How shelf position helps sell ag products
WASHINGTON, D.C. Suppose
you’re doing your grocery shop
ping and you’re in a hurry. You
stop at the breakfast cereal section
and reach for your regular brand.
But, wait. Another brand is on your
shelf! The box says it’s new, fiber
filled, and fortified with essential
vitamins. There’s something
appealing about the package, and
a little sign says you get 20 cents
off the marked price.
Yoif hesitate. Do you look around
for your old standby brand or do
you toss the new and improved
cereal into your shopping cart?
The decision you make will have
an impact on the manufacturer,
the retailer, and the shelf.
Shelf space. It’s coveted by
manufacturers. No matter how
large the grocery store, there is
only so much shelf space. On the
other hand, there seems to be a
virtually unlimited supply of food
and nonfood items you might
expect to find in a grocery store.
It’s not unusual for 12,000 to 15,000
different items to be stocked in a
single supermarket.
Why are some items stocked by
retailers and similar items
nowhere in sight? Why are some
products positioned on top shelves
and others stacked on the bottom?
The most obvious answer-items
that sell well get the best space-is
only one aspect of stocking grocery
store shelves, according to
Agriculture Department
economist Larry Hamm of the
Economic Research Service. In a
recent issue of USDA’s FAR
MLINE magazine, Hamm notes
that two other major con
siderations are advertising and
promotion.
“The food industry is more
dynamic today than ever before,”
Hamm says. “Manufacturers are
introducing about 3,000 new
products each year and they ad
vertise and promote each one.
Probably 80 percent of the items on
the shelves today were not there
just 10 years ago. And what sells
well this month may sell poorly
next month,”
Why We Bay
There are many reasons con
sumers select the foods they do:
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habit, price, convenience,
packaging, availability, variety,
and concerns about nutrition are
just some. These factors, and lots
of other details, are considered
when manufacturers plan a
campaign to influence consumers
to try their new product. In
essence, advertising and
promotion are the keys to
marketing a new product to the
American “I’ll try anything once”
appetite.
Marketing plans targeted to
specific groups of consumers have
brought a' new sophistication to
selling new products.
“This sophistication has been
carried over to stocking super
market shelves in the form of more
advanced merchandising
techniques,” Hamm says. Mer
chandising, the subspecialty that
gets the product on the shelf, has
been developed into something of a
science by many retailers and
manufacturers, he adds.
Hamm defines food mer
chandising as the activities
associated with retailer pur
chasing and pricing of products
and presenting them to the con
sumer. “It boils down to the
overlapping objectives of retailers
and manufacturers.”
Retailers want to increase sales
volume per fixed investment in
stores, warehouses, and labor
resources. Retail merchandisers
create shopping images for their
stores to attract new customers
and to induce their customers to
spend more money.
Manufacturers are concerned
with increasing the share of the
market for their products over the
products of their competitors.
Both are aiming to influence
consumer purchasing. When they
work together, they are a for
midable pair.
Creating Demand
The retailer may advertise
heavily, offer discount coupons,
construct elaborate displays, and
allocate space to items that are
being advertised
The manufacturer may also
advertise heavily, offer cents-off
coupons and rebates to consumers,
and offer special allowances to
retailers for promoting, ad
vertising, and distributing a
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specific product.
“Joint manufacturer-retailer
promotions are very effective,”
Hamm says, but sometimes one
segment of the food industry is out
to influence the other.
Here’s an example: A company
brings out a new product, ad
vertises it widely, offers discounts
on bulk purchases to retailers, and
cents-off coupons and rebates to
consumers. What’s really hap
pened is that the manufacturer has
created (or tried to create) a
demand.
The retailer is then in a bind.
Consumers will probably want to
try the new item and take ad
vantage of the manufacturer
discounts. If the retailer doesn’t
stock the item, regular customers
may go to another store, perhaps
permanently.
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What this translates into is
competition for shelf space-new
items versus established items,
best sellers versus slow sellers.
Prime Space Wanted
Shelf space layouts are carefully
designed and determine in detail
which products are placed where
and, especially, which products get
the prime displays
“Position can be everything,”
Hamm says. The decision on how
many rows (called “facings” in
the industry) to give a particular
product can double sales or cut
them in half. “However, the space
technique with the most sales
impact,” he says, “is the end-of
aisle display.” When combined
with advertising, the end-of-aisle
display is almost always a winner.
Hamm cites a past study on the
effectiveness of various display
techniques'.
—Sales of an item dropped by 80
percent when it was moved to the
bottom shelf from a top-shelf
display, although the price and
number of facings remained the
same.
—The use of a simple “As Ad
vertised” sign to point out an
advertised product on the shelf
increased sales by 124 percent
compared with the same product
without a sign.
—Sales increased 542 percent for
a specially priced item when it was
moved from the shelf area to an
end-of-aisle display with colorful
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signs.
—A combination of techniques
proved to be most successful. Sales
increased by 782 percent when a
specially priced product was
advertised in the newspaper and
highlighted with a shelf sign.
Although the data cited are not
recent, they are representative of
techniques that are widely con
sidered successful today. “Such
data are rarely made public,”
Hamm says, “because the in
formation can make a retailer
more competitive. Those who do
have it closely guard their fin
dings.”
Computers Scan Sales
Today, computers have made
merchandising information easier
and faster to collect. “For years,
retailers could only gather this
information by implementing
labor-intensive controlled ex
periments that were usually very
difficult and expensive to con
duct,” Hamm says.
But computer scanners at
checkout counters now give sales
Perry Valley
Grange wins
PORTLAND, Me. Perry
Valley Grange, Millerstown, has
won first place for the second
consecutive year in the National
Grange’s community service
awanl project. Kermit Richard
son, Lecturer of the National
Grange, made the announcement
this week during the Grange’s
annual convention being held in
Portland, Me.
Richardson said Perry Valley
had the best overall community
service projects which included
education, safety, health,
recreation and charity. The
Master of Perry Valley Grange is
William Cameron and community
tallies almost instantly. When
inventory information is linked to
demographic consumer in
formation available through
check-cashing cards, retailers can
have detailed breakdowns on
product sales by family size, in
come, and occupation.
t Through computers, retailers
can measure the effectiveness of
various promotions and marketing
techniques. Computerized space
allocation systems are now very
common in large chains. Even
tually, the store computer will be
able to directly link with the
manufacturers’ computers, so
products can be ordered and billed
electronically.
While this technology has
generally been too expensive to
implement for many smaller food
concerns, micro computers may
be able to bring chain-store
technology to Mom-and-Pop food
stores. Some software programs
for micros can provide detailed
space allocation plans based on
sales, gross profits, direct product
profit, or weekly supplies.
service chairman, Marion Shade.
Richardson presented State
Master Charles Wismer a plaque
and $l,OOO U.S. savings bond which
Wismer will present to Perry
Valley Grange after the national
convention.
Second place went to Rocky
Mountain Grange, Hamilton,
Mont., in recognition of their
leadership in planning a
retirement home for senior
citizens. Third place was won by
Montgomery Grange, Round
Mountain, Cal. and fourth place,
Cbepachet Grange, Chepachet,
Rhode Island.