As quickly as you enter a retailer, let’s say you get to view a shelf which has 25 beverage bottles from Model A and 5 bottles from Model B. Every thing else being equal, which bottle are you more likely to pick-up? Research present most customers will go for Model A. Thus, whereas trendy retail is usually perceived because the convergence of products and expertise, persons are on the middle of all commerce actions. Which makes the message clear – What you see is what you purchase. Thus, extra the share of shelf of a product – the likelihood of the merchandise’ sale will increase.
Share of facings on shelf (share of shelf or SoS) is a metric that measures how a lot of the visibility share is occupied by a model. The very best firms make investments plenty of bandwidth in guaranteeing they get the next share of shelf (each high quality and amount) and make it as a lever to drive market share development.
On this article we’ll talk about the whole lot about SoS and the best way to enhance it based mostly on our expertise of working with completely different CPG firms.
What’s Share of Shelf (SoS)?
SoS is the house allotted to a manufacturers’ product in a class, compared to different manufacturers’ merchandise positioned on that shelf. This house allocation is mostly consistent with market share of the model in that class. For instance – on the subject of child lotions, a retailer will present larger SoS to Johnson & Johnson as in comparison with some other model. Why? As a result of JnJ is a shopper favorite on the subject of the infant care vary of merchandise and enjoys a excessive market share. Thus, the retailer capitalizes on its model worth to generate gross sales for his or her retailer.
Completely different manufacturers calculate SoS in another way. Two of the widespread strategies are –
1. Share of facings depend – Calculated as a share, facings/depend is the ratio of the variety of SKUs of a specific model saved on the retail shelf to that of the full SKU depend in that class which is current on the shelf.
2. Linear SoS –That is essentially the most generally used definition for calculating share of shelf and is expressed as a share. It’s the ratio of the full house occupied on a shelf by the model’s SKU to that of the full retail shelf house allotted for SKUs of that class. Right here’s an instance the place Linear SoS for drinks is calculated –
What makes Share of shelf vital for CPG manufacturers?
When used strategically, SoS studied together with POS knowledge will be leveraged by CPG manufacturers to realize market share.
SoS helps drive person behaviour – When the variety of facings of a specific SKU on the shelf are extra, the chance of the patron to purchase that SKU will increase. This results in improved gross sales development and market share features (assuming the whole lot else is unchanged).
Increased SoS results in achieve in market share – In a simplistic method, one may even argue that getting the next share of shelf (v/s market share) can kick in a virtuous loop to extend market share.
That is the way it will work –
SoS is set based mostly in the marketplace share of the product within the class and the connection which a model enjoys with its retail companion. So, if a model negotiates a excessive SoS with the retailer and ensures execution of the plan, finally it’ll result in higher gross sales, achieve in market share – which can once more assist in getting a greater SoS take care of its retail companions.
What are the challenges confronted by CPG manufacturers in guaranteeing SoS execution?
Each model is allotted a retail shelf house. It’s on this mounted house the place the model has to determine the distribution of its merchandise – when it comes to sizes, variants and product facings.
Deciding SoS for every SKU is a extremely nuanced and knowledge pushed endeavor – The distribution of SKUs could be very particular and is predicated on the channel. For instance – in a hypermarket retailer, SoS will be spared for a lot of completely different variants of a product, however in a small comfort retailer, a model would need the utmost SoS to go to its hero SKU. Equally, gourmand shops could have completely different SKUs, and every could have its designated SoS. SoS distribution can also be variable based mostly on completely different geographies, and the connection between the CPG producer and the retailer, making it a extremely nuanced train.
Challenges in efficient implementation of Eye-level SoS and SoS for brand spanking new product launches- Manufacturers additionally battle to successfully implement high quality SoS KPIs. For instance – Eye degree SoS means distribution of the allotted house between completely different SKUs, positioned on the eye-level. Typically, manufacturers need to present SoS to their new product launches close to their hero SKUs and positioned at eye-level to make sure their success. Sure classes like sweets need to have SoS close to check-out counters to assist set off impulse purchases. However these methods bear fruit, provided that they’re carried out diligently on the bottom degree.
A spot between the determined model technique and its execution on floor degree – In our expertise, we now have all the time seen a spot between the retail execution plans determined by the CPG management, and the precise implementation of those plans in actuality. Many occasions, the phrases of commerce determined between the retailer and the CPG management should not absolutely complied with on the sphere.
Strategies deployed by CPG manufacturers to measure the execution of their SoS programme, is wanting – With a purpose to make sure the phrases of commerce relating to SoS are carried out, the manufacturers ship of their subject reps or use third – occasion auditors to verify that their good retailer pointers are being carried out. Nevertheless, an absence of correct SoS measurement mechanism nonetheless persists.
Why is that?
Self-reporting by subject reps is tormented by errors – the handbook strategies lack accuracy, to not point out time-consuming. When making an allowance for the trendy commerce atmosphere – it takes round 20 minutes to calculate SoS for every class.
Additionally, the sphere reps should not particularly educated for making the right shelf measurements and expressing the SoS share making their findings inaccurate.
Extra importantly, subject reps right here basically charge their very own efficiency at executing CPG pointers – this opens the whole audit course of to manipulation, as subject reps should not more likely to report after they have underperformed.
Feasibility of third-party audits is all the time in query – With regards to deploying third-party auditors – it’s too costly to scale, thus ruling it out as a viable choice.
Subject reps need to take care of an absence of on the spot insights – by the point they report their points to the CPG HQ, the bottom realities for that specific retailer could change
How Picture Recognition helps CPG manufacturers good their SoS meaurement prgramme –
Picture recognition immediately identifies the related SKUs and calculates the SoS for the model – thereby changing into nearly like an assistant to the sphere rep. SoS scores for that SKU are instantly computed, and the gross sales rep is ready to rectify the problem, thus enhancing retail execution.
Picture recognition and AI expertise helps in offering real-time insights and put in motion, a virtuous suggestions loop mechanism – It creates a strong redressal mechanism within the type of a virtuous suggestions loop. It provides real-time SoS insights to each the gross sales rep and the CPG management. The gross sales rep is ready to resolve the problem instantly within the retailer, and concurrently the AI additionally relays the problem to the CPG HQ. The model management has a dashboard which has entry to the SoS calculated, and so they talk with each the gross sales rep and the retailer to enhance their SoS execution.
Picture recognition options like ShelfWatch will also be custom-made to create a scorecard – All of the model has to do is ready SoS compliance targets for its gross sales reps and retail companions. Relying on the targets achieved by them, a scorecard is created. This makes it straightforward to discern the underperforming subject reps. It additionally pinpoints which retailers should not distributing the inventory as determined by the SoS phrases of commerce with the model. The scorecard can also be used to establish the place the targets have been achieved, and utilizing it as a base, incentives/bonuses will be decided.
Picture recognition thus helps in making a KPI pushed group, the place efficiency is valued, and adequately rewarded via incentives.
Issues to bear in mind when implementing the SoS measurement program for good retail execution –
Having labored with many CPG manufacturers and retailers in attaining their good retailer execution, we spotlight sure practices that may aid you construct an efficient SoS measurement programme.
Manufacturers ought to monitor eye-level SoS as a KPI for his or her focus SKUs – This generally is a lever used to drive behaviour change and get customers to attempt new merchandise or improve to premium ones in order to enhance ARPU. Furthermore, new launches will be included beneath a separate KPI referred to as New Launch SoS – and they are often aggressively tracked to make sure product success.
Excluding merchandise saved on secondary visibility belongings – For locating out what the true product lift-off is with out the garnish of a POSM (Level of gross sales materials) to assist an SKU’s sale – it’s vital to exclude secondary visibility when calculating SoS numbers. A model pays the retailer to maintain level of sale materials within the retailer, and it’s anticipated that the retailer will observe the phrases of commerce and preserve solely that manufacturers’ SKU within the secondary belongings like end-cap cabinets, hangers, floor-stacks or gondolas. The actual battleground is the first shelf – and its this natural SoS that the model ought to measure.
Stacked merchandise shouldn’t be included in SoS measurement – When performing linear SoS measurements, the merchandise stacked above one another on the shelf shouldn’t be thought-about.
Picture Recognition options ought to be capable of seize and sew total cabinets for SoS calculations – When utilizing picture recognition options to calculate SoS, subject reps seize photographs of solely their manufacturers’ merchandise, and never the whole class. This results in a basic difficulty – Say, if the shelf is lengthy and the sphere rep takes a picture of a small portion of the shelf, which primarily has their SKUs – SoS share for that model will look excessive. However if you take the whole shelf under consideration which homes many different cleaning soap manufacturers, now the denominator will increase thus giving the right SoS share.
ParallelDots ShelfWatch offers with this difficulty, by offering the manufacturers with the picture stitching function. Which suggests when the sphere rep captures a protracted bay in a number of photographs – ShelfWatch AI will sew them altogether within the appropriate sequence and provides the whole shelf in a single single picture for SoS calculations.
Measuring SoS when boundaries between classes are unclear – There are shops which have a whole shelf devoted to soaps. On this case, the class of cleaning soap is clearly outlined. However in some instances, such readability could also be absent.
For instance – hand sanitizers. Seldom shops will present it with a definite shelf space. When utilizing picture recognition options, as an alternative of capturing the whole shelf (right here the shelf could embrace SKUs which might be not-related to hand-held sanitizers), what manufacturers can do is to calculate the SoS of their prime 3 opponents within the hand-held sanitizer class after which evaluate numbers. Such comparability will give them competitors insights, and also will assist information their product placement technique.
Competitors SoS figures ought to be thought-about when making a marketing strategy for an efficient gross sales technique – A great way to take action to is measure the SoS for the opponents. In truth it was via the SoS measurements that certainly one of our shoppers deduced – that that they had excessive SoS within the orange juice class, however their opponents’ focus was now not on the orange variant of the juice – that they had shifted to the mango and guava flavours as and so they have been attempting to compete extra aggressively on these flavours.
Manufacturers ought to share the SoS knowledge with their retail companions and others within the firm – just like the model managers, their market analysis groups, the enterprise leaders and the analytics staff. This can assist the CPG management to get a whole image of how their SKUs and their opponents are performing available in the market. They are going to admire the info and incorporate it of their shopper enterprise plans.
The purpose right here is to create a SMART Shelf. Based on a report by Nielsen, A planogram will generate a “SMART” shelf provided that it has the proper stability of artwork and science. A SMART shelf is – Shopper pleasant, Maximizes gross sales and earnings, Avoids out-of shares, Reduces operational inefficiencies and Triggers experimentation. Thus, a SMART shelf will assist buyers, producers and retailers.
In conclusion, calculating Share of Shelf is a vital lever that manufacturers have to assist them win the battle on the shelf. The one motive they’re usually unable to leverage it’s the lack of an correct and efficient SoS measurement programme. Utilizing picture recognition instruments to assist in SoS measurement generally is a viable, possible and correct resolution to all of the woes of CPG producers. Ultimately, ROI might be generated within the type of enhance in market share for his or her SKUs.
Preferred the weblog? Take a look at our different blogs to see how picture recognition expertise will help manufacturers enhance their execution methods in retail.
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