The average weighted in-store inventory in a convenience store is $81,493 in U.S. dollars, according to data from NACS, the Association for Convenience & Fuel Retailing. This means that, as a c-store owner, you may have more than $80,000 sitting on your shelves. And your inventory turns an average of 11.5 times per year, NACS data also shows.
Do you ever think of your business in this way? Do you know which categories in your store have higher turns? Do you realize how unproductive items in your store can be your worst enemy that can tie up costly inventory on your shelves? You should!
The shelves in your store — and what you put on them — directly affect sales and profit (what you take to the bank), your shoppers, and your inventory levels. You shouldn’t leave your understanding of your retail store’s shelves (or space management) to others. Rather, you should always think about how the decisions you make to list new products, delist old products, change shelf sets, or make any other changes in your store affect the shelf — and therefore, affect the shoppers who come into your store.
As a c-store owner, you should have a strong understanding of the fundamentals of space management and how it affects your sales and profit, shoppers and inventory levels.
Think of your shelf this way:
- A vast majority of your store's dollar sales are from the shelf.
- Your shelves tie up your inventory dollars (which could be better invested somewhere else, or could be sitting in the bank).
- Poor inventory management results in out-of-stocks, or it results in overstocks leading to low inventory turns and unproductive shelves.
Effective shelving, or placement, strategies are critical for your store.
Three shelving perspectives you should understand are:
1. Total store perspective: It starts with a total store perspective. Think about how you allocate store and department space, based on an analysis of total available floor space compared to department sales.
2. Aisle & department perspective: Category adjacencies should be strategically determined based on how the shopper shops the aisle. This isn’t something you should take a guess at; it should be more scientifically determined using data.
3. Category perspective: Once aisle layouts are determined (including where categories belong in the store), it’s time to develop category specific planograms.
The first two perspectives are typically determined as part of your initial store setup. These decisions are critically important to ensure you have the store setup to best meet your shopper needs. The third perspective, category layouts or planograms, are something you need to understand beyond the planogram picture that a supplier may bring in.
A planogram, in its simplest form, is an image of a category shelf set that includes fixture types and products that are specific to a category. Planograms are typically created by your supplier or distributor to give you a visual on how to set up the category in your store.
UNDERSTAND YOUR STORE FIXTURES
A standard gondola is the physical unit that shelves or pegs attach to. Gondola height extends from the floor to the top of the gondola and will sometimes vary across different departments and aisles.
Your gondola and shelf dimensions will be different than other c-store retailers, which is what makes your shelf requirements unique, too. Based on this, the planograms that are provided by your supplier may not “fit” your store. So, you need to know how to make adjustments to the shelf based on your store and your shoppers.
First, define your maximum shelf height. The standard maximum height for the top shelf (measured from the floor) varies by c-store. You should have a maximum shelf height so that your shoppers can easily reach all products. Keeping this height at 54 inches ensures shopper safety by minimizing the hazards caused by climbing or reaching over one’s head.
Next, understand how shelf depths affect inventory levels. Shelf depth directly affects the amount of inventory that fits on the shelf, and can once again vary by c-store. The bottom shelf may also be much deeper than the rest of the shelves on the gondola, and therefore will hold more product. You want to put larger and heavier items on the bottom shelf in many categories.
DEVELOP SHELVING STRATEGIES
You can’t leave all of the recommendations and decisions for your store shelves to your suppliers, distributors, etc. You should have some well-developed strategies of your own as they relate to your store fixtures and in-store merchandising approach.
Here are some examples of shelving strategies that may work well for you:
“First to Shelf” on New Products. Your shoppers may see you as being the store where they can come to find exciting new products in your key categories. If innovation is important to your shoppers in certain categories, you should have a process in place to get those important new items onto the shelf as quickly as possible to satisfy their needs.
Minimize Out-of-Stocks. This is a large problem for many different types of retailers, distributors and suppliers. Out-of-stocks can be driven by retail store ordering, poor forecasting, poorly allocated retail store shelving, and upstream causes. You can lose current and future sales from disappointed or frustrated shoppers due to out-of-stocks.
Two ways to tackle out-of-stocks are:
- Define minimum “pack out” and/or “days of supply.” The objective of these guidelines is to both avoid out-of-stocks on fast-moving items and conversely, overstocks on slow-moving items. Your strategy may be to have a minimum plus a bit more inventory to cover your stock requirements between deliveries without running out.
- Minimize excess inventory. Too much inventory is expensive and ties up cash. You may want to minimize excess inventory through reduced days of supply or increased deliveries, while at the same time maximizing in-stock availability and ensuring the shelf looks well merchandised with enough visual stock.
It’s important to note here that you can have more than one space-management strategy for your store. You should write a formal document that includes strategies not only for space management, but also for product assortment (how you make decisions on what items to carry) and pricing/promotion, too. This document will help guide the decisions you and others make for your store.
Be sure to develop some overall shelving standards and strategies for your store. This should include the standard fixture sizes for your store; how to make decisions on merchandising the shelf (including the use of supplier planograms); and confirmation of your overall strategies as they relate to the shelf, based on what I covered above.
Once you’ve developed these strategies, you should share them with your store staff and provide them with an understanding of some of the considerations I’ve shared with you above. This will help them make better shelving decisions for your store.
Once you’ve defined the shelving strategies and standards for your store, you need to learn how to improve productivity on your shelves. Improving productivity on the shelf can help you increase sales, increase turns, reduce out-of-stocks, reduce inventory dollars on the shelf, increase profit, and/or increase shopability for your shoppers.
Ultimately, this means you will bring more dollars to the bank — and who doesn’t want that?
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News for the Single Store Owner.