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Planograms Turn Profits for Retailers


LAS VEGAS -- Customers visit convenience stores to buy specific items and sometimes leave with additional items they had not originally intended to buy when they walked in the door. Although customers don't realize it, there is a science behind that: planogramming.

Speaking at the "Profitable Planograms" educational session, Brian Mulcahy, merchandising standards and analysis manager at Chevron Corp., explained that as retailers look at the store layout, it is important to consider drivers and complementary products, and position them on the traffic path to destination areas.

"It is very important to know what people buy with driver categories and it is justas important to know what they don't," he said. For example, retailers should place salty and meat snacks on the traffic path to beer, not sweet snacks. 

When planogramming a store, retailers need to look at outside factors as well, Mulcahy said. For example, is the customer base primarily local residents or commuters? Is there a spike in sales during different parts of the week? Where are the customers coming from? And what is the competition doing? 

In regards to space allocations, retailers need to take into account the performance of a category relative to other categories in the store; a category's role and strategy impact; fixture options; and operational considerations such as stocking cycles, according to Mulcahy. Retailers should also consider growth trends for individual categories. 

Just because a large category may be over SKU'd, however, that does not mean all segments of that category should be thought of the same way, said Stuart Taylor, senior vice president of custom analysis at Nielsen. "You need to drill down to specific products," he explained. 

After determining space and the assortment for that space, retailers should block the products in the shelves to influence consumers; block products by use, occasion and price point; and place the best performers in the most visible position, Mulcahy advised. Retailers must also be proactive in the planogramming process and look for trends six months out. 

Additionally, retailers need to factor in the most relevant and granular data when making store assortment decisions; revise the space depending on category dynamics, role and strategy; and consider multiple points of distribution on the best-selling, high-impulse, trade-up products.

Taylor of Nielsen did caution, however, that high-growth categories tend to become oversaturated so retailers need to be careful with revisions. 

While setting a profitable planogram may seem a little overwhelming, retailers do not need to go it alone. According to Peter Leavitt, vice president of special projects at Eby-Brown Co. LLC, leading wholesalers, research companies like Nielsen and IRI, demographic data, and reset services are great resources for retailers to utilize.  

"Not every retailer has the resources that Chevron has," Leavitt noted. 

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