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CHAPTER 8

CHAPTER 8. ALLOCATING SPACE TO PRODUCTS. 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

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CHAPTER 8

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  1. CHAPTER 8 ALLOCATING SPACE TO PRODUCTS

  2. 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

  3. 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 retailer’s brand identity

  4. THE SPACE MANAGEMENT PROCESS (TABLE 8.1)

  5. STAGE 1: MEASURING RETAIL SPACE

  6. STAGE 1: MEASURING RETAIL SPACE

  7. STAGE 1: MEASURING RETAIL SPACE

  8. 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

  9. 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

  10. 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

  11. PRODUCT ADJACENCIES

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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)

  18. 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

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