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In the war for grocery space, it's time retailers digitise the grocery shelf

In today’s retail market, the number of branded or private label products may be climbing rapidly but shelf space is shrinking at an equal pace. Many food and beverage companies may also have to pay so-called ‘slotting fees’ for prime positions on the shelves. The hidden war for grocery shelf space is heating up so it’s time to ask: how are the winners getting it right?

In the world of retail, competition for shelf space is rife. Martin Smethurst, Managing Director of EMEA at Trax, believes that by digitising the shelves, the sector can make sure every inch counts.

When buying groceries, many people don’t think about how their favourite fizzy drink or snack got on the shelves. Yet behind every supermarket shelf and freezer door, there is a competitive market that may determine what you buy long before you get to the grocery aisle.

In today’s retail market, the number of branded or private label products may be climbing rapidly but shelf space is shrinking at an equal pace. Many food and beverage companies may also have to pay so-called ‘slotting fees’ for prime positions on the shelves. The hidden war for grocery shelf space is heating up so it’s time to ask: how are the winners getting it right?

Drawing upon customer insights and data analytics, Martin Smethurst, Managing Director of EMEA at Trax, says that consumer packaged goods (CPG) companies are increasingly looking to combine retail and technology to deliver a next-generation retail experience.

“CPG companies send products to retail shops every single day of the week, sometimes even several times a day, but they often have no idea what their shelf looks like,” explains Smethurst. “How their shelf looks really dictates how much they're going to sell – this is where technology comes into to its own. By utilising innovation, this is where you can give an organisation like Coca-Cola or Nestle a picture of what's happening in stores across the world.”

To level the playing field against e-commerce giants, many CPG companies have ramped up their digitisation efforts. For decades many firms conducted manual audits and surveys to see how products looked on the shelves, how they compared to their peers, and whether out-of-stock items are being replenished.

This process is not only time-consuming and outdated, it’s also prone to error. Thanks to new technologies, this method is increasingly being dropped in favour of better shelf intelligence.

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Take Coca-Cola, for instance, which is going to replace its manual auditing system in the US and trial a new technology from the Singaporean startup, Trax. Using mobile apps, fixed cameras or even robots, this platform takes images of product shelves using augmented reality (AR). Using computer vision and deep learning methods, the solution can then identify products and provide fully digitised shelf data.

“It allows CPGs to make actionable decisions,” notes Smethurst. “It's not just saying ‘my share of the shelf isn’t as good as it should be’. For us, it’s about giving CPG companies insight into the store so that they can see where they can improve and how they can practically change that as well.

“Every CPG company is fighting for their place on the shelf and in a lot of instances, they've paid a retailer to have that space too. They’re competing to increase their share of shelf and reduce their out of stock products. If executed properly, both of these things can really increase sales,” he adds.

More and more, it seems that CPG companies are gaining control of the in-store shopping experience. By delving into consumer insights and retail trends, successful CPG companies can use technology to bring the concept of their ‘perfect store’ to life.

Whilst every store is unique, technologies such as Trax’s software can help to discern the best product assortment for a store, the best location for a product and the best displays, as well as what pricing and promotion strategies are likely to succeed. This can not only help to enhance the customer’s shopping experience but can simultaneously boost sales opportunities.

“Generally, a CPG company has a view of what they call a ‘perfect store’ and the use of technology and data science solutions can really help to support that process,” says Smethurst. “We’ve seen a lot of growing trends. CPG companies do a lot of techniques like called brand blocking whereby you have blocks of a company’s products so that you're drawn towards it and that sells more.

“We've also started to see more subtle trends: for instance, some products are very ‘elastic’, so the more space you give to a particular product the more it will sell. Then there are other products that are inelastic. It doesn't matter how much space you give them, they will still sell the exact same amount. In fact, if you reduce their amount of shelf space, they may still sell the same amount,” he explains. 

“Using our technology and using some really clever data science, we're able to start to identify the products that are elastic and increase their share of that shelf and at the same time we can also identify products that are inelastic and can reduce their shelf space. This means we can actually get more sales from the same amount of shelf area.”

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The advent of e-commerce has undoubtedly changed the brick-and-mortar business for good but physical retailers have one key advantage over their online counterparts: physical availability. If you need a product and there’s a store nearby, you can get the item in a matter of minutes. This is part of brick-and-mortar retail’s competitive edge and should not be taken lightly.

By combining this with emerging technologies, brick-and-mortar retailers have the opportunity to deliver seamless, omnichannel shopping experiences and this is critical for the market today.

“I think that the coming together of e-commerce and retail is accelerating,” Smethurst says. “It's all about improving the experience. If you make it too difficult to buy from you, there's a reasonable chance that a retailer next door or online may have a similar or the same product. It’s about elevating the retail experience and making it more enjoyable.”

“There's a lot of work that goes into retail shelves,” he adds. “You need to see where the perfect spot is to put a product, particularly around what's called the ‘eye to thigh’ level because that's where your focus is as a consumer. Our technology is helping CPG companies get that right so that consumers can have a better experience in the store.”

In driving a next-generation customer experience, the retail sector has deployed robotics, implemented digital signs, used automated warehouses, and more. Now, it seems the grocery shelf is the last place to be digitised although it’s unlikely to stay that way for long. 

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