So What's My Problem with Space Management?

My hang up with space management solutions is that they are NOT able to help retailers who have a diverse merchandising practice – and yet, they are sold as if they do.  If you are a retailer who has apparel that turns with the seasons, items that do not have a sales history – only a buyer’s forecast, seasonal space that expands and contracts, outdoor merchandising space or a variable promotional plan that varies by geography or some other non-prototype related dimension, then you are SOL with a packaged space system.   Software “solution providers” have not provided a balance between the work required to use their systems to get necessary analytics and the value of those analytics for non-standard areas of the store.
On gondola runs of fairly consistent products (dog food, toys, cereal or hardware) it works fine – you update the planograms at the SKU level and feed SKU data and it gives you back robust reporting for decisionmaking.  BUT look at the non-consistent areas of the store: Endcaps, seasonal areas,apparel or fresh produce areas and the amount of work is gargantuan compared to the value.  Talk to most Space Management implementation teams and they rarely have a smart way for retailers to solve for this.  Because, their system doesn’t work for high-velocity areas that do not maintain SKU consistency.
Retailers have to create a system that unifies three different space allocation areas of the store:
  1. Standard fixtures with consistent product (grocery shelves, HBA, gondola runs with shelves) that can be managed with standard Space Management solutions.
  2. Standard fixtures with seasonally changing product (apparel rounders, produce tables, seasonal sections, outdoor merchandising space, etc) that can be mapped at a high level and then married with inventory data and sales data to create GMROS analytics and other space reports.  Generally, these areas provide consistent category homes for product – at least at the department level.
  3. Promotional locations that have inconsistent category merchandising that changes very quickly. (endcaps, promotional H-fixtures in racetracks, checklane ends and in-aisle locations.)  Because these can change from week to week, it is difficult to manage in a space system.  Yet, because this is among the most productive real estate in a store, it is the most critical to manage well to improve sales and profits.
I have not met a system that handles all three of these areas of a store well.  In order to allocate space charges back to business lines (and, therefore, get a TRUE Return on Space measure) retailers have to do a lot of data manipulation outside of the system. Or, more likely, they don’t look at consistent measures across all their businesses and are blind to opportunities and risks they could see if they had a real solution.  In fact, this is the most common implementation I see in the industry: Space Management tools are used to improve communication to store execution teams for some proportion of the stores, but the analytics (and real value of the tool) is not used across the entire store – eliminating tough to planogram areas from analysis or high-value promotional areas from analysis.
In my past posting (Do you believe the lies about Space Management?) I charted the root cause of this issue to the fact that Space Management software was underwritten by large CPG firms and that solving the problem of total store analytics was not their priority.  Retailers are notoriously cheap in paying for development and allowed their solutions to be paid for and driven by their vendors.  Unable to resolve an industry-wide standard for handling churning merchandise and unwilling to fund solutions, software providers have forced retailers to either build their own solutions or have created a de facto implementation plan for all retailers that only addresses a part of their store.
Here is what one Store Planning Manager at a Fortune 500 Retailer said to me recently:

Analytical tools at a Macro level are poor at best- [The tool set] is joke left over from the 90’s. It would be very difficult (impossible) to manage our processes in a [real time] environ. We were lucky because years before me, [my company] began maintaining spatially accurate floorplans in CAD- labeling the footage and location of every planograms assigned to each store. To implement Floorplanning, all we had to do was replicate what was in CAD. It was painful and a huge undertaking, but today we manage 1200 unique store maps and make manual space changes to just about every store every month, with 6 Floorplanning associates. The advantage [my company] has is that all assortments are created via the planograms- a nice tight control point.  If it’s not in a planogram, it’s not in the store. Changing assortment is as simple as changing the planogram- where it gets tricky is moving the planogram and changing it’s space. We have done some automations with a custom global swap utility and created some custom reporting to understand adjacency and net changes on a SKU/Store basis.  It’s become a manageable process for us.  It would like to see [software providers] put more retailer based solutions in it’s tools. Things that should be core functionality aren’t included.

So what do BEST IN CLASS retailers do? Like this manager says: they build their own reporting.   They build a host of quasi-home-grown solutions that resolve these problems in a non-standard fashion for their particular store environment.  I have known retailers who have bolted on assortment planning, merchandise planning. promotion planning, labor planning and real estate systems onto their space management system in order to get the data and reporting they need to run their business.   Every company is different.
Next in this series: I look at the choices some retailers make and how they make it work.

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