In your local grocery store there is a battle going on. In a grocery store, the most valuable real estate are the shelves. What goes on the top shelf, what goes on the bottom shelf, and, of course, what goes on the middle shelf. Traditionally this has been controlled by the big food manufacturing firms who told the grocery stores where their products were to be displayed. A lot of research by these firms has gone into understanding how customers make their buying decisions. However, now things are changing. Grocery store product managers are taking a look at their product development definition and taking control over what goes where on their shelves.
Product Managers Take Back The Grocery Shelves
In the U.S., the biggest food makers who are already dealing with increased competition and shifting consumer tastes, now face an additional threat: supermarket product managers are taking away prime shelf space. Grocery product managers are relying on their own proprietary research to decide how and where to shelve certain products, rather than relying on companies that sell well-known brands to tell them what to put on what shelf at what price. The result of this shift is less space for traditional supermarket staples from companies such as General Mills and Clorox in favor of niche items and store brands that deliver higher margins and are often in higher demand. Retailers have better information now. More of the conversations with their vendors have become “How do we drive growth together?”
Product managers at grocery stores such as Kroger and Walmart are using increasingly sophisticated software to decide where to place items and which products to shelve next to one another – factors that can move sales up or down several percentage points. The software, which can incorporate video-surveillance and other data, helps product managers create so-called planograms of the products on their shelves. These product managers are incorporating into the software’s algorithms such metrics as “walk rates,” which measure how much time a typical customer is willing to spend looking for certain products before giving up and leaving without buying anything. They know that high-selling products with short walk rates should be in the “strike zone,” just below eye level, where retailers often put products they want consumers to notice. If they can get this right, then it will look good on their product manager resume.
It’s All About What Goes Where
Grocery product managers know that there’s a lot more precision in how they think about the aisle today. Product managers at Kroger, the largest U.S. supermarket chain, have invested in beefing up its ability to collect and analyze data from customers. That is starting to change the grocer’s relationships with suppliers and the way it lays out stores. They have been looking at customer loyalty metrics to assess how folks engage with brands. This change in where foods go on a grocery store shelf is dealing another blow to the makers of decades-old packaged foods, which in many cases have fallen out of step with trends toward more natural and healthy foods and lost some influence over grocers.
The diminished power of the “category captains” – the top sellers of products such as soup or cereal is the biggest change to the way food is sold since Walmart expanded its grocery offerings 30 years ago. Grocery product managers once relied on big consumer-goods companies when making decisions about allocating shelf space because the companies were the experts in their respective food categories, such as Kellogg in cereal, Campbell Soup in soup, and Kraft Heinz in cheese and condiments. Grocery product managers also didn’t want to invest in consumer insights, and they were happy to take the hefty slotting fees big brands pay for prime space.
Now, grocery product managers are more focused on doing what it takes to maximize sales growth even if it means giving up some of those fees by stocking more of their store-branded products. Product managers began to realize that when they rely heavily on category captains, they are at a disadvantage because there’s an inherent bias. Grocery product managers have a big brand telling them to do it one way, and their own analytics telling them to feature more private-label or challenger brands. Now, product managers are devoting more space to new products to show customers that they offer, for example, the trendiest varieties of healthy snacks and infused beverages. The result of this is that some $17 billion of annual packaged-food sales, roughly 3.5% of the market, has shifted from incumbents to startups since 2013.
What All Of This Means For You
It turns out that the world of grocery stores has suddenly become a lot more competitive. Grocery story product managers know that in order to get their customers to buy their food products, they need to present them in a way that the customers will see them and then buy them. This means that where products get placed on a shelf is very important. The major food manufactures used to tell grocery store product managers where to place products but now grocery story product managers are using their product manager job description to do it their own way.
Grocery product managers have started to rely on their own proprietary research to decide how and where to shelve certain products, rather than relying on companies that sell well-known brands to tell them what to put on what shelf at what price. These product managers are using sophisticated software to determine exactly where specific products should be placed on a shelf. Product managers used to rely on the major manufactures to tell them where to put products and they were paid “slotting fees” for doing so. Product managers have come to realize that the major food manufactures have a bias and so they have started to collect their own data.
What we are seeing happen in the grocery store is a natural evolution. The grocery store product managers have gotten access to more data and they are starting to use it to find ways to make their product more successful. The result of this is that they no longer have to rely on what the major manufactures are telling them. Ultimately, the impact on their bottom line will tell them if they have made the right decision…
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that there is any value in what the major manufactures are telling the product managers about product placement?
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What We’ll Be Talking About Next Time
Ah, but to be the product manager for a vaping product. I mean these things have taken off like a rocket: they came out of nowhere and all of sudden we saw people everywhere engulfed in a cloud of smoke as they decided to vape instead of smoke cigarettes. However, the U.S. government became concerned when studies showed that vaping was attracting children and more kids were starting to vape – just like they had started to smoke cigarettes at too young of an age. The FDA stepped in and banded the sales of some of the most popular vaping product. However, some product managers have now found a way around those limitations. Have they gone too far?