Six Things You Must Consider in Your Shelf-Merchandising Strategy

BARRINGTON, Ill. — For convenience store retailers, merchandising can make or break the customer experience.

In an April 19 webinar entitled "What Winning at the Shelf Looks Like," Balvor LLC Managing Partner David Bishop identified key challenges and best practices for c-store retailers in battling out-of-stocks and laissez-faire attitudes to truly win over customers and gain more incremental sales.  

The first step in crafting a successful shelf-merchandising strategy, according to Bishop, is identifying key challenges.

At the backdrop of the challenges that today's c-store operators face are food deflation and a slow U.S. population growth rate. At the surface, the most prominent challenges are the widening popularity of online shopping (expected to grow by 20 percent in the next five years); the blurring of grocery channels; and the negative affect high gas prices have on in-store sales.

"If our whole job is finding a way to increase sales, then what we're talking about here today is a tactic, a tool that can help us increase conversions, which leads to increased sales," Bishop explained.

C-store retailers also have to know who their customers are. Spending on average only two to three minutes in-store, c-store customers are shopping for destination categories like cigarettes, beer and hot dispensed beverages. Most planned purchases are made in these categories. Other times, trips into the store are more impulse-driven, like when consumers are in search of a candy or snack item.

However, at the center of the store is where opportunity lies: Center-store categories, like snacks and non-grocery, yield penetration rates of 20 percent to 30 percent. Typically half to 55 percent of consumers shopping will walk away as a buyer when it comes to these categories, Bishop pointed out.

Winning at the shelf is one part art and one part science. Both are critical in executing a c-store retailer's category management plans, he articulated. The art side of merchandising is more operational — think availability, attractiveness and accessibility — while the science side is shelving, pricing, product, placement and signage.

Six key considerations for c-store retailers when it comes to shelf-merchandising systems are:

1. Warehouse-delivered. Improve labor efficiency, reduce costs of product handling. 

2. Front-load stocking. Reduce time associated with manual rotation. 

3. Strong unit sales. Make products in high consumer demand easier to find. 

4. Pegged products. Requires more time for stocking/restocking, could potentially have damage. 

5. Above-average penny profit. Items on which c-store retailers don't want to miss a sale. 

6. Impulse-driven. "If categories are generating significant shares of business through impulse purchases, seeing is believing in the sense that you can't buy what you don't see. So, if we can use shelf-merchandising systems that solve that issue, we can capture more sales that we might otherwise forfeit," Bishop said.

What makes or breaks a customer's decision to buy could depend on a retailer's shelving practices.

For instance, throughout the store, customers encounter two types of shelving. One is non-facing, which includes flat shelves and pegged items, mostly found at center store, or at the cooler or freezer. The other is self-facing — like gravity and pusher — primarily found in the cooler and at the backbar.

When looking at in-store sales, self-facing shelves are responsible for an estimated 60 percent of in-store sales, while non-facing and other are each responsible for 20 percent.

Even though "it's all about making the shopping trip and purchase occasion as quick and easy as possible," Bishop acknowledged that customers may find themselves faced with out-of-stocks, leading that retailer to lose at the shelf.

Out-of-stocks can be both actual and visual/false. A visual/false out-of-stock is when a product is physically on the shelf, but isn't visible to shoppers. For example, the last peg bag hanging on the back of the rack is not easily visible or easily accessible to customers without them exerting some effort to find it.  

Prime areas where c-store customers may encounter actual or visual out-of-stocks are: 8-section composite, like candy and snacks (3.1 percent actual, 2 percent visual/false); grocery including food (3.7 percent actual, 1.6 percent visual); and non-food grocery items (1.4 percent actual, 2.9 percent visual).

The fallout from out-of-stock situations can be extensive. Bishop cited findings from EIQ Research Solutions, the research arm of Convenience Store News' parent company EnsembleIQ, which found that when faced with an out-of-stock, customers are less satisfied with the overall experience (44 percent) and less likely to recommend a store vs. a shopper who didn't experience an out-of-stock (26 percent).

Additionally, 55 percent of customers faced with an out-of-stock did not purchase an alternative item, and one-third said they would stop shopping at a store for a period of time if the product that they wanted wasn't available.

When it comes to winning at the shelf, Bishop wants c-store retailers to recognize that a balanced and integrated approach is required. Companies should evaluate more holistically when accessing the fit of shelf merchandising. Questions retailers should ask themselves are:

• What is the cost? This is not a product for resale, and it's not something consumers are walking out with, but it's in support of that.
• What is the function? Does the shelf-merchandiser do what it's designed to do?
• What is the impact? There can't be a positive impact on the business if there is a malfunctioning system.

"It's important to remember that many of the reasons why we're investigating and evaluating the opportunities at shelving is, in some ways, similar to the rationale retailers have applied in improving or enhancing their in-store lighting, or overall signage package throughout the store or even the bathroom. ... Those things have to have a positive halo on the impression and the reactions of those who are shopping. In turn, it encourages them to spend more with us," Bishop said.

Convenience Store News was the exclusive media partner for "What Winning at the Shelf Looks Like." The webinar was sponsored by Retail Space Solutions. 

Based in Barrington, Balvor LLC is a sales and marketing firm that works with companies to improve performance results at retail.

Click here for a replay of the "What Winning at the Shelf Looks Like" webinar.