Planograms: the importance of Retail Space Planning

Let’s Discuss the Role of Planograms in Retail Space Optimisation

For decades, Planograms have been the primary approach to retail planning to design stores that positively influence customers’ shopping experience. Planograms include small retailers that create planograms manually to maximise their selling space or simply use their intuition and they include the most significant U.S. retail chains. For example, Walmart and Target automate planograms to create consistent experiences across stores, and improve visual appeal and optimise product or category placement.

However, as more and more retailers are discovering, the process of planogram creation via Category Management is not up to today’s ever-changing operations. These operations are where changes and adjustments abound, promotions occur daily, and teams are stretched to maximum capacity.

In summary, here  are some of the main issues related to space that retailers face:

• Inventory management: a stock shortage creates losses in sales and decreases customer satisfaction. In turn, an excess of stock causes a financial loss by unnecessarily immobilizing working capital.
• Store organization: retailers must decide where and how to place their products without limiting the visibility of items or affecting customers’ shopping experience.
• Get more value from data: when capturing customer data, it is necessary to analyze it efficiently to improve decision making and deliver personalized shopping experiences.
• Resources for planogram creation: skilled talent, time, and resources are needed for planogram creation, customization, or duplication. Generic planograms can be produced quickly and in quantity but do not meet the needs of local consumers, and sales may suffer as a result.

Also, a store manager often may struggle with what a planogram expresses in everyday operations.  Or they may discover that the number of products shown on a planogram does not fit on the shelves or that they are not working with the most recent version of the planogram.

The Solution for Planogram Creation and Space Optimisation:

Technology tools facilitate the creation and storage of planograms to increase company revenue by making efficient product allocation decisions. This is where the most profitable items receive the right amount of space. This then helps retailers determine the required amount of inventory for each product and facilitates space and planogram analysis.

Furthermore, Prisma’s Space Planning module suggests visually appealing layouts and generates greater linear space profitability. Retailers, merchandisers, and category managers will receive suggestions for ideal layouts for each category and product based on performance, sales volume, and available space.

Or they will be able to assign planograms to layouts and store clusters. In this way, you can associate layouts per point of sale, respecting their formats. It is possible to replicate and assign a planogram to a new store in an automatic, efficient, and error-free way to ease daily operations.

In short, Prisma facilitates the analysis of planogram performance and records the evolution of the KPIs over time.

Here is a list of top benefits Prisma Space Planning can deliver:

• Detect which version of the planogram maximised sales or margin.
• Apply filters and analyze the performance of the planograms for a subset of products. For example, to know which version of the planogram maximized the sales of imported cereals.
• Use the heat map and timeline function to measure the performance of the main variables in the different versions of the planogram and over time.

We also incorporated new features to create, manage and validate compliance with commercial agreements in an automated and error-free way. For example, we can set mechanics and directives on planograms, such as minimum and maximum facings per product, linear space, and space share.

How Does it Work?

1. The rule is created by creating its name, condition, value, and the products reached by it. Once the rule is made, it is active. The rule can be applied to the whole planogram, only to a module or shelf.
2. If the layout of the products does not comply with the defined rules, an alert will be generated.
3. The user will be able to review the alert to see the products that do not comply with the requirements. The alert will remain active until the product disposition complies with the parameters.

Prisma can match business rules and planograms across all stores automatically. This facilitates the task of the sales department, optimises resources and increases efficiency. Additionally, this is related to planogram replication.

Furthermore, for many retailers, copying planograms with store-level adaptations in a timely and cost-effective manner is a time-consuming and tricky process.

This leads us onto Prisma, which is more efficient. The Planogram Generator automatically creates customized store-level planograms in a 3-step process:

1. Preparation: the general parameters that will feed the automatic generation algorithm are set. These include a range of products, shelves, and a range of stores.
2. Subdivision into spaces: before adding products, the space can be automatically subdivided and successive subdivisions can be made. The result of this step can be shown in the graphic interface.
3. Automatic Generation: Prisma’s automatic planning algorithm takes over and automatically produces a planogram. It does this for each store, considering their assortments, shelves, business rules, and sales.

In this way, store-specific and customer-centric planograms can be created, considering commercial agreements, product, and category performance data.

Conclusions

In conclusion, today’s customers want engaging experiences that justify taking the time to visit the store physically. Retailers must efficiently manage their most valuable asset: physical space. As the competition among companies increases, retailers must focus their efforts to make use of their in-store space. At the same time, they must create visually appealing spaces and efficient exhibitions.

By using new space planning software, store design and planogram creation will be a clearer and faster process. Also, by analyzing historical data related to spaces, you will be able to build future scenarios and avoid stock management issues.

Ultimately, those who are able to plan store formats and assortments well will achieve the best results.

This is a guest post from PRISMA.

Prisma is a SaaS platform that provides retailers with a proven process to optimise prices, promotions, inventory, assortment and space planning within the same platform. By combining business rules with sophisticated machine learning algorithms, Prisma generates suggestions that help retailers make better decisions and increase profitability.