Retail - Center Store Space Optimization

A growing number of retailers are focusing on the perimeter of the store to support competitive differentiation strategies and are reducing the shelf space allocated to the center of the store to make room for these new initiatives. The space allocation decision processes employed by most retailers do not support effective analysis of multiple store to multiple category assortment and space changes. Current file-based space management systems do not support scenario analysis, target category assortment adjustments, excess space identification, and demand planning.

Building the capability to determine how to best allocate total category, aisle, department, and center of the store space, across all sections and stores, is essential to the optimization of space productivity and consumer need satisfaction. Unfortunately, retailers do not have the tools available to efficiently accomplish this larger objective.

Applying our proprietary space management technology, Center Store Space Advisor^SM can fill this void. We have both the knowledge and unique capabilities to help retailers plan more effectively and manage center store space across all stores within their chain.

Retailers typically use their investments in existing space management systems and organized support efforts when determining how to best allocate space within categories, aisles and across the store, by store. However, these capabilities have certain limitations. They do not provide the capability to implement neighborhood plans efficiently and effectively. Therefore, neighborhood or store specific space and assortment management, which is necessary in today’s environment, has become quite a challenge for most retailers. Most do not have an answer.

In order to meet the needs of today’s marketplace, retailers must be able to manage “every item in every store every day”. This means store specific category space allocation and assortment based on neighborhood or store cluster needs; store specific item level facings allocation and efficient replenishment; and store specific product compliance to plans. There must also be the capability to identify new space for new categories to service the growing ethnic and holistic health customer base, new product launches and line extensions.

Our Center Store Space Advisor^SM Capability

Actual experience with one of our leading retail clients demonstrates the efficiency of our Center Store Space AdvisorSM capability. The retailer needed to assess several categories that compete for space across several aisles in 40 stores (10 stores in each of 4 clusters). The following outlines the situation:

If the retailer had conducted the project:

There were 940 schematics (combination of schematics and stores).
It would have taken the retailer a half hour per schematic to pull up the data, import the movement figures and make the appropriate allocations/adjustments in the traditional space management system in use.
At the conclusion of the process, the retailer would have had 940 individual assessments but not a single picture across stores.
In total, it would have taken an estimated 470 man hours or 58 man days to accomplish all tasks associated with this project.

When Center Store Space Advisor^SM was employed:

It took WWA only 128 man hours or 16 man days to complete the project-- 73% less time than it would have taken the retailer.
WWA’s deliverables factually included more than the retailer could deliver on his own.
The results were very favorable. The targeted category was planed for space reductions to allow additional space for perimeter department expansion.

The analysis concluded that they were reducing space in the wrong category. And in fact, they needed more space in many stores for the category. Averages, even at the cluster level do not work.

We have a breadth of experience using our Center Strore Space Advisor^SM model in Food, Drug, Mass and C-Store Channels. We have used our model to assist in new store planning, major remodels, and cateogry review/space adjustment initiatives. We have also facilitated several joint projects between retailers and CPG manufacturers.

Our Approach

The principal function of the model is to evaluate current space against weekly sales and determine the correct levels of shelf inventory. The levels of inventory are adjusted for normal maximum stocks, case pack and minimum facings, and target days of supply.

The primary store level item data table is produced by merging the schematic database that is derived from the schematic files and a version of the movement file. Schematic file extracts can come from any space management program. The movement data is an average weekly movement over a retailer agreed planning period. The movement data may be filtered by a model process that removes weeks of statistically high demand, such as any effective promotions. The observation for the promotion week is not removed, but is replaced with a measure of average weekly demand.

The model adds various measures to the item data table that are used for the Excel reporting template.
Most of these measures are standard evaluations of performance such as Days of Supply, Turns, and GMROII.
The model also provides numerous measures of sales including units, dollars, costs, gross profit, cubic throughput, and case packs.
There are similar measures for inventory levels.
The model provides various space utilization rate measures

All items facings are backed off to the minimum facings, based on a comparison of facings minimums and case pack minimums. The available shelf space is then calculated based on the shelf space availability adjusted for the space utilization derived from the schematic. The target facings to meet potential demand are then calculated. All items that need additional facings over the minimum are sorted in descending order by number of facings. The model then proceeds to add facings and subtract space from the available space until all the current space is utilized. The model then allocates any additional space until all items have the inventory facings needed to meet demand.

Once the space, facings, and inventory have been determined, the model has the primary item database from which to create the store category information, the supplier reports, and the item detail reports. The reports are developed for an Excel format, and provided in a form that reduced the analysts need to re-sort the data.

The core measure of sales and inventory are units. Vectors for unit price, unit cost, unit gross profit (or price – cost), case pack, unit cubic dimensions are used as multipliers to develop most of the sales and inventory related variables. Summary reports that show the distribution of weekly sales levels can similarly be calculated on demand.

Additional measures that are included are shelf footage, item position, and a process to fill out any un-used space according to analyst direction.

Benefits that Retailers Realize from Center Store Space Advisor^SM

The benefits derived from using our proprietary space management capability
can be considerable, and include:

Improved sales rates through better inventory management
Improved customer satisfaction
Reduced out-of-stocks
Improved item authorization management
Optimized shelf and display space
Improved new item introductions and line extensions
More efficient labor practices in: store resets, remodels and new store planning and merchandising implementation
Higher GMROII (gross margin return on inventory investment)
Provides foundation to drive and measure efficient store level promotions effectiveness, CAO, SBT and related industry objectives
Improved utilization of supplier support systems

Unparalleled Store Space Management Capabilities and Expertise