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The Rise of the Planogram as a Competitive Differentiator

 
The planogram has long been a core tool for successful brick & mortar retailers, but leading brands are taking the planogram a step further 

Reminders of the power of brick & mortar retail industry are everywhere.  The U.S. Department of Commerce Retail Indicator Division recently released the December 2021 Monthly Retail Trade Report which showed that brick & mortar stores grew faster than e-commerce for the first time ever. Last year, physical storefronts grew 19 percent compared to e-commerce, which grew only 14 percent, with total U.S. retail sales for 2021 equalling $6.6 trillion. Gregory Ng, CEO of insights-driven consultancy Brooks Bell has said “…our data shows that consumers are eager for in-store experiences again, with 76 percent of shoppers stating last year that they had planned to make in-person purchases post-COVID restrictions. As vaccinations began to roll out across the country, customers were more comfortable stepping outside their homes and into a physical store.” 

Consumer preference for brick & mortar retail is stronger than ever, and for good reason. The power of the in-person experience makes it hard for even the most e-commerce dependant shoppers to say that brick & mortar retail has become obsolete.  At the core of it continued strength is the opportunity for customer engagement and the creation of an experience that can’t be replicated online. 

While the strength of brick & mortar stores remains strong, the need to drive growth, conversion rates, and impactful customer engagement to stay competitive has never been greater. And retailers are prioritizing the customer experience like never before. Salesforce recently issued a report called The Customer Experience in Retail: Data Drives Everything that found, 82% of retailers named ‘improving customer experience’ as their highest business priority for the year ahead. ‘Increasing revenues’ came in at 43%, far behind customer experience. 

Yet how to connect with customers and foster a positive brand experience that keeps them coming back isn’t always an obvious, or linear path.  In order to stay competitive, and elevate the in-store experience, retailers need to reimagine what an intelligent and optimized store looks like, and strategically using planograms can be seen as the foundation of a truly optimized store.   

Planograms have long been incorporated into successful brick & mortar retail planning. But how many of us stop to think about what exactly a planogram is intended to do, how they help with visual merchandising, and the specific purpose they are intended to serve? Is this recent article, Shopify describes plannograms as “…a schematic tool retailers use to plan their store layout to maximize sales and customer experience. Planograms place special attention on product placement and displays as well as point-of-sale (POS) location(s)”.  Planograms are also sometimes called “shelf space plans, space plans, and retail schematics”, and “are one piece of a larger, more comprehensive visual merchandising plan.” The article goes on to note the key benefits of planograms, specifically that planograms increase sales and planograms maximize space. 

The Planogram Inertia
While planograms are intended to maximize sales and the customer experience, as Shopify notes, the reality is that the process of planogramming has remained largely static in recent years and decades, which has resulted is many retailers relying on archaic planograming that isn’t truly maximizing sales or the customer experience. As Peter Townsend, CEO of DataSense Inc. notes, “the current planning process for creating store assortments, planograms and store layouts has not been efficient. Planogramming is often based on a static and generic ‘Consumer Decision Tree’ that likely reflects a small sample or focus group.” The planogram has been stuck in inertia.  

And yet, the problem of inertia is deep and has the potential to significantly impact retail operations and performance. “The average retail compliance for a planogram is approximately 60%,” says Peter. “Where there is full execution of a planogram, the compliance tends to decrease 10% each week due to any number of reasons including inventory on hand, product shipment shortages, new/delisted products, etc.” According to the ISI Sharegroup, Townsend says, the total cost of non-compliance of planograms is approximately 1% of gross product sales, which translates to a lost sales opportunity of between $10 billion to $15 billion across the food, drug and mass merchandising channels, and less than 60% of retailers currently have a way of measuring their planogram compliance.

The brick & mortar industry is evolving rapidly, and how planograms are developed and measured need to evolve with it. There is a divide that exists between those that are stuck using archaic planograms and those embracing technology to develop, deliver and execute planograms in a way that drives competitiveness and performance. Those relying on archaic processes need to catch up quickly.  

One Click Planograms 
As we wrote about here, OR’s retail management platform and its one-click planogramming feature is leading the way in elevating both planogram effectiveness as well as strengthening compliance. OR offers clients a simple tool that allows them to refine floor plans with one click, expedite go-to-market strategies, and reduce level of effort (LOE) among frontline staff, saving them money and improving the bottom line.  Benefits for HQ include everything from localized store planograms that reflect data-driven store profiles, to improved visibility into floor plans across teams, to Automated Photo Compliance (APC) which allows employees to simply hold a phone up to fixtures to demonstrate compliance while empowering retail leaders with a ‘realogram’ for each store and a quick way to assess store effectiveness. For stores and associates, they receive clear direction which helps maximize sales and strengthen performance, while also allowing them quickly look-up specific SKUs due to the integration of store inventory. Time, money, and resources are saved. 
 
Going back to that fundamental question ‘What is a planogram’?, many leading retailers today would argue it is so much more than just a schematic tool to plan store layouts. It’s a critical and powerful competitive differentiator that is strengthening store sales and ensure a brand engages with a customer in the most impactful way possible. 

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