Page 183 - DMGT554_RETAIL_BUYING

Retail Buying

Notes Introduction

Price is a key differentiation and a strategic tool in the hand of retailer. Pricing strategy can be
used to capture market share as well as a tool of survival. Retail fixes its retail pricing strategy
on the basis of its ROI objectives. But prices are not fixed, they are variable. Prices are elastic and
can be stretched to a certain extent depending on the retailer’s objectives. In this unit we focus on
this price elasticity in depth. We also touch up the price variable and the promotional pricing
strategies.

12.1 Merchandising with Planograms

In two subsequent articles Martin Lindstrom from Clickz.com discusses the practices of up- and
cross-selling used by brick-and-mortar retail stores and the potential in applying their principles
to the web. The key is planogramming.
“A planogram is a detailed and thoroughly thought-through map that determines where every
product in an establishment should be situated. It illustrates not only in what area every product
should be placed but also on which shelf every item should be accommodated. Shelf by shelf,
aisle by aisle, the planogram assigns selling potential to every item in a store.”

12.1.1 Background

A planogram is often received before a product reaches a store, and is useful when a retailer
wants multiple store displays to have the same look and feel. Often a consumer packaged goods
manufacturer will release a new suggested planogram with their new product, to show how it
relates to existing products in said category. Today, planograms are used in a variety of retail
areas. A planogram defines which product is placed in which area of a shelving unit and with
which quantity. The rules and theories for the creation of a planogram are set under the term of
merchandising.
It is primarily used in Retail sector. Fast-moving consumer goods organizations and supermarkets
largely use text and box based planograms that optimise shelf space, inventory turns, and profit
margins. Apparel brands and retailers are more focused on presentation and use pictorial
planograms that illustrate “the look” and also identify each product.

12.1.2 Approach

Primary Targets

Primary targets which should be achieved with planograms:
1. Creation of an optimal visual product placement

2. Creation of an optimal commercial product placement
In short, the primary targets can be summarised with a turnover and profit increase. The visual
product placement is supported from different theories:

1. Horizontal product placement: To increase the concentration of a customer for a certain
article, a multiple horizontal placement side by side of one product is applied. Different
researches found that a minimum placement range between 15–30 cm of one single product
is necessary to achieve an increase in customer advertence (depending on the customer
distance from the unit).

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