It is not a secret that quality merchandising boosts sales. That’s why merchandising analysis is a key component of analyzing sales data of a store. Making such analysis is much easier with the help of software. This way we analyze not only numbers in terms of total sales or categories. The sales analysis in merchandising is conducted in relation to the concrete trade equipment, its area and dimensions. In other words, not only sales are analyzed but also the placement efficiency and the return from of every square centimeter of the shelf. This article will discuss what you should keep in focus and how to make an analysis properly.
1. Store plan analysis
Merchandising analysis is conducted through the prism of the store plan and the trade equipment located in it. A store plan is a scheme or a drawing of a store. Aside from trade equipment, the plan contains auxiliary items that create a more accurate picture – cash desk, column, entrance and exit. It is important to take into consideration the following parameters when you analyze the store plan:
- The area of each SKU in centimeters.
- The number of faces in width and depth for each SKU.
This information is vital as when locating trade equipment, the real dimensions of products, as well as racks, are taken into account and then they are compared with the store dimensions. Thus, on the store plan, we are able to see the real picture of the store with all the placed products, equipment (showcases, racks, pallets, refrigerators etc.) and how much area each product occupies in the store.
It is important that you track the customer traffic when working with the store plan. Trade equipment should be placed in such a way that the products with high demand are accessible and visible on the shelf to the customer.
Firstly, it is important to assign categories on trade equipment. Which means to assign a specific category or a group of categories for each rack. On the store plan, you can determine or assign one or several categories for certain racks. It will speed up both visual and analytic analysis.
The "golden triangle" rule, as well as commodity neighborhood rule, will help you determine the best placement for products and categories no matter the size of the store.
At the base of the "golden triangle" rule lies the movement of the customer in the store along the given trajectory: entrance – showcase – cash desk.
During merchandising analysis, it is important to evaluate cold and hot zones as well as define the racks with the best sales data. Such “promising” retail objects need to be placed in the zones of highest customer traffic.
Nowadays all of this can be implemented instantly with the use of specialized systems. It is depicted below how, for example, Leafio conducts ABC store plan analysis in terms of sales for the period on practice.
In the software the period and indicator are chosen, in this case, it is ABC turnover. In the picture, you can see that racks are colored by categories.
- Green – category A;
- Yellow – category B;
- Red – category C.
So, on the basis of visual coloring of racks and table analytics in numbers, you have an opportunity to make decisions and analyze the efficiency of trade equipment location on the store plan.
Figure 1. ABC analysis of the store plan in terms of sales for the period
It is also important to compare shares, sales in physical and monetary terms. This indicator will show the real full picture of sales throughout the store. During the full analysis of the trade point, all of the following factors must be taken into account:
- sales in physical and monetary units;
- shares and ABC analysis;
- heat map of customer traffic;
- contract terms and commodity neighborhood rules.
The aforementioned factors can change depending on regional specifics and the area of activity but the one important thing that remains unchanged in the analytics is the use of modern tools with the opportunity to compare different periods and trade equipment locations.
2. Planogram analysis
Planogram is a scheme with the location of the products. It can be made as a table with a list of vendor codes, places on the shelves, faces or as a picture of products on the equipment. The combination of table and visual image is important not only for merchandising analysis but it also promotes quality work with the planogram on the trade point and analyzes its effectiveness.
Users of special software for merchandising can display in-store analytics by characteristics on a visual planogram.
Depending on the set characteristics, you can color products and groups by analogy with diagrams.
Depending on the retail sector, as well as regional and cultural factors the list of characteristics on the planogram can vary.
The unchanged factors for most retail networks remain brands, suppliers, rest, expiration dates, turnover in days, margin, taste, country of origin etc. (Figure 2. Coloring by brands). Visual assessment of indicators is a convenient and easy way of determining strong and weak areas, assess the integrity of the planogram and make a decision about a possible relocation of products.
Figure 2. Coloring by brands on the planogram
3. Analysis of return from shelf meter
Quality work with planogram and store plan helps to make decisions about relocating trade equipment, brands, product groups and SKU which eventually will boost the sales and accessibility of products. However, it is understanding of the full picture and the analysis of return from shelf meter in terms of the entire network or formats that helps to make complex decisions in category management and during the merchandising analysis in the store.
Such a picture can be obtained by calculating the return from shelf meter. This number can be calculated if the database of the following is available:
- trade equipment dimensions along all axes including width, height and depth of trade equipment;
- dimensions of products located on equipment;
- number of product units on equipment on all axes (in width, height and depth).
To get a return rate from the shelf meter you must define a total area of footage the product occupies and the sales of the product.
This rate is very important when you analyze assortment and the effectiveness of merchandising. The rate can help to change the matrix, increase or decrease the presence of products on the shelves. Moreover, it can reduce overstock or out-of-stock.
When you get a ratio for a certain category and expand the report to SKU, you can identify both outsiders and leaders in categories and product groups. It is difficult to make such a report without any special tools which accumulate all the data in one place.
The objective analysis of the use of each square meter of the store area helps to make strategical decisions regarding the business development. In category management these are the presence rate of categories on the shelves, increase or decrease of categories and formats of trade groups, decisions in the assortment matrix. In contractual companies, these are well-reasoned grounds for marketing budgets, changes in prices or adjustments to assortment matrix, withdrawal and returning of products depending on their return rate.
In-store merchandising analysis can improve the sales and turnover rates, helps to monitor the situation with products out of the matrix and deal with overstock and out-of-stock products. Such evaluation of merchandising effectiveness directly affects the performance of layout tasks, compliance with suppliers and internal network rules about planogram making. It also makes the layout more understandable and accessible to the customer.