Retailers can improve in-store compliance and cut costs if they collaborate with suppliers, according to PJ Brackman, global presence manager at Procter & Gamble.
Presenting at Aldata’s Gold User Association event in Ireland, 28-29 September 2011, Brackman highlighted current retail failings against a background of macro environmental challenges.
According to Brackman, retail inventories are too high, promotions are not relevant, out of stocks are prevalent, and shoppers are frustrated.
Brackman said there were joint implementation issues.
Compliance levels range from 30% to 90%, he said. Planogram compliance was less than 35% ie there was no real compliance. The rate of out of stocks is 8.3% but on promoted items is double the overall rate.
Brackman said 86% of inventory on the shelves was excess and the situation is getting worse.
Between 1987 and 2007, there had been an 83% increase in the average amount of items stocked and 90,000 so-called new products have been introduced, even though only 10-20% survive beyond a year.
Brackman revealed 11,000 stores in the US have store specific planograms and Procter & Gamble produces 21 versions per category per customer on average.
Retailers have up to 1m planograms in their databases, he said; and implementation costs exceed $2bn.
By contrast, online shopping provides the perception of 100% implementation, Brackman said.
He highlighted several reasons for poor implementation: no common measurement, no integrated process, retail and manufacturer challenges and third party challenges.
However, there are opportunities to improve, he said; but it requires collaboration between suppliers and retailers and software such as Aldata’s Apollo space optmisiation solution.
According to Brackman, retailers and suppliers need to behave as if they are one company because they are fighting with other sectors for the customer’s money.
Retailers need to understand their capability to implement by store level and by manufacturer for an event or promotion, for example; and they need to have a standard format for implementation.
Measurement is also critical as is an implementation budget, which should be created by the category manager.
Brackman said retailers should consider the store hours available and whether the implementation is worthwhile. If a store doesn’t have capacity it should eliminate implementations, he advised.
The outcome is shoppers get what they want, which drives store loyalty and reduces costs for retailers and suppliers.