Perfecting the Art and Science of On-Shelf Retail Availability
Do you ever find yourself sitting in a conference room with your colleagues wondering “Why are we missing our new item forecasts?” or “why are we missing plan?”. The good news is that you’re not alone. These same conversations are happening every day in conference rooms all across America. And it often has nothing to do with your product itself. Your product is good, maybe even great! When we hear this concern from our clients, the answer often lies in their lack of strategic planning and execution when it comes to retail availability, which leads to an ongoing struggle to keep the right amount of product on the right shelf at the right time. Sounds simple enough, but it isn’t.
While most businesses are easily distracted by launching new products, they tend to forget about the products they already have out in the market. There’s a toxic “on to the next one” mentality which leads to your current products being neglected and, well, failing when it come to sales. Launching a new product nationally used to take about 13 weeks, but the model has since changed. In today’s market, it can now take up to two years. This takes planning and commitment. What we see so often is businesses rushing through a product launch and then not following through on it properly. We can’t forget to nurture the seeds that we are planting. Getting your product on the shelves of leading retailers nationally isn’t a “set it and forget it” kind of thing. Ongoing effort and strategic decisions are required to ensure that your product succeeds once it is out in the market.
The Changing Retail Landscape
In today’s retail world, consumers have endless options and finite attention spans. Along with specialty stores and Mom and Pop shops, they can also visit box stores and mega box stores. Let’s not forget about the Internet - ecommerce sales in the US grew by 15% in 2018, eclipsing $517 billion, making up 14.3% of total retail sales. And guess what, it’s only going to continue to grow. Online sales account for over 50% of the growth in total retail sales growth in 2018. While better prices, more options, and convenience fuel online retail, in-store retail still plays (and will continue to play) an important role in how people shop.
More options. Less attention. How do you stand out? How do you compete? Often times, the key to success is ensuring that you have the fundamentals in place. Your new ad campaign or in-store promo won’t do squat if the customer can’t find your product. Here are some of those fundamentals that your business needs to be focusing on in 2019.
On-Shelf Retail Availability
When someone walks into a store (or clicks their way to one) and they are looking for your product, can they find it? They better. What if they are looking for a product but not necessarily your particular brand. Well, if you aren’t there but your competition is, guess which one the customer is likely going to buy? On-shelf retail availability is all about getting your product in front of the right customer, in the right place, at the right time. But ensuring on-shelf availability is not as easy as it sounds. There are plenty of factors at play here, from logistics to supply chain management to in-store inventory issues, but it’s never been more important.
Is this your worst nightmare? It should be (one of them at least). Think about it. You’ve developed an innovative product, built a strong brand, created interest, intrigue and even demand. An excited new customer goes to a retailer to purchase your product and then…sorry. Out of stock. Not only did you lose the sale, but you also lost the opportunity to obtain a new customer and likely hurt your brand in the process.
Managing inventory and keeping up with demand (without oversupplying) is a tricky thing. You don’t want to be that brand rep walking into a retail store only to find your product oversold with an “out of stock” sticker hanging where your product should be.
Out-of-stock rates continue to cripple businesses in all sectors, especially online where potential losses from out-of-stock are double that of in-store rates, reaching nearly $17B in losses last year. The entire trade is struggling here, but there are several things you can do. Give your buyers volume estimates for upcoming promotions. For hot deals, have them commit to a PO that will ensure we have sufficient inventory to meet demand. Adjust your case pack to increase inventory on shelf. With the proper planning and forecasting, the likelihood of facing out-of-stocks can be reduced.
Let’s say you sell coffee. You offer five different types of roasts all sold fully ground in ½ pound bags, meaning that you have five unique SKUs. Sounds simple enough to manage, right? Well, as your sales and research numbers roll in you discover that some consumers are looking for whole beans, preferring to grind it themselves. To appease these customers, you decide to offer the same five blends now in whole bean and fully ground. Now you have 10 SKUs instead of 5. Then you learn that a large cohort of consumers are looking to buy in bulk, wanting your product in a full 1 pound bag. Suddenly your SKUs have gone from 10 to 20. You can see how quickly this can get out of hand.
As CPGs and retailers continuously compete to provide consumers exactly what they want, SKU proliferation has become a serious issue faced by supply chain managers and distribution centres. Keeping up with the ever-changing needs of consumers and demand leads to more inventory, which can mean more sales, but comes with its fair share of costs, including increased overhead, packaging and cost to the consumer, while decreasing your efficiency and output. Managing your SKU assortment while getting your consumers exactly what they want is truly an art and a science.
Slotting fees have become a huge cost of doing business. While once relatively rare, retailers of all sizes are now charging slotting fees for shelf space and brands are now forced into paying big bucks to appear on their scarce shelves in an effort to get their product in front of the consumer. While it can cost millions of dollars to launch a product in national retailers, some brands are shying away, unsure if an investment of this magnitude will pay off. But know this - slotting fees aren’t going anywhere. As both in-store and online retailers continue to adopt slotting fee models, the market is now believed to be somewhere around $9 billion and it continues to grow.
As you expand your distribution, you will come face-to-face with slotting. It’s not a matter of if, but when. For many smaller brands, this can be a scary realization since slotting fees often feel astronomical. But in our experience, we can tell you that slotting is generally one of the highest ROI spend we have. Distribution is the gift that keeps giving. Reducing the fear around spending on slotting and bringing discipline will empower your sales team to get items on the right shelves without breaking the bank.
As you work through your annual account planning process (you need to have an annual account planning process!) the most important discussions will revolve around what we expect from the upcoming resets. This might be the only chance to get on shelf and being willing to invest in space can enable us to make plan.
Can’t sell if not on shelf – existence precedes essence.
Promos and branding are sexy and fun to talk about, but none of it matters if the customer can’t find your product. Plain and simple.
Gone are the days of your marketing hitting at week 13 because that’s when grocery ACV will reach 75%. This is no fault of sales organizations – it’s just the way things are now. With major resets occurring once a year if we are lucky, it takes a full 52 weeks just to have had a chance at getting on shelf.
To add to the madness, the rate of new entrants is increasing, meaning that retailers are inundated with new items to choose from and new brands that might be more willing to pay for slotting, making your job that much harder.
Managing all of this can seem daunting, but with the right planning and strategic vision it is possible to perfect this art and science.
If your brand is struggling to get your products on the shelf, keeping them in stock, or have serious SKU proliferation issues, get in touch to learn more about we can help.
We will also be attending Natural Products Expo West in Anaheim the week of March 5-9th. We’d love to meet up with you to chat about your challenges and upcoming opportunities.