Category space plays a defining role in shaping a retailer’s brand identity and setting their store apart from their rivals. So why do so many retailers make the mistake of underestimating the significance of category management?
A store’s category layout and space allotment are the keys to retailers’ ability to craft visually appealing product displays that help entice customers to purchase. When the incorrect allotment of space is given to a destination category, a routine category, or a seasonal/promotional category, the consequence is clear – lost sales and dissatisfied customers who may turn to competitors.
Floor plan analytics help macro-space planners evaluate, assess, and fine-tune their category space to ensure it serves both merchandising strategies and customers’ experience.
Retailers serious about maximizing sales and profitability must optimize their category management efforts using floor plan analytics. There are four key steps in this process:
- Gather comprehensive data.
- Analyze the data.
- Optimize category space.
- Monitor and adjust.
Let’s look at a hypothetical example. Floyd, the VP of Merchandising for a major hypermarket chain, wants to explore expanding the makeup category due to its sales within the rest of the health and beauty assortment.
In determining whether expanding the makeup category is viable for the business, Floyd must ascertain the appropriate amount of space for makeup and assess whether the expansion will lead to increased sales while maintaining or improving the performance of adjacent categories. There are four steps that will help him make his recommendation to the business:
1. Gather comprehensive data
Improving category management with floor plan analytics begins with macro-space planners collecting vast amounts of data. This includes a high volume of sales and customer data points to help planners better understand customer purchasing patterns to key sales performance.
The key metrics planners must consider as they analyze category and floor layout performance include:
- Sales by category. Planners must understand which categories are performing well in urban versus suburban stores to make the necessary adjustments to product facings, placement, or visibility.
- Dwell times. A longer dwell time can indicate that your customers are engaged and interested in the products, while shorter dwell times might suggest that the category needs better visibility, a different merchandising layout, or that it is not meeting the customer’s needs.
- Shopper flow. Planners should identify high- and low-traffic areas and allow them to adjust product placements, signage, and design layout.
- Hot and cold zones. This data helps planners identify which areas within the store customers spend more or less time in and determine which departments, categories, or displays need repositioning, expansion, or downsizing.
- Sales per linear foot. This information lets planners assess the efficiency of your space.
- Promotion performance. Compare sales during promotional and non-promotional periods to assess the effectiveness of your promotional strategies.
- Planogram compliance. Understand if each store is implementing the actual merchandising as developed by HQ, which will impact the overall sales performance.
- Shopper demographics & feedback. Planners must understand their customers’ gender, visit frequency, and location. This info, paired with feedback from customer surveys, helps planners make decisions on the products they carry, the placement of these products and the overall store layout.
2. Analyze the data
Once planners have gathered a comprehensive set of data, the next critical step is to analyze this information to inform strategic floor planning decisions. This involves leveraging advanced floor plan analytics tools that integrate various data sources, including sales data, customer movement tracking, and space allocation metrics. By employing dynamic visualizations such as heat maps, planners can create a vivid representation of customer behavior and store performance.
Key Aspects of Data Analysis in Floor Planning:
- Identifying Hot and Cold Zones. Utilize heat maps to visually identify areas within the store that receive high foot traffic (hot zones) versus areas that are less frequented (cold zones). This insight is crucial for optimizing product placement and promotional displays to capture customer attention effectively.
- Space to Sales Performance Analysis. Analyze the relationship between the amount of space allocated to different categories and their sales performance. This helps in understanding which categories are over or under-performing relative to the space they occupy, guiding decisions on space reallocation to maximize sales and profitability.
- Trend Identification. By analyzing sales data over time and correlating it with floor plan changes, planners can identify trends in customer preferences and behavior. This includes understanding how product placements, store layouts, and seasonal changes influence shopping patterns.
- Optimal Category Placement. Armed with insights into customer flow and product performance, planners can strategically place categories in locations that align with shopper behavior and preferences. This ensures that high-demand products are easily accessible, enhancing the shopping experience and potentially increasing basket size.
- Experimentation and Iteration. Data analysis in floor planning is not a one-time activity but an ongoing process. Planners should continuously experiment with different layouts and product placements, measuring the impact of these changes through data analytics. This iterative approach allows for fine-tuning the store layout to adapt to evolving customer needs and market trends.
3. Optimize your category management
Understanding and optimizing the space allocated to specific categories or departments within a store are crucial for maximizing sales, minimizing overstock, and delivering the ideal in-store experience.
With a deeper comprehension of your data, you can:
- Develop merchandising strategies regarding the allocated space for each category.
- Determine whether you need to increase or decrease space for a category or department to avoid overstocking and poor sales performance.
- Identify too much space for slow movers and too little space for fast movers.
These strategic choices could involve altering your store layout, space allocation, or repositioning categories adjacent to others, thereby increasing add-on sales.
4. Continuously analyze and adjust based on the latest data
Finally, it’s important to analyze and adjust your category space based on ongoing data analysis as a critical component of your retail floor planning. A balance of data-driven decision-making and creative merchandising strategies ensures your stores stay profitable and competitive while maintaining a customer-centric approach to merchandising.
Embrace your space with optimized category management
A retailer who carefully analyzes the performance of categories gains the ability to make strategic decisions regarding whether to increase, decrease, or maintain the current square footage for a category. This approach ensures that the company maintains a competitive advantage within the market while offering the products their customers seek.
