Retail 101: Part Five with Mike Mauti
PMG: Mike. Today, we’re talking about the second element of merchandising; placement of fruits and vegetables inside the produce department. Within the context of selling fruit and vegetables, what is placement, and why is it important?
Mauti: Simply put, placement is exactly as it sounds, placing your products in spots within the sales area of your produce department. Sounds easy, doesn’t it? You have products and a sales floor. At the start, the sales floor is a blank slate. So, just fill the empty spaces with product. In reality though, it’s not that easy. Your placement strategy becomes a vital component of your overall merchandising strategy because of the limited resources in a produce retail operation. And one of the most limited of resources is space. When we talked about assortment, we talked about the cost involved with listing incremental items. But another factor that comes into play when choosing an assortment, is the amount of available space to display it all. For that reason, placement should go hand in hand with assortment and since space is the limiting factor, how one executes their placement strategy can have as big an impact on sales as the assortment itself.
PMG: In what way?
Mauti: I think it is best to view the importance of placement strategy through the lens of a different department in the grocery store. Let’s consider the dry grocery department. Placement is one of the most important parts of the merchandising strategy for a dry grocery merchant. It’s also the area of the merchandising plan where they probably spend a disproportionate amount of their time. The primary placement tool for this category is the planogram. Picture a grocery shelf with hundreds of products lined up, it will probably be about five shelves high. A planogram is a two-dimensional picture of the assortment placed in its proper spot on the shelf. The responsible merchant will use the planogram to dictate different tactics that are important to that business. For example, it will dictate the size of the assortment and the replenishment cycle. It does this by determining the amount of product required on the shelf to fit the desired cycle. If the labor model allows for shelves to replenished once per day, then the planogram needs to allow for enough product on display to get through the day.
Aside from the size of the assortment and the quantity of product on the shelf, a planogram is also used to place products in the spots that will be most beneficial for the overall category. For example, if the merchant wants their most profitable items to be seen most frequently, then they would put them at eye level. If they wanted the top selling product in the category to be most visible, they would put that product at eye level. These types of decisions will change as their priorities change.
Some retail operations want the leading national brands first in flow, followed by private label, others, the opposite. Another tactic might be to have all brands of the most popular size out front and as you go up or down the shelf, you get progressively smaller and larger. In most departments, planograms are used to dictate merchandising priorities as well as operational priorities. And those same sorts of benefits can also be achieved in the produce department.
Although a planogram type vehicle can be used across the entire produce department, we see it used most frequently on a multi-deck merchandiser. This is often the display case used to display value added produce like packaged salads and cut vegetables or processed packaged goods like salad dressing and vegetable dips. Most of the elements that come into play on the grocery shelf are present in the produce multi-deck too. In fact, some of those elements can be more important for a produce operator than for a grocery operator. Take bagged salads for example, you’ll want to make sure your best-selling varieties have multiple facings to minimize the burden on replenishment and reduce the risk of out of stocks leading to lost sales. But if you take that strategy too far, you risk having too much on display leading to shrink. As you can imagine, the margin of error in produce is significantly smaller than in grocery.
PMG: It sounds like planograms are a useful tool, is it used for more than just bagged salads and dressings?
Mauti: It can be, but it’s rarer to see the produce floor planogrammed. Like all elements of the merch plan, there is a little bit of science and a little bit of art. A lot of the artistry plays out on the produce floor. What makes it so fun to build attractive eye-catching displays is the knowledge that you are going to get a lot of customers seeing them. It’s no secret that the produce department generates a lot of foot traffic, that’s why everyone wants their product displayed there. I can remember fielding a lot of calls from other departments looking for space in the produce department for their ‘complimentary’ items. Don’t get me wrong, I am a huge fan of cross merchandising to drive sales, but sometimes the requests were driven more by the promise of foot traffic than it was because the product was truly complimentary.
With that in mind, when you think about placement in the produce department, it is important to remember that traffic is an important element of the produce business. Although the entire department enjoys high foot traffic, there are some spots that are better than others. For example, end caps and off shelf displays are very good at driving significant incremental sales because of the traffic they get. Getting the right products in these spots is an important part of the merchandising plan and is often a required element needed to meet department objectives. This is why merchants spend a lot of time making plans to populate primary locations with the right items.
PMG: So far, you’ve talked about placement on a shelf or in a specific spot within the produce department. How about where the produce department is located inside the store. I normally see produce being the first department you walk into. Obviously, that is no accident. Is the decision on the location of the produce department part of placement strategy?
Read more of Mike Mauti's "Retail 101" interview here.