In this article, learn about:
What shelf management is and why it matters for both retailers and suppliers
How to build and implement effective planograms
Best practices for shelf management
Have you ever been standing in a grocery aisle, scanning tirelessly for what you need, only to walk away frustrated with something else or maybe nothing at all? In retail, well-organized shelves and aisles can make or break a sale. Shelf optimization strategies also have the power to significantly boost sales. For example, eye-level placement can increase product sales by up to 23%.
For retailers, strategic shelf management is key to deciding which products appear on which shelves, including the height placement, the quantity of items, the assortment of items for each category, and even which products appear next to each other. Retailers often utilize planograms to build a blueprint of what shelves will look like to ensure optimized space, an ideal customer experience, and increased sales.
Shelf management is not just a concern for retailers. Suppliers must be prepared to compete for visibility and prime shelf space for their products. By building strong sales records, keeping products in stock, and having reliable performance, suppliers can build a strong case for winning premium placement on retailers’ shelves.
What is Shelf Management?
Shelf management goes far beyond organization or simply placing items on shelves, it strategizes:
Product Placement: Deciding where products are placed on a shelf. For example, choosing to place a private label product eye-level or heavy/bulk items on the bottom shelf.
Product Assortment: Choosing what mix of products to offer within a category to satisfy customers and avoid overstocking or understocking a product type.
Product Spacing: Determining how much shelf space is needed for each product, factoring in sales velocity, profit margin, or category strategy.
Visual Merchandising: This goes further than product placement/arrangement and focuses on visually appealing presentation of products through things like color, signage, packaging, and displays.
Data should play a large role in evaluating current strategies and optimizing future ones. Shelf management is never stagnant, but an ever-evolving process to continually optimize customer experience and sales potential.
For example, if inventory data shows that a specific flavor of chips is outselling a different flavor of the same brand, the retailer may choose to increase the shelf space of the better-selling flavor and decrease the other to better match buying preferences.
Related Reading: What is Supply Planning?
How to Create a Shelf Management Strategy
Building a shelf management strategy goes beyond placing the best-selling products in the most visible places. It involves defining your business’s goals and then executing on a shelf plan that aligns with your brand, customer preferences, and larger company goals.
Because each retailer is different, there isn’t a universal formula for shelf management. For example, a retailer with a strong private label focus may give high-visibility shelf space to those products. On the other hand, a wholesale retailer may prioritize products with high velocity or high margins.
These examples show why it’s so important to build a shelf strategy that reflects key factors like your business needs, customers’ shopping preferences, and product mix. To build the best strategy for your business, start by asking questions like:
What data do I have to inform my decisions? Sales velocity, profit margins, and seasonal demand trends can all inform your decisions.
Which products need priority, and which can be deprioritized? For example, staple products that will sell well regardless of placement.
How should I balance a mix of private and national brand products?
Should the product mix favor high-velocity products, high-margin products, or a mixture of both?
What products complement each other, even if they might normally appear in different aisles? For example, chips next to dips, or pasta next to sauce.
Should I prioritize logical arrangements or eye-catching ones? Or a mix of them both?
After defining your strategy, you can begin building a planogram that translates your strategy into clear, visual shelf plans. It should be noted that it’s likely your strategy will vary depending on the product category, as shopper behavior can differ widely.
Related Reading: The Benefits of Private Label Brands
What is a Planogram?
A planogram is a merchandising tool used to visualize and plan how and where products should be displayed on a shelf. Building a planogram involves building out a shelf plan that communicates—through a diagram—the exact placement, position, and quantity of each SKU.
Planograms are useful for:
Creating aisle and shelf consistency across multiple stores.
Maximizing sales by placing items in high visibility areas, alongside complementary items, and/or where customers are most likely to look for them.
Optimizing shelf space to avoid wasted space or unappealing displays.
Intentional and measurable testing of product placement and displays.
Improved customer experience by providing a logical, optimized, and visually appealing product arrangement.
Note for suppliers: Although retailers are the ones making the planogram, Supplier’s still the have opportunity to influence decisions by providing data, demonstrating strong performance, and building a positive reputation with the retailer/buyer. In some cases, certain suppliers—often called category leaders—may even support or inform the planogram directly.
For example, a retailer may rely on the team expertise of a national brand’s team to provide insights on consumer behavior for niche products. While the retailer still makes the final decisions, this collaboration highlights how suppliers and retailers can work together on planogramming.
Related Reading: What is a Planogram and How is it Used?
How to Build a Planogram
1. Gather Information
There’s a lot of product, stores, and sales information that goes into building a planogram. If starting the process from scratch, you’ll need to gather:
Item data: To accurately plan shelf space you’ll need the measurements of each SKU to be included. It’s also helpful to have an image or graphic of the packaging to help visualize the layout.
Shelf/fixture info: It’s important to know the various types of shelves or fixtures that are available, including the dimensions of each one.
Relevant sales data: Knowing the sales velocity and profit margin of each item can help you make informed decisions.
Store-specific factors: Nationwide stores are often optimized to the region to match shopper preferences. Knowing which items perform better by region is crucial to building a planogram that meets customers’ needs.
Related Reading: What Is a Stock Keeping Unit (SKU)?
2. Outline Rules/Standards by Category
Once you have gathered all the relevant information, it’s incredibly helpful to build out your priorities or a decision-making tree. With the help of relevant stakeholders (buyers, category managers, suppliers, etc.), you can create rules that help determine how products should be placed. This method can help speed up the decision-making process while ensuring expectations are aligned across all relevant stakeholders.
For example, if you are working on a planogram for staple food items, you may come up with a rule that in the bread category, core products like white and wheat loaves are given the eye-level shelf space, while specialty items such as gluten-free, artisanal, or seasonal breads are grouped together at a different height. This makes it easy for shoppers to find everyday essentials while still drawing attention to differentiated products.
3. Build Planogram
Once you’ve gathered data and decided on your priorities and rules, you can begin sketching or designing your planogram. This is the step where the information you’ve gathered is then translated into a visual representation of what in-store shelves should look like.
While this step could be done manually, it’s becoming far more common to utilize planogram-specific software. This prevents the headache of manually keeping track of SKU info, product images, dimensions, etc.
Planogram software can help with things like:
Building a database of products for easy use and reuse
Documenting planogram rules
Automating the placement of products based on rules
Providing planogram visibility across teams
AI is also becoming an increasingly popular tool for building planograms. AI planogram tools are capable of quickly digesting sales data to analyze trends, make recommendations, and ultimately help merchandising teams make quicker and more accurate decisions.
4. Review Performance and Compliance on a Regular Cadence
Once the planogram has been developed and integrated, it’s crucial to follow up on its success. It’s particularly important to measure both the planogram compliance within stores as well as sales performance to assess if the planogram had intended results. It’s best practice to review planograms on a regular basis to pivot away from weak areas and optimize well-performing ones.
A perfectly planned planogram can still struggle due to in-store execution. Poor communication, employee turnover, or lack of training can all contribute to the execution of a planogram not matching the intention. There are multiple methods to ensure planogram compliance, including:
Manual checks: Where store staff or field teams go into individual stores to ensure shelves are stocked according to the planograms.
Image review: Require and/or request photo proof of shelf set up to ensure compliance.
Automated checks: AI is emerging as an efficient a low-lift way to ensure planogram compliance. By analyzing shelf images or real-time inventory data, AI can quickly identify issues and flag issues.
Best Practices for Shelf Management and Planograms
Regardless of the strategy you choose, there are some tried and true best practices when planning shelves:
Study your customer: Don’t assume you know what your customers want. Instead, closely follow their buying habits, monitoring items that are frequently bought together, items that are frequently returned, or even common paths that customers walk once entering the store.
Eye-level is buy-level: This common saying reiterates that customers tend to buy what they see first, which are typically items placed at eye-level. This may mean placing a new private label cosmetic on an eye-level endcap display, or putting a new toy on the middle to lower shelves where it’s easy for children to see and grab.
Color is powerful: Color psychology plays a big role in merchandising, as certain colors evoke specific emotions and even influence purchasing decisions. For example, the use of the color green on sustainable or environmentally friendly products may subconsciously influence a buyer to choose those items, as they may associate the color with nature or eco-consciousness.
Group complementary items: Customers are more likely to purchase an additional item if it’s placed by a relevant item, instead of a different aisle. For example, placing an impulse display of chocolate syrup and cones in the ice cream aisle.
Related Reading: Demographics: Understanding Your Target Market
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