ALLOCATING SPACE TO PRODUCTS

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CHAPTER 8

• ALLOCATING SPACE TO PRODUCTS

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LEARNING OBJECTIVES

• Understand the concept of retail space and how
  its productivity is measured
• Become familiar with the stages in the space
  allocation process
• Appreciate retailer objectives in space
  allocation plans
• Understand the relationship between space, sales
  and profits
• Appreciate the practical challenges of space
  planning and allocation
• Assess the contribution of IT to space allocation

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SPACE MANAGEMENT OBJECTIVES

• Use space effectively whether floor, page or
  virtual
• Optimise short- and long-term returns on
  investment into retail space
• Provide a logical, convenient and inspiring
  product-customer interface
• Make right selection of products available
• Communication of retailers brand identity

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THE SPACE MANAGEMENT PROCESS (TABLE 8.1)
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STAGE 1 MEASURING RETAIL SPACE
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STAGE 1 MEASURING RETAIL SPACE
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STAGE 1 MEASURING RETAIL SPACE
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SPACE PRODUCTIVITY

• Sales volume and profitability can be measured in
  relation to the amount of space used to generate
  them
• This provides productivity measures, e.g.
• sales per square metre
• profit per square metre
• sales per cubic or linear metre
• profits per catalogue page

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STAGE 2 DIVIDING SPACE INTO SELLING AREAS

• Allocation of space to product department or
  category
• Usually based on previous performance indication,
  typically sales
• Some products require disproportionately large
  area (e.g. furniture) others can withstand
  disproportionately smaller area (e.g. jewellery)
• Category life-cycle may influence amount of space

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STAGE 3 DETERMINE LAYOUT AND PRODUCT ADJACENCIES

• Converting numerical data into a workable outlet
  layout, considering inflexible elements
• entrances, walkways, checkouts
• Consider space quality
• Consider logical flow through products and
  complementary categories

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PRODUCT ADJACENCIES
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STAGE 4 ALLOCATING SPACE TO INDIVIDUAL PRODUCTS

• Products, like categories are often allocated
  space on the basis of sales.
• Advantage product is less likely to sell out
• Disadvantage may not be profitable
• Different sales figures have advantages and
  disadvantages (see Box 8.2)
• historical sales
• market share
• projected sales

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STAGE 4 CONTINUED

• Space elasticity is a term for the relationship
  between an increase in space given to a product
  line and the resulting increase in sales
• Space elasticity is not uniform amongst products
  or across stores
• Generally staple products have lower space
  elasticity than impulse buys
• Cross elasticity is the relationship between the
  increase in sale of one product and the resulting
  increase in sale of another product

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STAGE 4 CONTINUED

• Allocating space according to product
  profitability
• Advantage best and most space devoted to
  products that bring best profit margins
• Disadvantages
• wasting space because of low space elasticity
• consumers may have difficulty finding products
• Long term customer satisfaction must be
  considered in space allocation plans

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STAGE 4 PRATICAL AND CUSTOMER CONSIDERATIONS

• Seasonality
• Product characteristics size, weight, hazards,
  chilled and frozen, fragile, expensive,
  contamination
• Customer characteristics
• pester power
• mobility
• Fixture limitation

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SPACE ALLOCATION SYSTEMS

• Inputs
• Product information
• costs, sales, dimensions, complementary products
• Fixture information
• specific requirements of product (e.g. shelf
  level), dimensions, number available
• Product manager knowledge/experience
• space and cross elasticity, stock holding
  objective, life-cycle stage
• Output
• Planogram or visual display map

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SPACE ALLOCATION SYSTEMS

• Advantages
• optimises space productivity
• maintains consistent corporate identity
• allows retailers to experiment with visual
  display
• helps to achieve efficient assortment (see ECR)
• moving towards store specific planograms
• Disadvantages
• costs
• not appropriate for small retailers or where
  displays are frequently changed (e.g. independent
  fashion retailer)

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SPACE ALLOCATION AND CATEGORY MANAGMENT

• Many would argue that space planning and
  allocation and category management go hand in
  hand.
• Space planning systems help retailers to fine
  tune category assortment and analyse product and
  category performance
• Planograms by category ensure stores are
  implementing category plans
• Consumer behaviour (decision sequence) can be
  accounted for within the space allocation plans