PLANNING A PLANOGRAM – LOSS PREVENTION WAY

Background

1. As Wikipedia has defined, “Planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases. They may also be referred to as plano-grams, plan-o-grams or POGs.” It is required for helping customers, optimizing inventory and presenting similar looks of same format stores of retailer across city or geographical area.
2. Planograms can be ‘Demand Driven’ or ‘Supply Driven’ or mix of both of them. But, the underlying purpose of the retailer is how to sell more to earn more. I had queried from peers in our forum as to what is desirable aim for designing a store planogram. They came up with absolutely logical answers. Some logically stated that we should stock what is demanded, but, others had equal force in their comments that we can stock fresh products and create a demand. Both sides had strong reasons to support their thoughts. I was amazed to know that highest in the businesses have their feet on ground and they think of basics. And why not – there is no rocket science involved in selling. It is oldest profession in the world.
3. Whatever is the principle basis of designing a planogram by a retailer, the survey shows that faulty planogram can lead to unanticipated and unacceptable losses. (Question of what planogram should be based on is not debated here as it is exclusive privilege of retailer to decide the same on his own merits).
The Study
4. A dip-stick survey across various organised retail departmental stores was carried out in East Delhi (An area dominated by low income group in Delhi, India. The area is densely populated inviting number of organised retail chain shops. The study showed that most retailers have stocked latest brands of daily use items and most of these products remained unsold till they neared their Expiry or Best Before Date. At this stage, the products were marked down and the stocks got cleared, triggering fresh supplies and the cycle goes on. Under mentioned data is eye opener in itself :-

6. The basic reason for above mentioned losses is NON MOVEMENT OF STOCK FROM DISPLAY SHELVES TO CUSTOMERS. But the fact is that they impact bottomline. First problem is how to identify such stocks. The answer lies in analysis of store sales data over a period of time. For example, if data can indicate what all merchandise have not moved from the store for last 30, probably it is time to take note of this report. In other words, Data Analyst can be tasked to establish a pattern between the planogram and non moving inventory.

The Mitigation Process

7. After having identified non moving stock, then comes the issue of identifying reasons for the same and addressing the root cause. There could be variety of reasons why a particular product is not saleable from a particular store – could be there is no demand for that stock in the store catchment area or the product does not match customer satisfaction or could be pricing is not correct or some other issue. The concerned merchandising team and store team is best equipped to handle particular situation.

8. What ever the reason, some of the the solution lie in one or all of the following:-

(a) Non Selling Stock could be moved inter-store for liquidation and / or placement of fresh orders suspended.

(b) Planogram could be changed for the particular store in which there in Non Moving Inventory and be replaced with the products which will sell in the geographical area (unless business is stocking SKUs to build up a demand)
(c) Article could be replaced with similar product which has a history of good sales. Say for example Old Spice talcum powder is not selling over a period of time, but, Cinthol powder is doing fine, then, probably Old Spice needs to be removed from store planogram or promotion could be designed to help customer go for old spice.