Solving Shelf Space Issues With Analytics

The presentation of goods is something that every retailer must take into account. Whether they run an online store or a physical shop, the way they showcase products (whether it's on shelves or a home page) can have a crucial impact on their sales. For retailers with both online and brick-and-mortar operations, they must consider how both channels influence customer decisions.

Although shelf space is not a concern of eCommerce operations, multichannel retailers still need to worry about the matter. There is only so much room on the show floor for products, so it's critical that they reserve room for the best-selling items. Moreover, it's a difficult challenge to deal with because it's so localized – what works in one store might not work in another, depending on demographics and target audience. Proper shelf space and inventory management can make a big difference in a retailer's bottom line, especially when these same best-selling products are selling just as fast online.

Injecting analytics into the mix

As Babson Executive Education notes, there is a science behind shelf space management and it's fueled by data and analytics. By looking at sales trends and data, merchants can quickly identify which products are selling and have the best profit margins and which ones are not moving. This allows retailers to optimize their store shelves, maximizing revenue streams and preventing cannibalized sales.

Moreover, analytics allow merchants to plan in advance, rather than reactively. Without data informing shelving layouts, retailers would have to try different floor plans, see how products sold and then respond to customer behaviors. With the right analytic tools, merchants can effectively determine how different shelf layouts will perform before even putting product on the floor.

"Shelf space management is increasingly being analyzed with respect to the financial impact of different assortments, the specific preferences of shoppers in the store area and the likely responses to pricing and promotions," the Babson research suggests. "Retailers are also able to optimize not only SKU facings, but also whole departments and sections."

Having the right product both in-stock and on shelves is critical to running a successful retail business and maximizing revenue. One study cited by Babson suggests retailers lose half of their purchases due to out-of-stock goods, and that proper optimization of inventory and shelf management can lead to a potential 15 percent increase in sales and a 10 percent boost in full price sales.

Managing digital shelves

​When retailers hear the word "shelves," the first thing they likely think of are physical shelves in brick-and-mortar stores. However, it's just as important that merchants also consider what they sell on their websites. The optimization of inventory has as much impact on digital sales as it does in physical retail.

There are only so many places you can put products on a website. Proper positioning on a website can draw consumers toward popular goods, while poor optimization may make it difficult for them to find other products. Analytics can help retailers make the right choices and get the profitable products in front of internet shoppers or even increase cross selling opportunities with recommendations.

Analytics bring a lot to the table for any retailer, but better inventory management and shelf planning are perhaps two of the best reasons to invest in data management solutions. Modern retail is about more than just selling, and to maintain that competitive edge and maximize revenue, merchants need to use analytics to improve their operations at both online and brick-and-mortar retail operations.