How to improve in-store merchandising in 3 tech-enabled steps 

Mila Budeva
Mila Budeva
Feb 1, 2018

Despite predictions of a “Retail Armageddon” with brick and mortar retailers facing rising e-commerce competition and increasing financial pressures, 94% of all retail sales in the U.S. still take place in physical stores.

Let’s look at how improving in-store merchandising can help brick and mortar retailers to make the most of their physical presence and win at the shelves and how can digital capabilities assist that? 


1. Eliminate out-of-stocks with mobile

The global average of retail out-of-stocks (OOS) is 8%, meaning that shoppers only have a 42% chance of fulfilling a ten-item shopping list [1]. This means that grocery shopping for the Sunday roast, for example, can easily turn into a cross-outlet treasure hunt. Annually, out-of-stocks result in $ billions worth of lost sales and are among the top reasons for customer dissatisfaction.


Interestingly, only 10-30% of stock-outs result from upstream supply chain issues such as a shortage of supply from a supplier. Most of out-of-stocks are caused by poor in-store operations. In fact, it has been found that the larger the backroom inventory, the higher the OOS rate [2]. So, an empty shelf is often caused by poor merchandising practices rather than poor product availability. How can retailers fix this?


By establishing better monitoring and replenishment practices, retailers can resolve and pre-empt merchandising issues and reduce the associated losses. Connected devices can help to automate the process. Cameras placed over shelves, for example, can frequently capture and analyse images to identify depleting stock. Equipped with a mobile merchandising app, store associates can then receive re-stock alerts on their mobile or wearable devices. As another instance, data from EPOS and inventory systems, combined with predictive and prescriptive analytics, can help to identify peak sales times for products and prompt pre-emptive re-stocking.


2. Use image recognition for picture-perfect shelves

Only 11% of companies see store layout as a priority KPI when measuring store performance [3]. While it is understandable why financial KPIs are a top priority for store operations executives, letting planogram compliance slip down the list can be detrimental for those very KPIs.


Particularly in the peak of seasonal shopping, with increased footfall of customers rushing to complete their last-minute purchases, the likelihood of misplaced products and messy shelves grows and so does the importance of planogram compliance.


Planograms – visual representations of a store's product layout – can help to plan, implement and monitor tactical merchandising activities. One way to increase planogram compliance is to transition from pen and paper checklists to digital measurement. With the help of merchandising software and image recognition technologies, merchandisers can simply take an image of the shelves with their mobile devices. The image is analysed and compared to the planogram, and in a few minutes merchandisers receive an update on the required corrective actions such as re-stocking, facing or shelf labelling.


3. Raise operational compliance for improved operational effectiveness

Recent research conducted by IRI has shown that retailers are looking for ways to improve promotional efficiency and effectiveness [4]. This means that retailers and suppliers need a way of continuously monitoring in-store promotions and identifying those products which, when on promotion, result in sales uplift and benefit the larger product category. To do this, retailers and brands need to ensure that the promotions are compliant in the first place.


Tech capabilities can facilitate the preparation, implementation and monitoring of promotional campaigns. Retailers can use image augmentation to visualise where the promotional displays would be, ensuring optimal store layout. As in planogram checks, image recognition can help audit promotional compliance and effectiveness. A mobile merchandising solution, for example, can prompt store associates to take pre-emptive corrective action and ensure that in-store promotions are upheld for the life of the campaign with standing display units (SDUs), shelf edge labelling, advertising materials etc. all in compliance.


These are all examples of how retail merchandising operations, enhanced by digital capabilities, can positively impact customer experience and behaviour and improve physical store performance.


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