Planogram

Planograms

Planogram is a diagrammatic or pictorial representation of various fixtures in a store and more importantly, the arrangement of SKUs in the store shelves. Such a representation would give information about what kind of SKUs should be placed where in a store, in which rack of the shelf and in what quantities. But why is there a need to have a diagrammatic representation of how SKUs should be arranged and in what quantities. Let us see try to understand the reasons.

Let us take the soft drink product category inside a retail store. There are several kinds of SKUs under that product category. A sample hierarchy is given below.

If there is a shelf allocated for soft drinks in a store, how many of each of these SKUs must be stocked in the store at any point in time should be planned well by the retailer. Based on factors like item velocity, gross margin etc, the retailer will decide upon the quantity of SKUs. Accordingly, the space allocation to those SKUs should be made in the shelves. Unless there is clarity and pre defined standard in the arrangement of these SKUs, the store personnel will tend stock the SKUs as they wish and that will inhibit the retailer from achieving the desired sales. For instance, let us assume that 4 units of Coke can 300 ml have been displayed in the store shelf and that 3 of them are sold. A store person replaces the empty space with a Brand X 300 ml cans. Now it will be 3 Brand X and 1 Coke can in that shelf. Whenever the last Coke gets sold, there is a room to replace just that last Coke with a new can. If the Brand X is not so fast moving as a Coke Can, the retailer is possibly not making use of the space efficiently. Had there been 4 Coke cans always, the sales would have been more. To make the situation worse, assume that the retailer orders a fixed supply of Coke cans every day, targeting a specific sales figure. But as the shelf space is not well planned, all the Coke cans received will be lying in the back room with just one displayed in the shelf.  I hope this gives a perspective on the importance of an agreed upon SKU arrangement (planogram) for a retailer.

Basically, the design of planogram happens when the merchandise & assortment planning of a retailer transforms into space planning. A retailer plans the assortment based on several sales strategies, and that should be translated into store shelf planning as well. Here is where, planogram gives a helping hand. A simple planogram looks like the one below.

Let us not get into the details of how a planogram will be designed, but will try to see some basics here. The 2 basic attributes for an SKU in a planogram are 1) Facing & 2) Depth. Facing is the number of units of that particular SKU displayed in the front row of the shelf. Depth is the number of units of that particular SKU shelved one behind the other. In the following picture, the facing of the SKU is 4. If in the shelf, there are 3 such rows of this same SKU stocked, then the depth is 3.

Apart from these 2 attributes, there are various other parameters that will help to uniquely identify the particular SKU in a planogram. Some of them are:

• The classification or hierarchy of the SKU. (For instance, in the example above, Coke 300 ml can belongs to Soft Drink Category, Cola Sub Category etc.)
• The details of the SKU – UPC Code, SKU Name etc.,
• Dimensions of the SKU (Height, Length, Breadth etc)
• Fixture Details (Type of fixture, Location in the fixture. For instance – Non-refrigerated steel rack with 4 shelves. SKU should be in the topmost shelf etc)

Many distributors and brands compete for specific slots for their products in the planogram. Research on Consumer behaviour has given beautiful insights about the attractive zones in a store shelf, based on the way customers glance at the store shelves. All these factors make the planograms all the more important for retailers. In many organized retailer stores, compliance to planogram is one of the key performance indicators of Store Managers.

The sophistication of the planogram depends on the capabilities of the software used for generating a planogram, which in turn depends on the retailers needs, which in turn are driven by the merchandise mix of the store and the performance parameters of SKUs namely the gross margin, item velocity etc.,

I believe this post gives a primary insight about Planograms.