Forward-Looking Companies that Embrace Advanced Space and Category Management Solutions can Rise above Competitors, Grow Market-Share and Improve Customer Satisfaction Levels

In today’s competitive environment, grocers and food retailers face a myriad of challenges including stiffer competition from mass-merchandise retailers, increased customer demand for specialty products, rapidly shifting consumer preferences in the face of economic hardship and the ever-present issues around inventory seasonality. According to a recent Gartner report, many retailers and their suppliers have looked to planning space and assortment at a more detailed level to better account for local consumer demand — for example, clustered assortments and store-specific planograms to achieve customer-centric plans1. Originally developed to help supermarkets improve sales, space and category management has evolved to a “must have” for grocers and food retailers; forward-looking companies that embrace advanced solutions can rise above competitors, grow market-share and improve customer satisfaction levels.

Next-generation space and category management strategies are more demand driven, integrating intelligent forecasting and consumer demand data. Forward-looking companies that embrace these advanced solutions can rise above competitors, grow market-share and improve customer satisfaction levels.

Outlined below are the next-generation space and category management strategies that integrate intelligent forecasting and demand data.

Develop Clusters Based on Similar Demand Trends

Using demand data gathered from similar purchasing patterns helps store planners create intelligent forecasts for specific products; these forecasts can then be utilized to create store clusters. Clustering stores based on demand insight allows an organization to make assortment allocation and replenishment decisions, as well as reduce uncertainty by having a flexible plan that can be easily tweaked to accommodate shifts in consumer demand. Clusters formed based on intelligent forecast data offer more effective product launches as products can be tested among consumers with similar purchasing trends before being distributed to store shelves.

Adopt Accurate and Efficient Assortment Planning Strategies

An intelligent forecast will help grocery and food retailers determine trends further in advance and plan for what products should be in what stores at a specific time. Using demand insight and planning allows retailers to predict purchasing trends for new and seasonal products determine optimal product assortments and decide accurate item placement within the store and store shelves. Demand planning allows stores to localize assortments based on the demographic of shoppers, such as age and ethnicity.

Embrace and Utilize Effective and Flexible Promotion Planning

Promotion planning within a store can be difficult because retailers do not always know how many end caps or promotional locations are available in every store and the promotional products change on a week-by-week basis. Effective promotional planning allows stores to adjust assortments and planograms quickly based on the number of products being promoted and manage the frequent changes in promotion. Grocers must also keep in mind that in addition to raising inventory levels, promotions like price breaks and advertised specials can cause customers to purchase outside their normal buying patterns. For this reason, store planners must consider the additional space requirements due to specific promotions and ensure forecast data incorporates promotional lift in baseline sales information.

Create Floorplans That Increase Store Productivity

Making sure the right space is allocated for the right product is a key part of a store’s productivity. Using an intelligent forecast to develop a floorplan allows retailers to decide on the placement of specific products to maximize the real estate available based on future demand. An area in a store that receives the most traffic can be used to sell the higher demand items or promote the seasonal products such as produce. The ability to adjust floorplans quickly is essential for grocers as they make changes to floorplans based on seasonality of their products.

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Next-Generation Space and Category Management Strategies for Progressive Grocers

Develop Planograms for Improved Space Management

Demand insight allows grocers to decide how and where retail products should optimally be displayed, ensuring that shelf capacity meets future demand. Understanding shelf space availability, along with consumer demand, allows grocers to develop a replenishment strategy to avoid excess inventory and plan for a rise in the purchasing of a product based on season, promotion or other variables. Maximizing the space available and reducing excess inventory can increase revenue and efficiency within a store. Developing planograms from the bottom up and determining the initial quantity of an item keeps retailers from overwhelming the shelf space available and helps build specific displays of seasonal items. In the past, merchants have often been forced to choose between quantity and quality when developing planograms. However, advanced solutions enable retailers to create large quantities of detailed planograms without sacrificing quality.

While category management has traditionally relied on analysis of historical data, grocery retailers can yield better results by using demand insight to create an intelligent forecast of future buying patterns, trends and promotional lift. Maximizing the use of demand insight within an organization for planning clusters, assortments, floorplans and planograms allows progressive grocers to increase revenue and productivity while reducing inventory levels.

1 From the September 2008 Gartner, Inc. report, “Categories Where Detailed Space and Assortment Planning Delivers Results,” by Peter Bambridge

Wayne Usie, JDA Software’s senior vice president, retail, is responsible for JDA’s retail industry strategy and executive-level relationships with JDA’s retail customers and key prospects.

About JDA Software Group, Inc. JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company®, is a leading global provider of innovative supply chain management, merchandising and pricing excellence solutions. JDA empowers more than 6,000 companies of all sizes to make optimal decisions that improve profitability and achieve real results in the discrete and process manufacturing, wholesale distribution, transportation, retail and services industries. With an integrated solutions offering that spans the entire supply chain from materials to the consumer, JDA leverages the powerful heritage and knowledge capital of acquired market leaders including i2 Technologies®, Manugistics®, E3®, Intactix® and Arthur®. JDA’s multiple service options provide customers with flexible configurations, rapid time-to-value, lower total cost of ownership and 24/7 functional and technical support and expertise.

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10.08.10

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