Optimise shelf space within a category

Shelf space optimisation is the use of available shelves within a single category with maximum efficiency. And the calculation of efficiency will depend on its role and purpose.


The right assortment is the ultimate tool of **category management** for extracting profit in any retail environment. But even the best product assortment won't maximise profit if it's presented ineptly and inaccurately on the shop shelf.

A good product layout should take into account the following points:

• principles of display - grouped products (blocks) and their layout on the equipment;
• Efficient product placement - allocated fair space for the product on the shelf according to its sales/profitability/revenue, depending on the role of the category.

To optimise shelf space, the following steps should be taken:

The first step is to identify the blocks, based on the **customer decision tree**, for each category and sequence their placement on the equipment.
Blocks can be formed by:

1. The type or properties of goods For example, for beer, it is relevant to separate imported beer from regional and local beer, and divide the display within these blocks by packaging type. Or dairy, dark and white chocolate should also be collected in separate blocks.
2. By Brand/vendor. For tea, you could use grouping products by manufacturer or brand, grouping all tea leaf types of the same brand together in the same place on the shelf. This is done by keeping the same order of bagged, loose leaf and other varieties of tea inside the block.

Supplier agreements and other commercial conditions may also serve as constraints in the formation of blocks.

The second step is to analyse the efficiency of product display at different levels of the product classification. Such analysis can be done for the category as a whole as well as for smaller levels - blocks, groups, and subgroups of products. The primary focus should be on profit, number of pieces sold, and inventory turnover on the shelf. By comparing the share of sales/profit or turnover with the share allocated to the product on the shelf, it is possible to create an optimal display that will maximise profit.

A review of the effectiveness of the display should be carried out every time the assortment is changed. The sales department and merchandising department work together to do this. The Category Manager determines the objectives for each product group and participates in the formation of blocks if necessary, and only then can the merchandiser begin to create the planograms.