For a lot of us it feels as if the Christmas season starts earlier each year. Nowadays it seems like the only thing preventing retailers from pushing out Christmas products by early October, is that most of the campaign display areas are reserved for Halloween products.
Pushing seasonal products out for as long as possible might make sense for retailers to the extent that seasonal sales make a huge impact on margins. So, it’s both understandable and smart to try to get maximum benefit from seasonal sales periods.
But while it’s one thing to try to extend seasons for as long as possible, it’s another thing to manage your seasonal merchandise planning correctly. There’s no reason to allocate all the available promotional space for Christmas products, for instance, as early as October when they won’t sell as well as they do in November or December. Accurately forecasting the right quantities to allocate is all the more critical if you don’t want to compromise sales of other products. That leads me to my next point.
One thing that I have given a lot of thought to lately is the interplay between retail space and replenishment. As space is usually set aside for season-specific items and products, such as Christmas chocolates, it also needs to be replenished accordingly.
As space is usually set aside for season-specific items and products, such as Christmas chocolates, it also needs to be replenished accordingly.
There are two major outcomes, that almost every retailer will be all too familiar with, when it comes to stocking up for a season:
- Having too much stock will result in products being left over after the season, resulting in waste or capital tied in dead or slow-moving stock, while …
- Having too little stock will result in products running out before the end of the season, which in turn results in lost sales
I’m sure you have figured this out already, and you may well have an excellent forecasting process, good allocation management, and so forth. But although you might have solved the initial problem with the right amount of stock, it won’t address the root of the problem if you haven’t optimized the management of your space replenishment accordingly. Usually retailers that haven’t prioritized this and don’t have a clear process for seasonal merchandise planning, will end up in one of the following situations:
a) There is stock being left in the back room and shelves are quickly becoming empty
b) An entire army of store merchandisers is needed to fill the shelves constantly and that is, of course, a nightmare for store operations
So, in the end the retailer will either still end up losing sales because of bad space management or will tie up all its resources into battling the empty shelves resulting in jeopardizing the key element for any business: customer service. Do you really want to find yourself facing that sort of choice? Of course not.
Where does this lead us?
The whole point is quite simple really. Starting at the beginning, one can take space into account when forecasting and planning for initial allocations. After this, space will determine the replenishment process. Simple, right?
The important part is then to follow up and update forecasts according to sales. Then, when the season draws to an end, the space that has been given over to seasonal products will need to be reduced on the basis of the forecasts and in line with the planned ramp-down. This is especially important when your stores are all different shapes and sizes and all have unique sales volumes.
Let me give you an example.
Initially you might choose to allocate only a single space for your Christmas chocolates. There’s no need to go all out from the beginning (but it does offer those who like to get their Christmas shopping done early a chance to do so). Then, as the season starts to get into full swing and forecast sales increase, you might well decide to expand to multiple locations; displayed on shelves, endcaps, tables etc. Normally there’s a pronounced sales peak (hooray), after which the season starts to draw to an end and forecast sales decrease. Naturally, this is when you reduce the space, leaving chocolates only at strategic locations. This way, when the season finally ends, you won’t have taken up unnecessary space or be left with unsold products. In fact, you might already have freed up space for the next season or campaign.
However, this is not the only benefit that comes from optimizing your space planning; not by a long way. We all know that every store offers a subtly different experience to customers; the main elements for a store are the same but the store and display layout might be different. The good thing is, there will be particular display locations where Christmas products won’t just get noticed and sell more, but they’ll also drive sales of other products elsewhere in the store.
The good thing is, there will be particular display locations where Christmas products won’t just get noticed and sell more, but they’ll also drive sales of other products elsewhere in the store.
How so? Many of us visit stores with a specific goal. Retailers often talk in terms of ‘shopper missions’. So, given that people are very responsive to visual cues, it’s highly effective to tie in additional items that may relate to likely shopper missions. A display of Christmas chocolates doesn’t just say ‘chocolate’, it says ‘Christmas’ too. This means a customer buying Christmas chocolates might be on a mission to buy everything they need for a Christmas eve dinner with their family. The mission might include buying something for their mother in law, finding Christmas gifts for co-workers and so forth. So, consumers are potentially very much open to suggestion regarding other purchases as well, especially those related to their shopper mission(s). And in the context of a Christmas mission that means everything from cards and gifts to hams or a goose or turkey (or nuts for a nut roast), cake, decorations, seasonal vegetables and so forth. So, organizing displays with this in mind, can often make sense.
This is also where it becomes interesting. The way a good space planning solution works is that it not only analyzes how different locations or spaces function within a store, it also calculates how to maximize revenue from those locations. That means, for instance, ensuring that higher-margin items are placed where they’re more likely to sell, while ensuring that the sorts of products that regular visitors to that store buy, also get properly represented on the shelves. So not only can you increase your seasonal sales but also boost sales for your regular assortment.
It doesn’t have to be difficult
Allocating space doesn’t have to be a painful experience. At the beginning of a season, stores will normally designate and build promotional areas or displays for campaign products, but towards the end of the season this space will be reduced and the other products will start to take the place of the previous season’s stock.
It is possible to handle this level of space planning detail manually, and some companies do, but not all are able to do it as well as they’d like. After all, doing this store by store or cluster by cluster is labor intensive, even though it can pay real dividends to plan store by store, week by week and even change some displays during the working day (lunch items making way for things that make an evening meal for instance). (You can read more about this after Christmas in my upcoming blogpost Rapid-fire Planogramming)
Luckily modern systems, such as RELEX’s Space and Assortment planning solution, can automate most of the work. In the hands of a central planning team it can be an exceptionally powerful tool. Once it’s been programmed with the parameters, so that it ‘knows’ the details of each store, it can do the rest. The result: A Christmas season where you know you’re making the most of your space so you can concentrate on other things, above all on your customers.
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