The challenge for me in this discussion is that I do not have the answer!
And this is because I am not entirely convinced that planograms grow sales or even profitability for that matter, at store level.
What is a planogram?
Essentially it is a diagram that indicates which products go on which shelves – and how many facings of each product need to be on each shelf. The diagram will indicate which variant of a product to stock, and which supplier’s products should be on the shelves. I see planograms as vastly different to say a store layout – which is also a diagram. To some extent I think these are being confused.
A store layout tells you where to position your pay point, where the fridges should go, where chips, sweets and snacks should be displayed in your store etc. As such I see store layouts as infinitely more helpful to me as a retailer when opening a new store or revamping a store. And even as you trade – you can review your store layout to better meet the traffic flow in your store. So a store layout can be very useful to me as a retailer.
A store layout will not show which variant of toothpaste to stock. It will indicate however, where toiletries as a category or department should be in your store. The planogram will indicate actual line item, the colour, size etc – and on which shelf it should be merchandised.
Planograms are the end product of some sophisticated software (that in many cases costs the earth to use or buy outright) – into which all sales of all products are pulled into the system. The software then uses these sales to generate a product layout based on these sales.
So why am I not entirely convinced that planograms can work and drive increased sales at store level?
Well firstly it all depends on where the information is being pulled from. If it is from my store only – then I would concede that there might be merit in using a planogram. However, mostly because the costs of these programs is prohibitively expensive – Franchisors tend to collect information from its entire network – to drive consistent planograms throughout its network.
Some are fortunate to get down to regional level – but even at this level of information I am not convinced it helps me at store level.
For one thing the information is historical. So it is based on sales that have already taken place either a week ago, last month or even worse – the last six months. And those of us that work on the ground know intuitively that our customers’ tastes continuously change.
I remember a few years back when a large supermarket in our country introduced planograms into their store network. Based on historical sales – planograms were sent out and store staff ordered according to these plans. However, in that particular year down here in the Western Cape – we did not have a winter season. So soups and bread were not the priority purchases that had been incorporated into the planograms. Instead customers were looking for a continued supply of fruit and salads!
The one positive thing that worked in this company’s favour – was that they owned the supply chain – it was not a franchised network. They supplied their stores out of their own distribution centres. But it did incur some revision of their strategy in this regard – as the whole supply chain was treated as one business entity – so their suppliers and orders had to be reviewed quite quickly.
Those of you that have worked with planograms will know that it is not that easy to comply with product layouts sent to you. And I am sure like me – there will be those of you that look at the product selection and then say to yourself – but these don’t sell in my store! And this is a common complaint from franchisees.
So why is it difficult to implement store planograms on the ground if there is no central distribution centre?
There are a number of reasons why this is so.
- You don’t stock an item because it does not sell in your store or region
- You do not have the required fixtures and fittings in your store to display the products as depicted in the diagram. This is particularly true when you use pegs and hanging displays
- You don’t sell that variant – your customers for example prefer strawberry yoghurt to vanilla yoghurt
- You don’t like where that product has been positioned on your shelves as your margin on that product is very low
- Your supplier is out of stock – very common in some regions in our country
And by far the biggest challenge for me is that we are basing our future product layouts based on information that may or may not be correct in the first place. They may not be a true reflection of what our customers are looking for.
In this regard a while ago I wrote about a product such as Jelly powder. It really only sells in one month of the year – and if you did not have it last year – it won’t be on the planogram for the next year’s sales.
Don’t get me wrong about those networks that have central distribution points. They too have difficulty in implementing planograms in their networks too – but it is much easier for them than say a franchised network that does not have a DC.
My feeling is that to some extent implementing planograms across a network run by franchisees is hard work for all concerned – and in the end, very few stores are able to comply fully to these at store level.
So my question is why bother in the first place?
I just don’t see the return on the bottom line – except of course perhaps for our suppliers?
Take care out there