Retailers must reimagine how every inch of the store, from the front end to the backroom, is used."
The COVID-19 pandemic has upended how, where and what Americans are buying — rendering traditional retail and brand strategies for optimizing product mix and shelf space less than optimal.
As many brands continue to grapple with supply chain challenges and grocery retailers strive to fill the sudden increase in online shopping orders through their brick-and-mortar stores, both must rethink their pre-pandemic notions of ideal store-level inventory levels, category management and maximizing a store’s footprint and linear real estate.
With six in 10 pandemic shoppers choosing to shop at an alternative to their primary retailer and more than half straying from their preferred brands, the conversation needs to extend beyond the immediate sale lost when a shopper doesn’t find a product they need. Now, more than ever, it’s about the long-term impact of shoppers going elsewhere for their groceries or switching brands permanently.
For many grocery retailers, a pre-COVID emphasis on using floorspace for services such as in-store dining and minimizing days of inventory on the shelf, all while maintaining high SKU counts, needs to be reconsidered, quickly. To keep the right products available for purchase online and in-store, retailers must reimagine how every inch of the store, from the front end to the backroom, is used. In short, they need to operate not just as retail stores, but as warehouses, to meet the omnichannel demands of shoppers who are buying groceries online at record levels. This rethinking will have a significant impact on which brands, how many brands and how many individual SKUs are on the shelf.
Space management has typically been a local store, category-based, assortment proposition, a process that should now be supplemented by a wholistic, storewide view of space management. By understanding an individual store’s shoppers’ needs first, then flexing aisle and category space allocation and category assortment to meet their preferences, grocery operators can deliver localized space management versus what has historically amounted to localized assortment.
Grocers will need to rethink how they create local planograms, which are typically based on brand and item preferences, plus local product offerings, on a category-by-category basis, and on shopper traits such as income and ethnicity. Now, shopper traits such as financial security, health concerns and dwelling size have taken on greater importance.
More than ever, it’s critical for retailers to understand their true role in their customers’ grocery shopping journey. What are they coming into the store for? What are they buying online for curbside pickup or delivery? If they aren’t choosing my store, why? And who are they choosing?
It’s no longer optimal to plan space on shopper demand alone. Retailers need to consider a multitude of metrics, including the role of the category in the store and across channels from the shopper’s point of view (do shoppers see it as a convenience or a necessity?), the size of the category and category walk rates at the local level. All of this must be considered with an eye toward shoppers who live around the store — not just those who walk into the store. In many categories, that means rethinking overall space allocation, expanding in some areas and subtracting in others, ensuring broader supply and variety in some and less space and duplication of like offerings in others.
It’s also time to consider planogramming every store’s backroom. The go-forward strategy for retailers will need to address the delicate balance between shelf space allocation, replenishment processes and cost of inventory. Planogramming the backroom will help ensure key items are on hand, easily picked and shelved to safeguard against out-of-stocks in the brands, categories and aisles that matter most to shoppers in each store’s neighborhood.
During these times of great uncertainty, anxious shoppers are looking for a grocery retailer who they feel understands them and can be counted on to meet their needs.