Planograms

Planogram Guide #1 – What is a planogram and why should we use one?

Introduction

We all have been there in those awkward cross dinner conversations with new acquaintances where you’re asked, “and what is it you do for a living?”. Yep Those! Well I have to explain I am a director at OSP Retail, ‘What do they do?’ they say, ‘We (……. There is always a long awkward pause as I know this could be a touch point for me to go rambling off…). ‘we make you buy ten things when you only went to a shop for one”-  A one liner I stole off a friend.

Usually this is enough to kill the conversation however on occasion the persistent integrator lead me to ‘educate them’ explaining in detail what space planning is and in doing so it is impossible not to explain what a planogram is because it is at the heart of retail planning, it is a vital tool not just for large multi site retail but for all.

In this article I am going to explain not just what a planogram is but why we use them, the automated future and try to break the illusion that planograms are ‘just for large multi-site retailers’.

So how do you define a planogram?

As far as my research has taken me the word ‘Planogram’ or ‘plan-o-gram’ originated from K-Mart, however the exact citing of this seems unclear and when this happened seems to be even more unclear.

We know in 1971 Tesco were using a space plan and the earliest computer system was around in the early 1980’s I think we can make an informed guess that ‘planograms’ or the action of ‘planogramming’ came about in the late 1900’s when multi-site single brand retailing began trying to create synergies, using one site (Head offices) to control multiple sites (stores). Before computer technology came through a typical planogram would have been drawn on graph paper.

So what is a planogram?

According to the Oxford dictionary it is ‘A diagram or model that indicates the placement of retail products on shelves in order to maximize sales’.

A more technical explanation is given by Mikko Kärkkäinen who is the Co-Founder and Group CEO at RELEX Solutions, a planogram is the executable visual presentation of the category strategy enabling efficient sales and store operations in that particular store (i.e. the role changes from representing the overall strategy to an executable recipe for that store)”

That’s the official definition however the best way to explain a planogram is to break It down into small sections explaining what it does and how it should be used:

Purpose 1 – Ranging tool:

In retail there is already strong collaboration between the buying and merchandising functions. The buyer strives to ensure that the correct range is defined whilst the merchandiser strives to ensure there is enough shelf stock in store to support sales. Enter the planogram which when used correctly enables both the buyer and the merchandiser to work towards the same goal, achieving (defining) the correct range whilst also balancing the actual space to meet the sales demand.

A planogrammer (a person that creates planograms) takes the range data from the buyer and sales data from the merchandiser and combines the two into a database. The software then builds a visual representation of the bay and fixtures and then either from an automatic function or manual function, the planogrammer places the products on the shelf, assigning the correct volume of product to each location utilising data such as customer insight (explained later in this article) and visual merchandising principles (These are principles assigned by the category or type of product e.g.. in product code order or price order). Once complete the buyer and merchandiser can review the final plan to understand firstly whether the range is correct and secondly how much inventory of each product is required either in store or across the entire estate to meet the expected demand.

Purpose 2 – Analytical tool:

Once a planogram has been produced, it enables the retailer (user) access to unique insights into the range and space.

Example:

DIY retailer BGA Supplier is doing a range review on its plumbing bay – on a spreadsheet the range is performing well however they have had feedback that the stores are consistently having to replenish their pipe spares. The planogrammer (Alex) runs a report looking at ‘required capacity’ and confirms that the pipe products are under-spaced, driven by an increase in sales from the last range review.

The buyer (Jody) is understandably adamant that they do not want to reduce the range and there is no space to increase the macro space. They must however reduce the store work load.

Alex runs a report on ‘linear space % to sales volume %’ and finds two large products, a high value pipe testing kit and a soldering kit. Both of these products are performing well in sales value however had a low sales volume but needed two facings to support sales. These products were flagged as under indexing on space to sales i.e. they were taking a disproportionate sales value to the space they were sitting within.

Alex presented his findings to Jody and they agreed with some support from operations that they would reduce the facings down to one and hold the additional stock in the warehouse. This allowed for the fast moving smaller lines to increase in facings, dramatically decreasing the in store replenishment rate.

This example is very common in the work we do and is the type of insight that will increase on-shelf availability and reduce the reliance on in store operations to manage on shelf stock levels. Very simply stock in warehouses is trapped working capital!  

Understanding your customers interaction with space:

One of the benefits of understanding space performance is that you gain an insight into how your shoppers are buying. Understanding the theory of customer interaction is important to help forecast your customer’s behaviour however this should be treated as that, a forecast.  Once the ‘real’ or live data is gathered you can make informed decisions. This is a commonly over looked tool and one FMCG (fast moving consumer goods) retailers use on a regular basis to sell space to their suppliers as well as driving high margin products for example if you would likely never see unbranded baked beans at eye level an example of this type of analysis is shown in figure two. The planogram is showing what we refer to as ‘Heat Mapping’. The products are all fairly consistently priced and have no POS driving specific product sales. The greener the product appears the higher the sales and the more orange or red shading a product has the lower the sales.

In this planogram the slower sellers mainly feature at the bottom of the bay however the sales spread moving vertically is not dramatic. This outcome is consistent with what the consumer theory predicts and is pretty common across the board however is now fact and not theory. Don’t assume this is always the case, always trust the live data not theories.

With this information we can now start utilising the same tool for margin as shown in figure 3. The same colour scheme exists (green high, red low). In this bay, assuming there were no obvious flow issues we would suggest moving some of the high sales / lower margin products down to the bottom and swapping with the two high margin products at the bottom. The performance of these two high margin products could be negatively influenced by the location from the data we see here.  

It is crucial to never assume your bay performs like all other bays, understand real data that you have. Location is one factor that can affect sales. Use it as a lever that you can use in supplier or retailer negotiations. Knowing everything about your product requires you knowing everything about your space.

Purpose 3 – The merchandising instruction manual:

The most commonly known use of a planogram, but one not to be over looked is from operations or the in store user.

Imagine a planogram is a 1000 piece jigsaw puzzle; it’s going to take you a significant amount of time to piece the puzzle together isn’t it? Now imagine each piece is numbered and piece 1 is connected to piece 2 and 3 and so on. The pieces are then laid out in numerical order. This is going to take a substantially shorter amount of time.

Now consider a few of those 1000 pieces need changing over, a planogram can prompt the user to change those products over.

Now multiply that by 10 or even 1000 puzzles and you can start to understand how much time a planogram saves retailers by simply giving stores the instruction manual to their individual puzzles. An example of a typical planogram is shown in figure 4.

A planogram itself can be anything from a 2D block plan to a 3D visual (as shown earlier in figure 1. Examples of both of these can be seen in the images. Here at OSP Retail we build thousands of planograms in 2D and 3D. The majority of our planograms however tend to sit in the middle with, 2D image planograms (shown in figure 4) we do this for one reason, speed.  

In 2018 OSP Retail with support from a retailer carried out a simple time motion study. We decided to do this on a Monday when key staff were available to rule out simple learning being a factor that could influence the results.

We measured a variety of different product setups, some with images and some without and averaged the time across all of them.

The results and feedback showed an increase in product association when they had images to use. This speed increase created an average of five minutes improvement in merchandising speed. This five minutes of store members time although small on the surface. But when multiplied across 100 planograms is suddenly 500 mins or 8.3 hours.

“Continuous improvement through the aggregation of marginal gains” (Kaizen)

Summary of what is a planogram and its benefits

In summary a planogram is a ranging tool, an analytical tool and a merchandising instruction manual however, additionally a planogram could also provide:

 

  • Consistent brand messaging
  • Consistent shopper experience (same plans or layouts of products in each store no matter which store you shop)
  • Data driven solution to collaboration between buying and merchandising (Data is everything these days)
  • Ability to retrospectively analyse results (good or bad). Data is retained to be reported against at a later date, “What did that category look like 12 months ago when sales were either high or low”

So how do we planogram: Manual & Automation

Manual:

This is the basic form of planogramming which is widely used across the industry. Data is brought into the planogram through a spreadsheet or a data file. Typically, in this style of planogram averaged sales data is used across a set of stores or cluster and is used to specify on shelf capacities.

This type of planogram is very much suited to a small to medium size business selling non FMCG (Fast moving consumer goods) goods where the variation of range and quantities of stock would not vary dramatically.

This is a user defined planogram where all the facings and capacities are driven by the user. This is still a highly accurate method of planogramming however when you have multi sites with a large variation of product sales it is limited by sales averages. It can also be extremely time consuming when creating 1000’s of Planograms or indeed having to update 1000’s of Planograms.

Consider all the great benefits listed above in the article, these benefits are only available either at the point of creation or if the Planogram is continually kept up to date.

Automation:

Tesco in the later 90’s and early 00’s realised that non store specific planograms were restricting their growth and that having an army of planogrammers was not cost effective so they approached Relex to produce an automated planogram system.

Relex started working with Tesco in 2002 to develop what’s now known as automation.

Automation is driving the biggest opportunity for retailers to fully optimise their micro space.

To build automated planograms you can use three simple layers of information;

  • A blocking template defining merchandising style.
  • A sequence template defining product positions and their adjacencies to one another
  • An assortment defining the exact range per cluster/store

The sales data of each individual product is then brought in from either historical sales or from live forecasted sales data (E.g. RELEX Demand Forecasting) and then each store within a cluster is given an optimised capacity and facings based upon its true sales data. No averages just accurate, real, sales data.

This is where automation comes in. The software itself then utilises the sales data to actually assign the correct facings to the product by store, by planogram.

Your net result is store specific planograms that have a unique alteration depending on each of their sales profiles that exist within the store.

A planogram revolution:

As businesses are hit harder and harder on rates and rising costs, planogramming is a powerful way to fight back, but not everyone is doing it. Why wouldn’t you want to increase your ROI on space?

As a business we have come across many reasons but below is the most common:

  • A total misunderstanding of planogramming – It is NOT just a tool to allow stores to setup. Hopefully this article has shown that.
  • Only Large retailers will get the benefits from planograms – Large retailers absolutely planogram, as they want to maximise their ROI on space. However, the principles and the gains are across big and small alike – in fact you could argue that you could get a better result in smaller businesses with a slower turn on product.  We work with a lot of smaller retailers who are keen to optimise their space – it works!
  • It is just for retailers – Many, many suppliers the software to not only provide optimised planograms, whether it be in fixture or in an FSDU to their retail customers.  They also use it to demonstrate performance of their products and how they have used real sales data to provide optimised bays that will perform for their customer.
  • We don’t have the skill set to use it – We can train you! Or OSP Retail can not only use the software on your behalf but can manage, optimise and develop your plans.

Final thoughts

I believe that all things are cyclical, bricks and mortar retailing maybe declining however retail is resilient and is evolving. The High Street is not going to just disappear, innovation will proceed and what we know now as the “High Street” will change.

There are many retailers out there who are thriving and growing by using the latest technology to expand their thinking and improve their ways of working.

What I do know is that if you stand still your business will suffer as someone will do something better than you:

“Many a false step is made by standing still” – Timothy Ferris

Take care and happy trading

Introduction

We all have been there in those awkward cross dinner conversations with new acquaintances where you’re asked, “and what is it you do for a living?”. Yep Those! Well I have to explain I am a director at OSP Retail, ‘What do they do?’ they say, ‘We (……. There is always a long awkward pause as I know this could be a touch point for me to go rambling off…). ‘we make you buy ten things when you only went to a shop for one”-  A one liner I stole off a friend.

Usually this is enough to kill the conversation however on occasion the persistent integrator lead me to ‘educate them’ explaining in detail what space planning is and in doing so it is impossible not to explain what a planogram is because it is at the heart of retail planning, it is a vital tool not just for large multi site retail but for all.

In this article I am going to explain not just what a planogram is but why we use them, the automated future and try to break the illusion that planograms are ‘just for large multi-site retailers’.

So how do you define a planogram

As far as my research has taken me the word ‘Planogram’ or ‘plan-o-gram’ originated from K-Mart, however the exact citing of this seems unclear and when this happened seems to be even more unclear.

We know in 1971 Tesco were using a space plan and the earliest computer system was around in the early 1980’s I think we can make an informed guess that ‘planograms’ or the action of ‘planogramming’ came about in the late 1900’s when multi-site single brand retailing began trying to create synergies, using one site (Head offices) to control multiple sites (stores). Before computer technology came through a typical planogram would have been drawn on graph paper.

So what is a planogram?

According to the Oxford dictionary it is ‘A diagram or model that indicates the placement of retail products on shelves in order to maximize sales’.

A more technical explanation is given by Mikko Kärkkäinen who is the Co-Founder and Group CEO at RELEX Solutions, a planogram is the executable visual presentation of the category strategy enabling efficient sales and store operations in that particular store (i.e. the role changes from representing the overall strategy to an executable recipe for that store)”

That’s the official definition however the best way to explain a planogram is to break It down into small sections explaining what it does and how it should be used:

Purpose 1 – Ranging tool:

In retail there is already strong collaboration between the buying and merchandising functions. The buyer strives to ensure that the correct range is defined whilst the merchandiser strives to ensure there is enough shelf stock in store to support sales. Enter the planogram which when used correctly enables both the buyer and the merchandiser to work towards the same goal, achieving (defining) the correct range whilst also balancing the actual space to meet the sales demand.

A planogrammer (a person that creates planograms) takes the range data from the buyer and sales data from the merchandiser and combines the two into a database. The software then builds a visual representation of the bay and fixtures and then either from an automatic function or manual function, the planogrammer places the products on the shelf, assigning the correct volume of product to each location utilising data such as customer insight (explained later in this article) and visual merchandising principles (These are principles assigned by the category or type of product e.g.. in product code order or price order). Once complete the buyer and merchandiser can review the final plan to understand firstly whether the range is correct and secondly how much inventory of each product is required either in store or across the entire estate to meet the expected demand.

Purpose 2 – Analytical tool:

Once a planogram has been produced, it enables the retailer (user) access to unique insights into the range and space.

Example:

DIY retailer BGA Supplier is doing a range review on its plumbing bay – on a spreadsheet the range is performing well however they have had feedback that the stores are consistently having to replenish their pipe spares. The planogrammer (Alex) runs a report looking at ‘required capacity’ and confirms that the pipe products are under-spaced, driven by an increase in sales from the last range review.

The buyer (Jody) is understandably adamant that they do not want to reduce the range and there is no space to increase the macro space. They must however reduce the store work load.

Alex runs a report on ‘linear space % to sales volume %’ and finds two large products, a high value pipe testing kit and a soldering kit. Both of these products are performing well in sales value however had a low sales volume but needed two facings to support sales. These products were flagged as under indexing on space to sales i.e. they were taking a disproportionate sales value to the space they were sitting within.

Alex presented his findings to Jody and they agreed with some support from operations that they would reduce the facings down to one and hold the additional stock in the warehouse. This allowed for the fast moving smaller lines to increase in facings, dramatically decreasing the in store replenishment rate.

This example is very common in the work we do and is the type of insight that will increase on-shelf availability and reduce the reliance on in store operations to manage on shelf stock levels. Very simply stock in warehouses is trapped working capital!  

Understanding your customers interaction with space:

One of the benefits of understanding space performance is that you gain an insight into how your shoppers are buying. Understanding the theory of customer interaction is important to help forecast your customer’s behaviour however this should be treated as that, a forecast.  Once the ‘real’ or live data is gathered you can make informed decisions. This is a commonly over looked tool and one FMCG (fast moving consumer goods) retailers use on a regular basis to sell space to their suppliers as well as driving high margin products for example if you would likely never see unbranded baked beans at eye level an example of this type of analysis is shown in figure two. The planogram is showing what we refer to as ‘Heat Mapping’. The products are all fairly consistently priced and have no POS driving specific product sales. The greener the product appears the higher the sales and the more orange or red shading a product has the lower the sales.

In this planogram the slower sellers mainly feature at the bottom of the bay however the sales spread moving vertically is not dramatic. This outcome is consistent with what the consumer theory predicts and is pretty common across the board however is now fact and not theory. Don’t assume this is always the case, always trust the live data not theories.

With this information we can now start utilising the same tool for margin as shown in figure 3. The same colour scheme exists (green high, red low). In this bay, assuming there were no obvious flow issues we would suggest moving some of the high sales / lower margin products down to the bottom and swapping with the two high margin products at the bottom. The performance of these two high margin products could be negatively influenced by the location from the data we see here.  

It is crucial to never assume your bay performs like all other bays, understand real data that you have. Location is one factor that can affect sales. Use it as a lever that you can use in supplier or retailer negotiations. Knowing everything about your product requires you knowing everything about your space.

Purpose 3 – The merchandising instruction manual

The most commonly known use of a planogram, but one not to be over looked is from operations or the in store user.

Imagine a planogram is a 1000 piece jigsaw puzzle; it’s going to take you a significant amount of time to piece the puzzle together isn’t it? Now imagine each piece is numbered and piece 1 is connected to piece 2 and 3 and so on. The pieces are then laid out in numerical order. This is going to take a substantially shorter amount of time.

Now consider a few of those 1000 pieces need changing over, a planogram can prompt the user to change those products over.

Now multiply that by 10 or even 1000 puzzles and you can start to understand how much time a planogram saves retailers by simply giving stores the instruction manual to their individual puzzles. An example of a typical planogram is shown in figure 4.

A planogram itself can be anything from a 2D block plan to a 3D visual (as shown earlier in figure 1. Examples of both of these can be seen in the images. Here at OSP Retail we build thousands of planograms in 2D and 3D. The majority of our planograms however tend to sit in the middle with, 2D image planograms (shown in figure 4) we do this for one reason, speed.  

In 2018 OSP Retail with support from a retailer carried out a simple time motion study. We decided to do this on a Monday when key staff were available to rule out simple learning being a factor that could influence the results.

We measured a variety of different product setups, some with images and some without and averaged the time across all of them.

The results and feedback showed an increase in product association when they had images to use. This speed increase created an average of five minutes improvement in merchandising speed. This five minutes of store members time although small on the surface. But when multiplied across 100 planograms is suddenly 500 mins or 8.3 hours.

“Continuous improvement through the aggregation of marginal gains” (Kaizen)

Summarey of what a planogram is and its benefits

In summary a planogram is a ranging tool, an analytical tool and a merchandising instruction manual however, additionally a planogram could also provide:

  • Consistent brand messaging
  • Consistent shopper experience (same plans or layouts of products in each store no matter which store you shop)
  • Data driven solution to collaboration between buying and merchandising (Data is everything these days)

Ability to retrospectively analyse results (good or bad). Data is retained to be reported against at a later date, “What did that category look like 12 months ago when sales were either high or low”

So how do we planogram: Manual & Automation

Manual:

This is the basic form of planogramming which is widely used across the industry. Data is brought into the planogram through a spreadsheet or a data file. Typically, in this style of planogram averaged sales data is used across a set of stores or cluster and is used to specify on shelf capacities.

This type of planogram is very much suited to a small to medium size business selling non FMCG (Fast moving consumer goods) goods where the variation of range and quantities of stock would not vary dramatically.

This is a user defined planogram where all the facings and capacities are driven by the user. This is still a highly accurate method of planogramming however when you have multi sites with a large variation of product sales it is limited by sales averages. It can also be extremely time consuming when creating 1000’s of Planograms or indeed having to update 1000’s of Planograms.

Consider all the great benefits listed above in the article, these benefits are only available either at the point of creation or if the Planogram is continually kept up to date.

Automation:

Tesco in the later 90’s and early 00’s realised that non store specific planograms were restricting their growth and that having an army of planogrammers was not cost effective so they approached Relex to produce an automated planogram system.

Relex started working with Tesco in 2002 to develop what’s now known as automation.

Automation is driving the biggest opportunity for retailers to fully optimise their micro space.

To build automated planograms you can use three simple layers of information;

  • A blocking template defining merchandising style.
  • A sequence template defining product positions and their adjacencies to one another
  • An assortment defining the exact range per cluster/store

The sales data of each individual product is then brought in from either historical sales or from live forecasted sales data (E.g. RELEX Demand Forecasting) and then each store within a cluster is given an optimised capacity and facings based upon its true sales data. No averages just accurate, real, sales data.

This is where automation comes in. The software itself then utilises the sales data to actually assign the correct facings to the product by store, by planogram.

Your net result is store specific planograms that have a unique alteration depending on each of their sales profiles that exist within the store.

A planogram revolution:

As businesses are hit harder and harder on rates and rising costs, planogramming is a powerful way to fight back, but not everyone is doing it. Why wouldn’t you want to increase your ROI on space?

As a business we have come across many reasons but below is the most common:

  • A total misunderstanding of planogramming – It is NOT just a tool to allow stores to setup. Hopefully this article has shown that.
  • Only Large retailers will get the benefits from planograms – Large retailers absolutely planogram, as they want to maximise their ROI on space. However, the principles and the gains are across big and small alike – in fact you could argue that you could get a better result in smaller businesses with a slower turn on product.  We work with a lot of smaller retailers who are keen to optimise their space – it works!
  • It is just for retailers – Many, many suppliers the software to not only provide optimised planograms, whether it be in fixture or in an FSDU to their retail customers.  They also use it to demonstrate performance of their products and how they have used real sales data to provide optimised bays that will perform for their customer.
  • We don’t have the skill set to use it – We can train you! Or OSP Retail can not only use the software on your behalf but can manage, optimise and develop your plans.

Final thoughts

I believe that all things are cyclical, bricks and mortar retailing maybe declining however retail is resilient and is evolving. The High Street is not going to just disappear, innovation will proceed and what we know now as the “High Street” will change.

There are many retailers out there who are thriving and growing by using the latest technology to expand their thinking and improve their ways of working.

What I do know is that if you stand still your business will suffer as someone will do something better than you:

“Many a false step is made by standing still” – Timothy Ferris

Take care and happy trading

Every business, we have supported over the years have been on a space planning journey. Some at the very beginning and others right at the forefront of the latest technology.

“OSP’s unique approach and delivery have provided Wolseley with the foundation, tools, and ability to build on and deliver continued success. Their skill to quickly build the necessary foundations based on business requirements, develop processes and coach individuals have catapulted Wolseley into a new era of true Customer Centric Merchandising. OSP’s ability knows no bounds.

Charles Milgate, Wolseley UK

“OSP has been providing essential ongoing support to Wyevale as it makes the significant transition to planogram all of its retail space, as a result, we have started to maximise our retail space. Their abilities, business understanding, and expertise across different platforms have supported the planogram capture of circa 70% of total SKU count so far”

Peter Aylott, Visual Merchandising Manager

“OSP’s merchandising solution revolutionised our space planning facilities. A thorough day’s training gave us all the tools to get started creating effective planograms. If we ever have any questions the support is always quick, detailed and friendly.”

Sarah Dixon, International Marketing Executive

“OSP stepped into the breach at short notice, quickly acclimatised to the business needs and delivered a superb merchandising outcome which is now being rolled out”

David Weaver, Retail Consulting & Interim Management

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OSP RETAIL LTD

Bakers Loft
Quay Street
Lymington
SO41 3AS
UK

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OSP RETAIL LTD

Bakers Loft
Quay Street
Lymington
SO41 3AS
UK

SOCIAL MEDIA

SUBSCRIBE TO OUR NEWSLETTER