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Look at the things you notice at any successful retail operation without even realizing the effort: it's intentional. Popular products are at eye level, complementary products are grouped together and nothing is at random. This is not coincidental; it's part of store management, a key tool that is often overlooked: the planogram in retail. The knowledge and implementation of planograms effectively can impact bottom line for any retail business that wants to get the most sales out of the same shelf space.
What Is a Planogram in Retail?
A planogram is basically a graphic representation or blueprint which will outline the exact position, direction and number of each product to be stocked on a shelf, rack or display fixture. A planogram is a standardized layout that is data-driven and expected to be followed in every store in the chain, as opposed to being left to the discretion of the store employee.
Just as an architect's plan tells staff what products go where, it also explains why, taking into account elements such as products' sales velocity, product margins, seasonal relevance, customer shopping patterns, etc. It makes shelf arrangement objective instead of subjective and it becomes a process that can be repeated and measured.
Why Planograms Matter for Visual Merchandising
It's all about store layout and display to help influence purchasing behavior, and planograms provide the technical foundation to enable this on a large scale. A lack of planogram means that visual merchandising decisions reside in the minds of the last person to do the work, and are not consistently implemented or repeatable in different stores.
Once there's a planogram, the principles of visual merchandising, such as the use of eye-level, visual blocks for color and category, and positioning of promotional items, are translated into repeatable, exact instructions. For retail brands with dozens or hundreds of locations, the brand experience needs to be the same from one employee to another and from one store to another – and this is particularly critical.
The Direct Link Between Planograms and Product Placement
The core of a planogram is product placement decisions. The shelf location of a product is more influential than its price in determining sales. Products placed at eye level perform better than those on bottom shelves, end caps and checkout adjacent locations encourage impulse purchasing, while complementary product locations tend to be helpful in cross category sales.
A well-designed planogram takes advantage of this knowledge:
- The high speed, high margin products receive top shelf positioning.
- Items which move slower or are bulk items are lower or higher, which allow for more deliberate browsing.
- Advertising of 'complementary foods' (such as chips next to drinks) is used to promote basket growth.
- New or promotional products are placed temporarily in premium area to generate visibility.
If there's no planogram, these decisions go by guess, or staff convenience, and may overlook sales opportunities that aren't even apparent until somebody looks at the shelf.
Planograms as the Foundation of Retail Store Layout
While a planogram usually controls the layout of a single shelf or fixture, its principles expand to the larger retail store layout. The layout of entire sections, aisles and departments also has a logic, guided by the idea of making more visible products more visible, and getting the customers' feet moving through the store, while keeping important products from being lost in less frequented corners.
The retailers who think of planograms and store design as related, rather than unrelated actions, are more likely to create a store environment where each area complements the other to offer a logical path for customers to follow, increasing exposure to important sections of the store along the way.
Building a Retail Merchandising Strategy Around Planograms
Planograms are only snapshots, their evolution over time depends on a wider retail merchandising strategy. These cover frequency of planogram changes (seasonally, new product launch, and respondent to sales data), changes between store formats and store location demographics, and planogram changes based on performance data for future planogram revisions.
There is a good merchandising approach that includes:
- Regularly examining sales and inventory data to determine shelf sections that aren't performing well
- Planogram optimisation to meet regional preferences and/or store size differences
- Before implementing planogram changes network wide, test these changes in a few stores.
- Ensuring planogram changes are coordinated with marketing schedules and promotions
Without this layer, planograms can be static documents that soon outpace reality, in terms of both shopping patterns and stock levels.
Executing Planograms Within Retail Operations
While creating the proper planogram is a significant part of the equation, it's the execution that’s the difficult part in day-to-day retail operations. The planogram has little value if it is not accurately implemented by store personnel and is not consistently maintained, which necessitates effective communication, training and regular checks.
Typical issues with execution are:
- The need to use non-compliant shelf arrangements whilst busy.
- Lag time between reformulation of an existing planogram and the update of shelves after the release of the planogram.
- Inconsistent performance at stores because of different training levels among staff members
- No effective system in place to ensure that planograms are being implemented on the floor
These are being tackled in many retail outlets by conducting store audits or mystery shopping trips, and comparing the store to the planogram to determine if the shelves are the same. This will ensure accountability and give on-the-spot feedback on execution deficits that can be overcome by staff training.
Getting Started: A Simple Execution Guide
When a retailer is considering adopting or refining their planogram process, here are some steps that may be taken:
- Analyze sales and customer data to determine products and categories that generate the most value.
- Design the planogram based on this information, making sure to place important goods on the eye level and in areas of heavy traffic.
- Communicate clearly with store teams, using visual references, not just written instructions
- Verify execution is correct by making regular visits to stores or audits to ensure that shelves are in line with the planogram.
- Review and refine planograms regularly to reflect sales data, seasonal changes or changes in products/ingredients
As a continuous cycle, not one-off, planograms remain in line with what customers actually do, not what they were doing at the beginning.
Also Read: Types of Retail Audits Explained
Conclusion
The planogram in the retail industry could be a simple diagram on paper, but it is a deliberate, fact-based method that essentially has an effect on the sales performance of retail and the way products are presented to customers. Planograms are a powerful tool that bring together almost every element of a retail store design to sell products, whether it be visual merchandising, product placement, how the store is designed, and overall merchandising strategy. When it comes to driving meaningful and measurable sales improvement, working with experienced retail audit companies in India to verify execution is one of the most cost-effective strategies any retailer focused on maximizing shelf value can adopt.
