Shelf space is a hot commodity, and CPG companies often incur substantial costs to get their products in-store, secure premium placement, and run promotions. It’s critical that CPGs get the standard of execution they pay for. More importantly, they must be able to accurately evaluate if the rewards, in terms of incremental sales, outweigh these costs.
An insider’s guide to retail shelf space fees
The ever-growing portfolio of brands and high competition for shelf space allows retailers to command considerable shelf space fees. There have been numerous arguments about whether the fees charged actually enhance space allocation efficiency or encourage backroom deals between stores and manufacturers that promote monopoly. But as it stands today, these are the broad types of costs incurred by manufacturers:
Here’s an explanation of the finance of promotion and slotting in frozen foods, courtesy Kevin Janiga, President of Winsights Marketing.
Combine these fees with auditing and data costs, and you get a sense of the what the manufacturer pays to be in a retailer.
Measuring ROI to justify spend on shelf space costs
In order to achieve the right return on investment (ROI) on these costs, CPGs must ensure that they get the space they paid for – and that this space is actually maximizing sales, and that shelving principles are property executed in store.
A short-to-midterm evaluation cycle analyzing various micro and macro drivers of sales performance is necessary for companies looking to measure return on shelf related costs:
Trustworthy shelf data: The main hurdle to ROI measurement
But all too often, many CPG companies don’t get the right distribution on new items at key accounts. In terms of display compliance and shelf placement, there is little objective data available to manufacturers to truly know which retailer is executing well, and who isn’t.
With relevant and accurate data, CPGs can quickly learn if the cost of doing business with a specific retailer will return sufficient sales growth.
In the next blog, we’ll find out how CPGs can use granular, store and SKU-level in-store execution data as powerful evidence to enrich ongoing conversations with retailers, allowing your sales team to successfully negotiate space allocation, product placement and associated fees.|Shelf space is a hot commodity, and CPG companies often incur substantial costs to get their products in-store, secure premium placement, and run promotions. It’s critical that CPGs get the standard of execution they pay for. More importantly, they must be able to accurately evaluate if the rewards, in terms of incremental sales, outweigh these costs.
An insider’s guide to retail shelf space fees
The ever-growing portfolio of brands and high competition for shelf space allows retailers to command considerable shelf space fees. There have been numerous arguments about whether the fees charged actually enhance space allocation efficiency or encourage backroom deals between stores and manufacturers that promote monopoly. But as it stands today, these are the broad types of costs incurred by manufacturers:
Here’s an explanation of the finance of promotion and slotting in frozen foods, courtesy Kevin Janiga, President of Winsights Marketing.
Combine these fees with auditing and data costs, and you get a sense of the what the manufacturer pays to be in a retailer.
Measuring ROI to justify spend on shelf space costs
In order to achieve the right return on investment (ROI) on these costs, CPGs must ensure that they get the space they paid for – and that this space is actually maximizing sales, and that shelving principles are property executed in store.
A short-to-midterm evaluation cycle analyzing various micro and macro drivers of sales performance is necessary for companies looking to measure return on shelf related costs:
Trustworthy shelf data: The main hurdle to ROI measurement
But all too often, many CPG companies don’t get the right distribution on new items at key accounts. In terms of display compliance and shelf placement, there is little objective data available to manufacturers to truly know which retailer is executing well, and who isn’t.
With relevant and accurate data, CPGs can quickly learn if the cost of doing business with a specific retailer will return sufficient sales growth.
In the next blog, we’ll find out how CPGs can use granular, store and SKU-level in-store execution data as powerful evidence to enrich ongoing conversations with retailers, allowing your sales team to successfully negotiate space allocation, product placement and associated fees.