dramatically simplifies communication between central office managers and store employees, as well as automates a significant part of the manual processes of monitoring the planograms implementation.

Conclusion

In the fierce competition for customer attention and profit, adequate product display is one of the most critical sales promotion tools. To cope with this complex task, retailers can analyze big data sets and develop a merchandising strategy themselves. But some prefer to put it in the hands of experienced professionals and modern software. And the customers of Leafio from 18 countries around the world have already made their choice.