W hy Da ta - D ri ven ­C l us t ers ,

Asso rtmen ts and S p ac e ­Planni ng

­

is Critical Fo r ­Res po n d in g t o
­C h a n ges in C ons um er D em and
During the G lo b al C OV I D -1 9
Pa n d e mic
­

www. dotac ti v. c om
 Table of Contents
01 Purpose Page 1

02 About This Content Page 2

03 List of Contributors Page 3

04 COVID-19 and its Effect On Consumer Demand Page 6

05 An Integrated Database Which Supports the Page 9

Interdependent Nature of Category Management

06 Using Data to Calculate Optimal Category-Based Clusters Page 12

07 Using Data to Rationalise Assortments Page 14

08 Using Data to Enhance Floor Space Planning Page 20

09 Using Data to Enhance Shelf Space Planning Page 22

10 Planograms as a Tool to Realise Your Strategy at Store Level Page 24

11 Conclusion Page 26

12 Bibliography Page 27
Purpose
Regardless of who you are or where you live in the world; COVID-19 has had a significant impact on life in general

(Fu et al., 2020). More specifically, it’s had an impact on how people purchase and consume products (Jones, 2020).

Retail professionals will know about the enormous consumer demand fluctuations (Burns, 2020) this pandemic

has caused and responding to these fluctuations has left unprepared retailers struggling to adapt quick enough.

COVID-19 has altered what your customers buy and how they feel when entering physical stores (Wharton School

of Pennsylvania, 2020).

The purpose of this document is to offer expert perspectives on how you can equip your organisation to ­sustainably

and efficiently predict and respond to changes in consumer demand. Ultimately COVID-19 represents a stern
reminder that retailers who are best equipped to rapidly respond to changes in consumer behaviour and demand
­

(Becdach et al., 2020) will be the winners in their local markets.

While we do not refute the role which e-commerce will play, we still believe that humans are social by nature,

therefore, there will always be a big role to play when it comes to physical stores (Nanos, 2020). Instead of ­thinking

about e-commerce vs physical retailing the mindset should shift towards how they can work together to offer
exceptional experiences (Dore et al., 2020) regardless of whether shopping is taking place online or offline.
­

PA G E 1
Ab o u t t h is

Content
Based on experience with our combined user base of over 2000 retail professional users in more than 110 ­countries,

we have found that our customers have prioritised equipping themselves with the talent, knowledge, tools and

processes required to efficiently predict and respond to changes in consumer demand. The global COVID-19

pandemic has merely amplified changes in consumer demand (Blackburn & Wright, 2020) in that the fluctuations
­

have been faster and more severe.

With faster and more severe fluctuations in consumer demand, we have experienced a heightened prioritisation of

category management as a mechanism to improve responsiveness.

This is to be expected because efficient consumer response is at the heart of category management (Hübner,

2011). Therefore we believe that it is only fitting that we revisit the topic of category management as a method for

responding to consumer demand and discuss how it is even more important amidst our current global pandemic

when compared with pre-coronavirus times.

When developing this document, our content team consulted multiple internal experts with a combined category

management experience of more than 35 years. These perspectives were balanced against third-party research

from globally trusted sources such as Accenture, BBC, Boston Globe, Category Management Association, EY, Forbes,

Fortune, Kantar Retail, McKinsey & Company, National Retail Foundation, Nielsen, The Guardian, The New York Times,

The Washington Post, and the World Economic Forum.

Since this document is an important academic resource for retail professionals, we have referenced all sources

using the globally accepted Harvard style of referencing (Imperial College London, 2017) with the inclusion of
­

in-text citations and a comprehensive bibliography. Added to this, we have included the professional biographies
­

of the internal experts who contributed to this document.

PA G E 2
List of
Contributors
­

Bria n Nyama ch iri

An operations manager based in Johannesburg with over 10 years of ­retail

experience, Brian has worked for DotActiv for seven years. He currently
­

oversees the Adcock Ingram, Danone, GSK, Dr Oetker, Loreal, Makro, Premier
­

Foods, Revlon, and UPD accounts.

Brian has a BComm in Supply Chain and Operations Management.

Lis a -M ay Krige

The first female operations manager appointed in DotActiv’s history,

­
Lisa-May
­

Krige has been at DotActiv since 2013. Based out of the Cape Town office,
Lisa-May oversees Dot Activ’s largest account in the Western
­ ­
Cape - Food
Lover’s Market. She also oversees DotActiv’s ­other ­Retainer and Ad-hoc
­

accounts in the province.

­

Lisa-May has a BComm with a specialisation in Tourism Management.

Ru n et Kritzin ger

Runet has been with DotActiv since 2015. She currently manages the Makro
Food and Liquor account and is part of DotActiv’s Cross-Functional ­Management
Forum.

Runet has a Bsc Consumer Science degree in Business Management.

PA G E 3
List of
Contributors
­

Is abel Wes s els

Based in Johannesburg, Isabel joined DotActiv in late 2017 as a senior space

planner, creating data-driven planograms for one of the latest pharmacy
retailers in Africa on the Dis-Chem account. She was p
­
­ romoted to account
manager for Dis-Chem in 2019.
­

Isabel has a Bsc Consumer Science Honours degree in Clothing Retail

Management.
­

Erin Ho dgs o n

Erin joined DotActiv in early-2019, quickly establishing herself as the ­go-to

expert on clustering in the business. This saw her promotion to Cluster
­

Development Manager in late-2019. With her assistance, DotActiv has

­

developed powerful cluster optimization software which works seamlessly with

­

the rest of our all-in-one category management software.

Erin has a BConsumer Science degree in Food Retail Management and will
complete a Masters degree in Consumer Science at the end of 2020.
­

S ven Arn dt

Having worked at DotActiv since 2015, Sven has a range of category ­management
experience across various pharmacy retailer accounts. He currently works on
the Dis-Chem account, creating data-driven planograms.

PA G E 4
 List of
Contributors
­

Ilze Klo pper

Ilze joined DotActiv in 2018 as a shelf planner, working on the Amka account.
Here, she is responsible for all the business analytics on all categories. Ilze is
currently working on the development of Custom Reporting Templates within
DotActiv Software.

Ilze has a certificate in Business Intelligence through the University of Cape

Town

S u n é Nel

Suné joined DotActiv in late 2019 as a space planner. She currently works on
the Dis-Chem account in Johannesburg alongside Isabel and Sven, cr eating
data-driven planograms for the pharmacy retailer.
­

Suné has a BConsumer Science Honours degree in Clothing Retail Management

Da rren Gilbert

With over 10 years of writing and marketing experience, Darren joined

DotActiv in 2017 as a c ontent writer where he was responsible for producing
­

blogs, ­Ebooks and more. He has since worked himself up to the role of content
manager, where he oversees all and any content produced by the company.
­

Darren has a BA in International Studies.

*A ll cont r ibut or s h ave b een c e rt i f i ed i n D o tAc ti v’s S oftwa re M a stery Level s. These c­ ourses c over Data,

Clu st e r ing, Asso rt men t P l a n n i n g , P l a n o g ra m Genera ti on, F l oor Pl a nni ng a nd ­R eporti ng modul es.

PA G E 5
COVI D- 19 An d Its Ef fe c t

On Consumer Demand
Given the current state of the world due to the Coronavirus pandemic, retailers can expect to make changes to
how they do business. That would include arranging space to encourage social distancing when queuing, placing
plexiglass shields at cash registers (Bhattarai, 2020), and having disinfectant at store entrances for customers to
use before they enter.

While these are important aspects that all retailers need to consider, for the purpose of this ebook, we are focusing
on getting product assortment, clustering and space management right.

From a human perspective, you can understand that COVID-19 has altered how people think and thus how they
shop. People are buying items that they might not have thought of buying before. If they were already buying these
items, they’re now buying more of them than they’d usually buy (Gelles & Leatherby, 2020).

The result is major fluctuations in consumer demand. Basic goods, immune health, hygiene, virus containment and
safety products get priority while luxury products take the back seat (Gramling, 2020).

You’d only need to think of other known events that result in changes in consumer demand. Christmas, Back to
School or Valentine’s Day are three such examples. Of course, there is a significant difference between these
mentioned and COVID-19. While you can plan for Christmas, Back to School or Valentine’s Day, it’s not the same
­

for a pandemic (Horovitz, 2020).

Black Friday is another example. However, in this case, you can see the similarities between it and COVID-19 in panic
buying (Singh, 2020). For example, because of the pandemic, demand for rice and instant noodles in ­­Singapore lead
to its prime minister needing to assure the public that there was enough for everyone (Lufkin 2020). ­Meanwhile, in
New Zealand, supermarket spending rose by 40% when compared to the same day last year (Henry, 2020).

As a side note, once the world understands how to manage the COVID-19 (Denworth, 2020), there will still be
events that lead to changes in consumer demand. Black Friday, Christmas, Valentine’s Day will still have an effect
on which products you range and how space is allocated to these products (Arndt).

Let’s consider the Hand Sanitizer product category as an example. In early March, IOL reported that pharmacies
and stores in KwaZulu-Natal had run out of hand sanitizer, face masks, hand wipes and liquid hand soap after one
confirmed case of coronavirus (Mgandela & Waterworth, 2020).

That said, in all of these examples, the demand change principle is the same. Our argument is that retailers need
to equip themselves to respond to fluctuations in consumer demand so that when new trends or even severe

fluctuations come about that they are able to adapt quickly and efficiently.
­

PA G E 6
Meanwhile, CBS News reported that demand for hand sanitizers rose by 1400% (Gibson, 2020).

That’s not the only category that saw a dramatic spike in sales. Staple food categories across the US, for example,

have also been affected (Bekiempis, 2020). In the UK, supermarkets are rationing food after a wave of ­panic-buying

(Payne, 2020) while a supermarket such as Waitrose announced a three-item limit on certain products to prevent

running out of stock too quickly. A few supermarkets have since eased some restrictions (Westbrook, 2020).

So what does this mean for you as a retail leader?

For one, e-commerce will play a greater role (Columbus, 2020). As people practice social distancing and grow

­increasingly worried about public places, it provides the perfect opportunity for you to consider digital channels.

“The COVID-19 pandemic has made it clear that e-commerce can be an important tool/solution for consumers in

times of crisis” (World Trade Organization, 2020). That is further backed up by the WTO who noticed a similar

spike in e-commerce during the SARS epidemic in 2013.

That said, in all of these examples, the demand change principle is the same. Our argument is that retailers need

to equip themselves to respond to fluctuations in consumer demand so that when new trends or even severe

fluctuations come about that they are able to adapt quickly and efficiently.
­

Of course, it’s worth pointing out that e-commerce won’t replace in-store shopping (Morgan, 2018). After all, why

else would major eCommerce companies like Amazon be entering the in-store retailing market? (Greene, 2015).

Today, Amazon operates several different kinds of physical stores (Fox Rubin, 2020).

Instead, the expectations on you to merchandise your stores so that shoppers can find what they need are far

greater (Nielsen, 2016). Anyone walking into your store to shop wants a stress-free experience (Pariani, 2019) and

doesn’t want to struggle to find what they’re looking for in your store.

In fact, a study by C+R Research (Teboe, 2020) that surveyed over 2000 US grocery shoppers found that 60% were

afraid of going to the grocery store during the COVID-19 pandemic while 73% were making fewer trips to the

store than before because of the coronavirus. This point exacerbates the importance of providing shoppers with

a stress-free shopping experience.

In today’s retail environment, the brick-and-mortar winners will be those retailers who can adapt their stores to

consumer demand changes in the fastest and most efficient way (Krige). To achieve this, you’d need to consider

category management and all of its data-driven elements.

PA G E 7
 Afraid of going Fewer trips to
to the grocery the store
store

In fact, a study by C+R Research (Teboe, 2020) that surveyed over 2000 US grocery shoppers found that 60% were

afraid of going to the grocery store during the COVID-19 pandemic while 73% were making fewer trips to the

store than before because of the coronavirus. This point exacerbates the importance of providing shoppers with

a stress-free shopping experience.

In today’s retail environment, the brick-and-mortar winners will be those retailers who can adapt their stores to

consumer demand changes in the fastest and most efficient way (Krige). To achieve this, you’d need to consider

category management and all of its data-driven elements.

PA G E 8
An Integ rate d Data b a s e Wh i ch Support s t he Interd epend ent

Nature of Category
Management
The various elements of category management are by their very nature interdependent with one another. For

example, it’s not practical to have a planogram illustrating where and how products should be merchandised on

shelves without a finalised assortment of products (Ray, 2010). Furthermore, you should not remove a product

from your planogram when it has been removed from the assortment and there is still inventory available as this

would lead to wastage.

These are just two examples of interdependence and they illustrate the need for a database which brings simplicity

and accuracy to a previously complex retail management problem (O’Brien, 2010). To get the most value from your
retail data, you need an integrated database which supports the interdependent nature of category management

(Gilbert, 2018a).

This is a database that not only needs to be accurate, but it must also be efficient. That’s because your ability to

predict and respond to changes in consumer demand is directly linked with the quality and accessibility of your

retail data (MacKenzie et al., 2013).

The next important issue to point out is that category management does not operate separately from the rest of a

business and therefore its database should be integrated with other systems.

For example, POS data should flow into the ideal category management database while assortment and space

causal data should flow into other systems such as inventory replenishment and ERP systems (Krige). When data

flows automatically in this way, retailers can execute decisions faster, with less risk and in a more efficient way.

PA G E 9
An accurate database

To ensure an accurate database, it’s key that you set up one that can import and export data automatically. In this

instance, you should consider a SQL database. SQL or Structured Query Language is designed for managing data

held in a relational database management system (RDBMS).

According to Mcquillan (2015), SQL is ‘a language used to talk to databases’ while an RDBMS is ‘a collection of

services that together support the storage and retrieval of relational data from some kind of file store’.
­

As for why you should consider SQL over Excel or Google Sheets, consider manually importing and exporting your

data. While you can do it, when using manual sheets, which are formatted and used on an ad-hoc basis, you’re

building multiple versions of the truth, opening up the possibility of data inaccuracies due to human error and
­

aren’t building a scalable data asset (Krige).

­

Also, many enterprise-grade systems often rely on robust data transfer methods which allow for custom ­database

integration, and so choosing to transfer your data automatically makes sense. Two such types of data transfer

methods include Transact-SQL and the DotActiv Import Utility.

The first - Transact-SQL - is Microsoft’s extension of SQL and central to Microsoft SQL Server. You’d use it to send

data between relational databases (Ben-Gan, 2016). If you intend to use this method, you need to have the ability

to write SQL scripts or queries using Transact-SQL.

Meanwhile, DotActiv has a dedicated application that imports data either from CSV files or from SQL staging

tables into the DotActiv database structure (DotActiv, 2019a).

­

Ultimately the data itself needs to be accurate and clean.

Below are some of the characteristics of clean data:

• No missing data within a column; • A well-classified display hierarchy;

• No replicated and/or duplicated data; • No commas in your data; and

• Correctly spelt words; • No NULL values.

PA G E 1 0
An efficient database

Once you’ve set up and populated your database, and you’re satisfied with it, it’s time to ensure it’s as efficient as
possible. You can ensure it’s efficiency through a two-way database integration process (Woodall, 2014), which
DotActiv offers.

Database integration is ‘the practice associated with managing data that travels between applications, data stores,
systems, and organizations’ (Reeve, 2013).

DotActiv approaches the integration process (DotActiv, 2019b) by extracting retail data (Sales, Stock, Market and
Product) from various sources - point of sales database, ERP, SAP - and placing it into staging tables to process. This
approach allows DotActiv to integrate with almost any environment.

We can also approach it in two ways depending on your needs. Either, we can manually prepare and upload ­datasets
using CSV and Excel files on an ad-hoc basis (Kritzinger). Or, we can achieve it through automation by using staging
databases and Transact-SQL statements or queries via the DotActiv Import Utility

By setting up an integration through the DotActiv Import Utility, data can enter from other systems. You can also
extract data from the database to inform other systems such as your inventory replenishment.

In essence, the Import Utility finds and collects your planograms from the folder set up by you before extracting
all the necessary causal data from them (Nyamachiri). The causal data, which includes your X Facings; Y ­Facings;
Capacity; Days of Supply; Minimum Display Depth, and so on, refers to any information that helps you to ­understand
­

your environment so that you can make informed space planning decisions.

Let’s consider category management and its various functions. Each function, be that assortment planning, space
planning or inventory management is brought to life when retail data flows seamlessly between each other. That’s
because category management requires data management (Shoppermotion, 2018).

Due to the COVID-19 pandemic, you’ll likely find that many categories will go through an extensive range change
to cater to changes in consumer demand (Wold, 2020). However, even if you derange products, you’d still have
them in stock and they would need to remain on your planogram until sold out.

However, not integrating your category management efforts makes it harder to execute any changes ­accurately
and without wastage. Database integration also reduces the complexity of processing your data (Akella et al.,
2009). Since data is imported and exported automatically, you won’t need to format or transfer it manually.

The seamless flow of data into your category management platform, across each category management element
and to other interdependent systems results in faster and more accurate execution of much-needed changes to
assortments, planograms and floor plans (Wade, 2016).

PA G E 1 1
Usi n g Dat a to Ca l c u l ate Opti ma l

Category-Based Clusters
Clustering is ‘the process of grouping sales outlets together based on similarities or patterns in their underlying

customers’ behaviour’ (Pollack, 2015). Conducting a cluster analysis can be a manual process or it can be done

using machine learning where an algorithm groups stores together based on multiple variables (Hodgson, 2020).

For Carr (2013), it’s a simple form of localisation - tailoring aspects of your stores to cater to your target ­­m
­­­ arket -

since ‘at its heart, it’s about reaching customers’ unique preferences while preserving scale in the business”.

For example, Target offers a variety of hats and t-shirts of local sports teams based upon the location of the store.

Target stores in the Denver area have Broncos and Rockies apparel, while shoppers in the Boston area Target

stores would find Red Sox and Patriots gear (Carr, 2013).

This is a typical pre-COVID-19 example but it also shows why it is important, regardless of the time. Before the

COVID-19 pandemic, you could view clustering as a way to optimise the process of your business and gain a

competitive advantage.
­

It allows you to cater to the product needs of your target market. It also allows you to ‘reduce spend, ensures stock

levels are monitored and adjusted to reduce the likelihood of out of stocks and lost sales’ (Wilson, 2019).

That said, in all of these examples, the demand change principle is the same. Our argument is that retailers need

to equip themselves to respond to fluctuations in consumer demand so that when new trends or even severe

fluctuations come about that they are able to adapt quickly and efficiently.
­

PA G E 1 2
Meanwhile, you could reduce the stock of other products which they are not buying. Also, you can create ­uniformity

and familiarity for your shoppers. Taking the above example, no matter which Target store in Denver a customer

visits, they can expect to find Broncos and Rockies apparel.

But that doesn’t mean it’s not important during COVID-19 or even once we overcome the pandemic. While the

world struggles with the coronavirus, retailers need to understand and react to fluctuations in consumer demand.

During COVID-19, clustering is important because it’s a process that you can implement to remain competitive.

If we were to consider the coronavirus and how best to respond to (if not anticipate) changes in consumer demand,

it’s best to analyse your data. By profiling each cluster to understand what shoppers are purchasing at various

stores, you’ll have a better understanding of how best to cater to them.

For that, we would recommend you use a combination of POS and Loyalty-level data (Hodgson). You could also

use Demographics, LSM and performance data to group your customers based on their demographic profile and

purchasing behaviour.

Currently, you can use POS data in the Cluster Optimizer feature of DotActiv Enterprise to generate your clusters.

Once done, you can map and profile each cluster to understand the predominant customer base of each.

Post-COVID-19, clustering will remain an important cog in your retail strategy. That’s because there will always

be fluctuations in consumer demand, be that because of seasonality, a change in the tastes and preferences of

customers or a change in pricing.

­

PA G E 1 3
Usi n g Dat a to

Rationalise Assortments
Basuroy et al., (2009) as cited in Hübner (2011) posits that assortment planning ‘considers the question of which

and how many different products to offer’ customers in-store.

Meanwhile, Fisher & Kök (2007) go further, defining retail assortment planning as ‘specifying the set of products

carried at each store and setting their inventory levels so as to maximize a profit function subject to fixed shelf

space and possibly other constraints, which vary by context’.

In that, it could be argued that determining a product assortment is one of the most basic strategic decisions

a ­retailer would need to make, a point which Dankworth et al. (2009) agree on. And yet, it is difficult for many

retailers. ‘If the retailer fails to provide the expected assortment, customers defect, causing losses in both current
­

and future sales.’ (Dankworth et al., 2009).

O’Connell (2008) makes reference to Macy’s, who, having realised that a “one-size/style fits all” strategy wasn’t

working, moved towards tailoring at least 15% of its merchandise in each of its stores to local tastes. ‘A ­localisation

strategy can boost sales at stores open at least a year by 1 to 3 percentage points, and as much as 90% of the

benefit can be gained by customizing 10% to 15% of inventory needs’.

­

Assortment planning is critical to demand generation and shopper satisfaction.

‘Retailers who get the assortment right enjoy more sales, higher gross margins,
­

leaner operations, and most importantly, more loyal customers’ (Wachinger et al.,

2019)

But what about the importance of assortment planning during a pandemic like COVID-19?

PA G E 1 4
It’s simple - it remains just as important if not even more so to organise your product

assortment to satisfy the needs of your customers. The only difference is that we’re
­

living in a time where demands are fluctuating wildly. During this time, you need to

use your data to rationalise your assortments so that you can respond to changes in

­customer demand (Hübner, 2011).

Data required for assortment optimisation would include, amongst others:

Fact data such as Price, Profit, Product data such as Brand, Unit External Market data such as
Sales and Unit Movement; of Measure (UoM) and Variant Price, Sales and Unit Movement.

By analysing all the above data, you can get a better understanding of which products you should keep in your store

(Nyamachiri).

Let’s take an example such as the Hand Sanitizer category. You manage a Pharmacy and considering that there is

increased demand for it, which you will likely gather through your Fact data, you’d know that you need to stock
­

more products in this category to cater for the increase in customer demand. Meanwhile, you might need to ­reduce

the size of your assortment for the Household category in order to make physical space available for the hand

sanitizer category.
­

But let’s also look at a post-COVID-19 example since we will find a vaccine and it will end (Denworth, 2020).

However, you’ll still need to rationalise your assortments. So let’s consider an alcohol category such as White Wine.
­

Here, you’d first need to establish its category role by analysing your market data (Nyamachiri). Depending on the

product coverage (the width and depth of your range) you’d assign the most appropriate role to the category.

There are good reasons for assigning the above-mentioned category (as well as others) a role. Besides the fact that

it will directly impact your assortment, effective category management depends on the role you assign a category

(Dhar et al., 2000).

PA G E 1 5
‘[B]ecause consumer behaviour and motivations can differ dramatically given what role the product plays in

everyday life, the effectiveness of marketing actions should differ systematically across categories. These issues
­

are key to any formal category management process where retailers must explicitly define the role that each

category plays in the overall store portfolio’ (Dhar et al., 2000).

­

For example, if a retailer chooses to follow a Convenience role for the White Wine category, they’d need to

understand that for customers, ‘retail convenience means shopping speed and ease’ (Berry et al., 2000), and it
­

should be geared towards one-stop-shopping and often encourages impulse purchases.

The range would thus not be extensive as that for a category which follows a Destination role, which “is to be the

primary category provider and help define the retailer as the store of choice (Briesch et al., 2013).

Let’s consider an efficient approach to assortment planning, one which DotActiv takes that can help you with any

product assortment decisions, pre, during or post-COVID-19.

When optimising product assortments, our methodology is centred around a selection of strategy matching

algorithms which are applied to sub-groupings of products as applicable. This methodology allows you to ­optimise
­

assortments with different strategies at different product grouping levels within different categories. We use

the terminology of Rules, Templates, and Plans (Kritzinger). Each is fully customisable to meet the specific retail

environment and the needs of your target market.

­

PA G E 1 6
Rules are individual calculations, which are built into DotActiv software. They are used to rank products within a

database and to generate an assortment based on specific attributes. Retailers can also add in new and customised

rules if they are proficient in SQL.

Templates are groups of rules, which are linked to a particular product sub-category or segment. Templates

consisting of appropriate rules, applied at various levels of the hierarchy will rank the top-performing products to
­

include the optimal premium products as well as the mainstream and economy products based on their potential

(Krige).

Plans, meanwhile, are applied to an entire category. They are made up of a customised selection of templates with

each template being linked to a specific product grouping in a category (Kritzinger). Similar to Rules and Templates,

retailers can also customise the selection of templates used.

The second component is to manage the product lifecycle of those items that need to enter and exit your business

(Nyamachiri) to make space for others that will meet customer demand during the COVID-19 pandemic.

For DotActiv, the standard approach begins with product classification, followed by a decision to do a range review

or range maintenance exercise.

A range review allows you to analyse your data around each product to establish whether one is performing or

not. ‘By getting a better understanding of the why, how and what of shopper behaviour in support of the sales data,

businesses will be in a better position to answer ranging challenges with deeper insight (Pinnington, 2010).

With this information, you could look to derange a product and replace it with one that meets consumer demand.

A range maintenance exercise, meanwhile, involves refining your range until its fully optimised and performing as

well as it should (Kritzinger).

PA G E 1 7
When deciding which products to range, it’s critical to consider various aspects (Hodgson). These include:

• Product exclusivity: This refers to a brand or product that is listed exclusively at your stores. These ­products

also have low transferrable demand, which enhances your competitive advantage. When reviewing your

assortment plans, DotActiv’s Range Optimizer tool selects the ‘Exclusive Brand’ rule to ensure these products
­

are considered and favoured when recommending the final range.

• Stock on hand / Stock turn: Stock on hand is critical to consider to ensure that you sell the stock in-store

or at the distribution centre first before removing it from your range and planogram. When reviewing an

assortment plan through DotActiv, products that apply to the ‘5-week’ rule are highlighted. This means that
­

those products will need more than five weeks to sell out (Hodgson), and therefore, should not be removed

from the planogram.

• Brand profiling: You need to profile your brands in each assortment plan based on the consumer market they

serve. For example, you can profile brands based on their average retail selling price, classifying them as either

economy, mid-tier or premium. To utilise this in assortment planning, you can use the ‘Good, Better, Best’ rule

in DotActiv’s Range Optimizer tool.

• House brand impact: You should always consider your house brand and give it specialised rules when

assortment or space planning. You can prioritise your house brands using the ‘Private Label’ rule found in
­

DotActiv’s Range Optimizer tool.

­

• External market performance: As a retailer, you should have access to some form of external data. You can link

this data source to DotActiv’s Range Optimizer tool to assess product performance within the external market
(Hodgson). You can also find opportunity gaps to capitalise on.

• Transferable demand: This occurs when a product that a consumer wants is not available. Do they select a

substitute product or do they go to another store to find it? It also links to brand loyalty. A loyal customer is

unlikely to switch to a different brand when they can’t find the product they want. Considering transferable

demand will help you to determine the inclusion of certain SKUs in your assortment over others.

• Cannibilisation: This may occur when you add a new product or brand to your assortment. The new product

may absorb or cannibilise a portion of the sales from other substitute products that are in your range. It’s best

to evaluate this in terms of your house brand to avoid listing new brands that would compete with these sales

(Hodgson).

PA G E 1 8
The maintenance exercise is an ongoing exercise and during a pandemic like COVID-19, it’s well worth carrying

out.

Once decided on your range, you can update and implement the new planograms. With DotActiv, you can ­seamlessly

update planograms with ranges directly from any range maintenance exercise. Then, if you find that a ­product no

longer works, you can make a decision on how to exit these items gracefully and without wastage (Wessels).

Ordinarily, we would recommend that those items which need to be exited to make way for new products are

marked as discontinued. The products would then remain on the planogram and the system considers stock levels

across all stores and DC’s, ensuring to deplete the stock in DC’s first (Krige). Then, once inventory reaches a certain

level across all stores, the system marks it off the planogram.

PA G E 1 9
Usi n g Dat a to En h a n ce

Floor Space Planning

Retail floor planning or macro space planning describes the layout of your store at a category level. It also allows

you to determine how much space to allocate to each product category in-store (DotActiv, 2020).

What’s more, you also need to consider the principles that will contribute to the final look of your store (Gilbert,

2018b). Principles include drawing up an architectural floor plan for your store and deciding on the appropriate

amount of space for each of your categories. The first is straightforward. The second involves understanding the

role that you’ve established for each of your categories.

This ties in to a question that is often asked of us: how do you know how much space to give a category? It’s the

roles you give your categories that will help you to determine how much space you should give to each department

(Dujak et al., 2016).

For example, if you’re a Pharmacy retailer, while the world combats the COVID-19 pandemic, you might want to

give your Hygiene category a Destination role while giving your Household category less space in-store.

By the time you have mapped out each of your categories according to their roles, you’ll have a better ­understanding

of what your final floor plan will look like and how your categories will appear in-store.

As for the importance of floor plans, Hudson (2019) argues that it allows retailers to maximise their sales for
each square foot of their allocated selling space. That’s achieved by featuring merchandise in an efficient way that

encourages customers to consider making additional purchases. Hudson (2019) continues, pointing out that a
­

good floor plan is ‘the perfect balance of ultimate customer experience and maximised revenue per square foot’.

PA G E 2 0
Of course, if we consider how you can use a floor plan to meet consumer demand fluctuations during COVID-19,

you only need to consider another benefit of a well laid out store: a reduction in floor congestion during peak

shopping hours. This is an advantage of strategic floor planning regardless of before, during or after the pandemic.

However, it’s especially pertinent given the current pandemic.

With all the social distancing protocols in place (CDC,

2020), retailers need to find innovative ways to keep their

staff and customers safe. According to C&R Research

(2020), 35% of shoppers believe that more should be

done to protect ­customers from COVID-19.

One of the best ways to achieve that is by planning stores

that allow shoppers to visit and shop a store without the

fear of people crowding around them.

DotActiv has a Highlights Function that allows you to identify areas of high traffic in your store (Hodgson). This

allows retailers to place categories that receive the most sales across the store, thereby reducing any unnecessary

crowding during peak shopping hours and keeping customers safe.

Meserole & Warhurst (1938) analysed the design of a grocery store, pointing out that it met all of the ­requirements.

A few such demands included the need to provide easy access to goods and steady process around the store.

‘The later is expedited by department signs that indicate the location of various goods. Thus, a large number of

customers can be accommodated without congestion.’

­

Alongside this is the need for logical category adjacencies. We know about the unease of many shoppers during

COVID-19 - C&R Research (2020) confirms that. And yet, customers still need to shop. By positioning categories

in such a way that meets the expectations of your customers so they can easily find what they’re looking for, you’re

helping to ease any feelings of anxiousness.

Shoppers can enter your store, quickly find what they need, and be on their way, thereby reducing the possibility

of their exposure to COVID-19.

PA G E 2 1
Usi n g Dat a to En h a n ce

Shelf Space Planning

Shelf space planning is the process of determining where and how to place your products on the shelf to maximise

your sales. This is usually done through a planogram, which is generated based on your retail data.

‘Matching consumer demand with retail shelf supply is a key lever for ­increasing

efficiency in the retail industry’ (Hübner, 2011). He goes on to point out that

consumers are demanding better service levels and prices, while r­etailers alike
­

have responded.‘These developments have greatly increased pressure on margins

and the c­ omplexity of managing retail shelf space, which may be one of the most

scarce and strategically valuable operation ­resources’ (Hübner, 2011).

According to empirical studies conducted by McIntyre & Miller (1999), Hennessy (2001), Grocery ­Manufacturers

Association et al. (2005) and Campillo-Lundbeck (2005) as cited by (Hübner, 2011), ‘well-executed shelf space

management has positive profit implications in terms of an efficient consumer response’.

From a practical point of view, in managing the products on your shelf, you can group them in a way that your

customers shop your store. That means customers can find what they’re looking for quickly and easily. This is
­

especially helpful when you have customers who are anxious about entering stores (Teboe, 2020).
­

When considering the financial benefits, it allows you to, amongst others, improve overall category profitability,

reduce shelf space replenishment costs and out of stocks, and reduce your inventory holding (Nyamachiri).

PA G E 2 2
It’s also worth noting that by combining your space data (shelf capacity, facings wide, facings deep, Days of ­Supply

etc) with sales data, you can interrogate data with an added dimension. This can assist you to make better ­decisions

during the COVID-19 pandemic (Klopper) as well as during any event thereafter. For example, if a product ­increases

in sales but there is no information about how it has been merchandised on shelf during that period, this would

leave an analyst with more questions than answers.

You can also apply these benefits to your shelf space planning efforts during COVID-19. That said, your space plans

do need to reflect the current environment to provide your customers with what they want (Wessels). That’s why

data is so important to your efforts. By building planograms using your retail data, you can match the ­products on

the shelf with consumer demand head-on, thereby catering to any demand fluctuations because of the ­Coronavirus.

Also, by placing your products logically on the shelf, you’ll ensure a better shopping experience. A shopper can walk

in and easily find what they need resulting in a stress-free shopping experience.

Of course, merchandising products on shelf requires more than just placing items where they seem to fit. It ­requires

that you understand the customer. By placing products on the shelf, retailers should aim to create a ­visually ­appealing

appearance so that products are easy for customers to find (Kong & Pegler, 2018). What’s more, by thoughtfully

cross-merchandising products in a logical manner, retailers can encourage shoppers to buy ­complementary items

(Nel), all while saving time and reducing any stress associated with shopping during COVID-19.

It’s worth noting that this applies during the Coronavirus as well as in the future, once we eradicate the pandemic

(Wahba, 2020).

Of course, these planograms, and the way you manage your shelves are temporary and will need to be refreshed.
It is unlikely that you’ll use them again once the pandemic is over and consumer demand changes. For example, it’s

likely that the economic impact will still affect consumer demand once the pandemic ends (Nyamachiri).

You might find many shoppers buying conservatively. Thus, you’d need to be prepared to cater to new demand.

In this environment, the cost of not considering your data and using it to meet demand is high (MacKenzie et al.,

2013).

PA G E 2 3
Pl anog ram s a s a To ol to Re ali se Your

Strategy at Store Level

For retailers, planograms play an important role. That’s because planograms are visual merchandising tools

(­Sheehan, 2018) that describe the placement and positioning of retail products on shelves. They are ‘detailed

drawings of your store layout with special attention on product placement’.

­

Of course, building a data-driven planogram is only the first step. Retailers also need to communicate them to

stores for implementation. When implemented correctly, the Head Office of a retailer has the ability to make

assortment changes quickly and accurately.

­

This is important for a number of reasons. Firstly, product ranges change all the time (Nyamachiri) and so retailers

must remain as relevant as possible to their customers. Regardless of the season or circumstances, retailers need

to offer products their customers want. Secondly, data isn’t static. It’s forever changing. As Sheehan (2018) points

out, over time retailers can learn how product placement impacts purchase behaviour and adjust accordingly.

This means that any collected retail data changes too. Customers will purchase more of one product and less of

another.

If these two reasons were important prior to the outbreak of the Coronavirus, they are critical during the ­pandemic.

Let’s say a retailer wants to optimise the range in their Toiletries category. According to their POS data, customers

are purchasing more products than usual in this category during the COVID-19 pandemic and so the retailer would

need to ensure this category is fully optimised. That would include completing a range review where the retailer

would focus on the data for each product in the category before refreshing any built planograms.

PA G E 2 4
Once planograms are signed off and sent to store, it’s important to communicate to stores the importance of

correct implementation (Kritzinger). Feedback should be received from the store as to when implementation was
­

completed, any issues they experience - out of stocks or not enough stock to fill the shelves - and accompany this

with a drop by drop photo as proof.

Once planograms are implemented it’s important to note that frequent planogram reviews are necessary to

continually update them to match demand changes and new trends. Planograms should not be approached with a
­

“set and forget” mindset.

When implemented correctly, retailers are getting the right products in front of their customers. That leads to

a satisfying (and stressless) shopping experience. ‘By maintaining planogram compliance, retailers can position

themselves to better meet consumers’ expectations and realize higher returns on their display investment’ Kumar

et al. (2013).

PA G E 2 5
Conclusion
COVID-19 is changing consumer behaviour and affecting demand (Bhargava et al., 2020). As a retailer, you need to

respond to these changes by prioritising rapid, regular and data-driven changes to your product assortments and

merchandising displays. When COVID-19 is over retailers will again need to adapt to new trends and ­preferences,

therefore, it makes good business sense to equip yourself to adapt sooner rather than later.

But what about concrete results? With DotActiv’s help, Ultra Liquors increased the average sales and unit

movement for its entire Corlet Drive store by 39% and 31%. Fresh produce and groceries retailer, Food Lover’s
­

Market, increased sales and unit movement for its Oils category by 147% and 157%.

DotActiv has helped a leading pharmacy retail chain to increase its average sales, unit movement and gross profit

in the Bath Care category by 31%, 20% and 65% respectively. DotActiv was also central to assisting a supplier

to the Self Medication category to gain control over shelf space positioning and allocations for their products. This

lead to an average sales and unit movement increase by 23% and 12%.

DotActiv is a specialist category management software and professional services firm. We provide all-in-one
category management software which enables the optimisation of clusters, automation and optimisation of
­

data-driven product layouts, floor layouts, localised assortments, and advanced retail analytics. We work with
­

small retailers (less than 5 stores), large retailers (600+ stores) and suppliers.

PA G E 2 6
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