The sources of expertise and insights about how best to arrange products on grocery store shelves to encourage purchases have changed notably. Whereas once, grocery stores relied on category captains, employed by major consumer goods brands, to make recommendations and design displays, today they often reject such outside influences and instead devise plans on their own, to ensure the greatest benefits for their own sales and revenues.
This shift substantially reflects the enhanced technology available to grocery retailers. Using video surveillance and related technology tools, they can determine the paths that shoppers take in their stores, how quickly they move (known as their “walk rate”), where they look, what kinds of displays grab their attention, and so forth. With all these data, the stores design aisles and end cap displays that ensure the products that provide the highest revenues or the biggest margins are the ones that consumers are likely to see.
In many cases, those promoted products are store brands, such that the grocer can keep the profits within its own corporate organization, rather than sharing the proceeds with a national brand. But grocers’ enhanced data-gathering capabilities also inform them about what today’s consumers prefer, so some of the highlighted items might come from brands that appeal to those niche demands, such as organic and healthier options. For example, while Bisquick brand pancake mix, owned by General Mills, still might earn more sales, many grocery stores are giving more shelf space to its smaller competitor Kodiak Cakes, which promises a high-protein version of the ready-to-make pancake mix. Consumers are seeking such options, so by making them prominent on their shelves, grocery retailers can encourage sales while also enhancing their own reputation as a place where consumers can find what they want.
Regardless of what they promote though, the grocery retailers are making these decisions independently, which represents a notable change in the practices surrounding shelf space decisions. For decades, category captains hired by big name brands would visit stores on their routes, making recommendations about where and how to organize displays of soups, cereals, and other consumer goods. These recommendations often reflected close, long-standing relationships between the manufacturers and retailers. However, these brand employees likely could not help but exhibit some bias, such that a condiment category captain employed by Kraft probably assigned a better shelf position to Kraft ketchup than to Heinz’s versions, regardless of which one would lead to more sales by the retailer.
Another outcome of this shift is a decrease in the slotting fees that retailers once relied on as a steady source of revenue. When category captains made the decisions, they also could dictate how much different national brands should pay the retailer to earn a prime spot on the shelf. When the retailer makes its own decisions, based on what design will prompt the most sales and revenues for it, demanding such fees is less possible. That is, it worries less about how much it can gain from slotting fees and more about how it can ensure enhanced and profitable consumer sales.
The new structure and practices defining shelf space decisions thus rely more on objective data, consumer behaviors, and relatively unbiased technology-based recommendations. They also mean weaker relationships between the manufacturers and the retailers selling their products and the diminishment of slotting fees. The trade-off appears to be worth it though, because the self-reliant trend continues to spread, and category captains continue to lose relevance.
Discussion Questions:
- How does grocery retailers’ increased reliance on their own sales data affect their category management processes?
- How does it influence the role and functions of category captains?
Source: Annie Gasparro and Jaewon Kang, “Grocers Wrest Control of Shelf Space from Struggling Food Giants,” The Wall Street Journal, February 19, 2020