What is a Planogram?
The planogram is a visual merchandising tool used to plan which products will be displayed in which area & fixture at the retail store.
The ultimate goal of a planogram is to maximize sales per square foot (SPSF), while also allowing for a seamless shopping experience for customers.
It’s a planning tool used by visual merchandisers and merchandisers ahead of product launches or before floor sets.
They are used by the merchandiser to plan how many facings of each SKU to send to the store as well as the depth, based on the allocated space.
When they are shared with the store teams, planograms are used to display the products in their allocated space as planned by the visual merchandiser.
Benefits of Planograms
- Optimizing the retail space and improving returns
- Planning the right quantity for store allocations based on space
- Standardizing visual display at multiple store locations
- Linking product display to commercial performance
How to Create a Retail Planogram?
To create a planogram you will first have to go through preparation steps, to ensure that the final planogram will be effective in increasing sales and helping customers shop.
1. Analyze the Reports
The first step is to generate the relevant sales reports and analyze them at category & SKU level.
These reports will include:
Sales by Category
This report will show how much each category contributes to the business in terms of sales, as well as gross margins. This will then play a role in determining how much space will be allocated for the respective category.
Best Seller Report
This report will show the best selling SKUs in terms of quantity and value.
This helps determining where those products should be displayed and highlighted on the floor and on their respective shelves.
Zero Seller Report
The zero seller report will reveal some SKUs that have not sold for a certain amount of time. In many cases, the main reason for those SKUs not selling is actually their display on the floor.
In this case, the new planogram can solve this problem by putting those SKUs in a more prominent area and if they are still not selling then they can be recommended for markdowns. The best action before resorting to marking down a product is always to change its display and see if it works, so it can sell at full price.
Sell Thru Report
This report will show the velocity of sales for each SKU and hence will help in changing display for products with low sell through rate to help selling them before they get discounted.
Based on your analysis for those reports, you will decide the appropriate space and place that should be allocated to each category and product.
You will then move to creating or adjusting the floor plan.
2. Create or Adjust the Floor Plan
The floor plan (aka store layout) is a diagram that shows the fixtures and all display units and their place on the floor. Those display units are then assigned to different product categories, based on sales contribution and category roles.
Based on your reports analysis, you might find that some products/categories need more space or need to be relocated to another area on the shop floor.
You will implement those changes in the floor plan first, and then move to the next step.
3. Create the Planogram
After finalizing which product category will be on which fixture in the store, you will then create the planogram that details how many facings of each SKU will be displayed on which shelf or table.
This planogram will then be used by the store team for display and for maintaining the visual standards.
How to Read a Planogram?
When you receive a planogram, you will first locate the display unit on the floor, using the floor plan or the store layout.
For example, in the above pictures we used the example of the wall for “DAIRY“. You will find that this dairy wall is located on the left side of the store as per the floor plan.
After that, you will identify the products (SKUs) that the planogram is telling you to display in this unit.
You will then count how many facings for each SKU are supposed to be displayed and how the display form looks like. For example, the facings could be displayed in one row or in two rows on top of each other. The depth of the display will depend on the available quantity and depth of the unit.
After gathering all the required products in their respective quantities, you will start to create the same display as per the planogram on that fixture.
Usually, pictures of the final display are taken and shared in a slideshow with the visual merchandiser for confirmation.
There are certain factors to be taken into consideration while creating retail planograms.
Visual merchandising should always be linked to commercial performance. This is sometimes neglected at certain retail segments, such as fashion and apparel, where visual display is more focused on color collections and creating visual stories.
It should always be assessed using the commercial reports, to ensure that it is serving the end goal of the retail business; and that is: to make more sales.
If analyzing the reports indicate that certain products or categories are not selling because of where or how they are displayed, then the plan should be reviewed and revised.
While we’ve mentioned that planograms are used to standardize display at multiple locations, this standardization should take into consideration the local factors at each location.
These local factors can include customer profile, shopping behavior and local culture.
For example, some places celebrate halloween and wait for this time of the year, yet in other cultures halloween is irrelevant and not really something to celebrate. In this case, the display of halloween themed products will be the focus and theme of the store in the first case, but might only take a small area of the store in the second case.
Local factors will also include commercial performance at each store.
Some stores will show wide variance in their category contribution and best/worst selling products. Those stores will then have some variation in their planogram based on what sells at this store.
Other stores will be outliers in terms of size (e.g a very small store). These can maintain the same theme and weightage of display of each category but have different number of facings or have some SKUs absent altogether from this location.
So the standardization aspect is not set in stone, but rather used as a brand guideline and a way to ensure customers get almost the same, familiar, shopping experience no matter where they shop.
The role of each category will play a role in where is it displayed at the store.
For example, you will find at grocery stores that essentials are displayed at the back of the store to encourage customers to walk through the entire store first. This exposes them to more products and offers down the line.
Other categories that are used as add ons are usually displayed near the cash counter, so they can be used to add to the transactions at last minute.
So while creating an effective planogram, the role of each category and how it contributes to the business should be a deciding factor on where it will be displayed and how much space it will be assigned.
Read Also Category Management
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