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Industry Focus – Food Grocery Retail Market

Supermarket Shelf Space – do you have any rights as Distributor?

 

There is enough scientific evidence to show that product placement on shelf space in supermarkets is critical to the power to influence buying choices of customers. And do not underestimate the Art of category management and algorithms which can be used to optimize a placement system. Supermarkets have, with time, become uncontested experts in shelf space management, as their profit maximization depends on this obviously. There is delicate balance which they need to exercise between consumer preferences, maximizing profit and sneaking in their own Private Labels (supermarket own brands) for those who have one or sell one.

There are several criteria used to calculate shelf space including [1], age of customers, location and lighting, behaviour pattern of customers (which supermarkets have plenty of data and big data on), companies promoting their products, types of bestsellers, size of store and other relevant factors, such as demographics of shoppers at any specific location. This can all be entered into software which could assess the validity and profitability of any planogram created or suggested for the most advanced ones.

Statistics suggest that much of today’s product placement is made on research that says shoppers start looking the eye level shelves, work from left to right, and make purchasing decisions in 8 seconds. Consider this when you are there next time and test it yourself!

Over time, there are a few strategies which have come to light on placement and 5 of which are:

  1. Block placement – namely where related items are placed together;
  2. Vertical placement – where merchandise is placed at more than 1 level or height;
  3. Commercial placement – Products with more perceived value is more prominently displaced;
  4. Margin Product placement – the more profit the item generates for the retailer, the better position it may receive;
  5. Market share placement – when highest revenue generators are placed where customers can find then easily.

Supermarkets, and specially larger chains may avail themselves of real time analytics nowadays which effectively predicts or provides data which can assist them in optimizing shelf space, both for branded products, and their own in-house products.

Generally, for those selling less known products, secondary brands or SMEs, without the power of the strong market leading brands or similar products, their fate has normally been left to the whims of the retailer. Strategies recommended to the SME, for example, in absence of the power to pay for shelf space have focused on the following 5 [2]:

  1. First build clout: – With no money power, develop the clout – e.g. a strong track record with, for example a strong following with smaller retail stores or online presence with social media buzz and following
  2. Consider the broker option: Consider grouping up for jointly negotiating with larger supermarkets and retailers. You will need expert advice on this to make sure you are not falling fowl of competition principles – so call your expert of lawyer.
  3. Know your shelf placement: make sure you know which slots are best for your product. Being at eye level may not be the best thing for every product test and find out.
  4. Co-brand your display: You may consider a display with other suppliers of complementary products – such as cheese and wine!
  5. Target a failing competitive brand: follow those not doing so well, and fight out their position!!

Or you can consider whether competition law principles can help you in your shelf space support:

  • Do you need to pay for the space?
  • Are you competing against a private label (Retailer in-house brand)?
  • Are you threatened of delisting if you ask for too much?
  • Are you limited in the access you are getting through discrimination of terms?

Although not per se breaches, it is worth considering your position in the broader commercial environment of retail to consider whether there are grounds to make a case on ground of unfair competition or competition principles!

Call our office for someone to present to you the list of services we provide in collaboration with experts in the field.

[1] www.checkstandprogram.com/news – 26/02/2019

[2] www.repsly.com/blog/consumer-goods/retail-product-placement-for-small-and-medium-businesses – 26/02/2019

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