Nowadays, artificial intelligence is becoming an indispensable tool for retail trade. As reported by McKinsey, in companies, which use AI, revenue is increased by 3-5% and expenses are reduced by 15%. Solutions based on computer vision are particularly efficient. They computerise merchandise display, analyse customer behaviour and optimise product layout.

Despite general belief, to bring AI into retail sales, one does not require long-term projects taking months to implement. There are approaches that make it possible to launch such solutions in just one month or even several weeks. This article deals with three main scenarios for quick AI implementation in the processes of FMCG companies in order to improve performance without major investments.

How Artificial Intelligence Improves Business Processes in Practice

Artificial Intelligence in the Store

Artificial intelligence and computer vision are becoming indispensable assistants at retail outlets. They help to reduce service costs, to increase purchase amounts, and to predict customer behaviour more accurately.
At points of sale AI solutions are used to check whether all relevant products are available on the shelves and to select the best places to place the products. If any product is stolen, the computer vision will see it and notify the employee in charge. In addition, AI technologies can show the map of customer movement across the retail space and show those goods, which generate the greatest customer interest. Due to this, the products do not lie around unsold and the sales grow.

AI also collects analytical data. In this way, a company obtains the required information about the performance of the outlet, and is able to monitor the key indicators and improve processes. For instance, the company can monitor the number of SKUs, POS materials and prices, brand/SKU share on the shelves, any changes as compared to previous periods, any goods missing on the shelves, photo quality analytics, etc.

Many FMCG manufacturers and distributors in various regions have already launched pilot projects in the sphere of artificial intelligence and computer vision. For example, a European video surveillance systems integrator is offering computerised merchandise display monitoring for cafes and stores selling own ready-cooked foods, because employees were not able to serve customers and replenish goods on the shelves at the same time.

Goods Checker, a cloud-based solution, has been chosen to solve the problem. It uses computer vision to find empty spaces on the shelves. If a product is missing, the system instantly sends a message to the employees in charge via messenger.
Using computer vision solutions, retail traders and cafes have been able to identify peak demand periods and increase the products availability. Moreover, these solutions will help to increase sales due to constant monitoring of the availability of goods on the shelves and reduce the quantity of spoiled products due to accurate production planning.

Three Scenarios for AI Integration

AI Integration Options in FMCG
Currently, IT companies offer different ways to implement artificial intelligence and computer vision technologies, and FMCG companies can select the optimal scenario. When choosing the scenario, the managers must take into account the technical capabilities of their business and whether their employees are ready to work with new tools. Now, using Goods Checker as an example, we shall consider the ways to implement computer vision and the advantages of each scenario.
Mobile App for Merchandising with AI

Mobile app

Using a mobile app with computer vision is an easy way to automate merchandising. The customer starts to use a ready-made application provided by the developer. The IT company can customise the app to suit specific needs of a particular business, if necessary. For example, it can add new indicators to be monitored, improve analytic features, etc.

AI implementation simplifies monitoring of product availability on the shelves: employees just take photos of the shelves in the application and immediately see the results of the processing. The system shows whether the product display corresponds to the planogram. The ability to use the app without a permanent Internet connection is an important advantage, which is crucial in outlets where connection may be poor. The app generates reports that help managers to see performance of each employee and identify problem areas in different stores. Although this solution may be more costly as compared to other scenarios and may take several months to implement, the company finally gets its own tool customised to its specific needs.

Computer Vision Integration via API

Integration via API

Integration via API may be used by companies that already have their own corporate app. In this case, computer vision is simply embedded into an existing system. Employees still use the familiar apps, and the company saves money without the need to develop a new one.

This scenario allows flexible customisation of functions to suit the needs of a specific business – one can add new analytic indicators or change the existing ones in order to be used with the specific product groups. The implementation is quick and easy for personnel, since the main interface remains familiar to all participants in the process.

Computer Vision Integration via FTP Server

Integration via FTP server

FTP integration will be suitable for companies, which have to launch a project and test how the solution works within short timeframes. This method also may be used efficiently by businesses that do not require real-time analytics. A computer vision system is directly connected to the company’s existing server and automatically processes all photos uploaded to it. Employees may just follow the usual work process and they do not have to adapt to using new programs. This solution maybe implemented on tight schedule, which is critical for large retail chains with large volumes of accumulated information and a unified reporting system.

Artificial Intelligence is a Crucial Factor for Success in Modern Retail Trade

Artificial Intelligence in Retail – The Key to Success

The AI market is rapidly developing, creating significant advantages for FMCG manufacturers and distributors. State-of-the-art technologies allow automation of the key processes: from product placement monitoring to customer behaviour analysis. Due to various integration scenarios, even medium-sized businesses are able to implement such solutions with minimal changes in day-to-day operations.

A successful example of the video surveillance integrator clearly shows how computer vision is already helping businesses. Computerised monitoring of products availability on the shelves ensures expeditious response to demand fluctuations and provides management with key information required to make strategic decisions. Companies that already use these technologies have a significant advantage on the market, so you better be quick with the implementation of digital solutions.

Manual merchandising has hidden costs that can significantly impact a retailer’s profitability, such as high labor expenses, human errors, and missed sales opportunities. In this article, we will identify these hidden costs of manual merchandising and how to fix them, exploring practical solutions to address them. By understanding the hidden costs of manual merchandising and how to fix them, you can enhance your retail operations and boost efficiency.

  • Manual merchandising incurs hidden costs that erode profitability through mistakes, poor inventory management, and outdated practices.
  • High labor costs and human errors from manual processes lead to operational inefficiencies and missed sales opportunities.
  • Leveraging AI and technology can automate merchandising, enhance inventory management, and create personalized shopping experiences to drive customer satisfaction.

The True Cost of Manual Merchandising

True Manual Merchandising Cost

Manual merchandising can lead to significant profit loss due to human errors and outdated practices. These hidden costs are not always immediately apparent but can have a substantial impact on the overall profitability of a retail business. Ineffective POS systems add to the problem by eroding profits, hindering growth, and leading to costly mistakes. Many retailers continue to rely on manual inventory management, unaware of the financial drain it causes.

In addition to the direct financial impact, there are hidden risks in manual merchandising strategies that can further exacerbate the problem. Poor product placement, outdated displays, and inefficient use of space are common issues that result from manual processes. These factors not only affect sales but also diminish the customer experience, leading to dissatisfied customers and lost sales opportunities.

The true cost of manual merchandising extends beyond immediate financial losses. Poor inventory management, resulting from manual processes and data entry errors, can lead to a host of other issues. Retail stores often struggle with maintaining accurate stock levels and managing inventory effectively, which can affect sales and the overall profitability of the business.

Recognizing and addressing these hidden costs and the hidden cost can significantly improve retail operations and increase average order value.

Labor Costs and Human Errors

Labor Human Errors

High labor costs associated with manual merchandising can quickly accumulate, diminishing overall profitability. Manual data entry errors disrupt inventory accuracy, leading to costly operational mistakes. Poorly trained staff can contribute to significant inefficiencies in inventory management, causing delays and mistakes. These accumulated costs ultimately erode the profitability of retail operations.

Moreover, disorganized inventory systems and communication breakdowns among departments can result in misplaced or mispicked items, further escalating human errors. The combination of high labor costs and human errors reduces operational efficiency and affects sales.

Addressing these hidden costs and refining inventory management processes can save time, reduce costs, and boost operational efficiency.

Missed Sales Opportunities

Missed Sales Opportunities

Manual merchandising processes often lack the agility required to adapt to fast market changes, leading to lost sales. Manual inventory tracking methods are often slow, resulting in delayed restocking and potential lost sales. Inadequate inventory visibility can hinder timely decision-making, preventing retailers from capitalizing on market trends. The reliance on outdated merchandising strategies can cause retailers to miss key consumer trends, affecting their sales.

Additionally, poor inventory management can lead to underperformance and unsatisfied customers. Misalignment in promotions across various channels can create confusion and diminish customer trust in the brand.

The impact of missed retail sales opportunities is not just immediate; it can have long-term effects on overall profitability and customer loyalty. Retailers must stay ahead by adopting efficient inventory management practices to avoid these hidden costs and missed opportunities.

Excess Inventory and Stockouts

Excess Stockouts Risk

Inefficient inventory processes can result in overstock situations, leading to sales that fail to meet consumer demand. A significant 43% of retailers struggle with overstocking, which can lead to financial losses. Overstocking can hinder cash flow and increase carrying costs, while stockouts can result in lost sales opportunities. Seasonal stockouts can occur when inventory levels are not managed effectively, directly impacting sales during high-demand periods.

Stockouts can result in lost revenue as customers may turn to competitors if their desired products are unavailable.

AI-driven tools enhance merchandising by providing insights that enable more effective inventory management. AI can analyze historical sales and external factors to forecast product demand more accurately than traditional methods. Utilizing AI can significantly reduce stock discrepancies, leading to fewer errors and improved inventory accuracy. Adopting AI technology enables retailers to manage inventory levels more effectively, minimizing stockouts and overstock situations, thereby improving overall profitability.

Inconsistent Customer Experiences

Inconsistent Customer Experience

Outdated displays and product placement can detrimentally impact customer satisfaction and loyalty. Inadequate visibility into customer behavior can lead to outdated assumptions that negatively affect merchandising outcomes. Overlooking critical customer insights can hurt sales and brand loyalty. Misaligned promotions lead to confusion, hesitation, and questioning of the deal’s authenticity among customers.

Artificial intelligence is transforming retail by enhancing customer experiences and optimizing operational efficiencies. Automated processes from POS integration can significantly reduce customer support costs by providing better insights into customer behavior. Integrating customer relationship management systems can further enhance merchandising efficiency by managing customer interactions effectively.

Addressing these inconsistencies helps create a seamless shopping experience, fostering customer loyalty and satisfaction.

Operational Inefficiencies

Operational Retail Inefficiencies

Labor-intensive merchandising processes increase operational costs and can negatively impact customer satisfaction. Poorly timed promotions due to inventory mismanagement can lead to decreased sales and wasted marketing efforts. Manual inventory tracking can lead to inaccuracies, resulting in significant discrepancies and impacting profits. Inventory shrinkage due to theft, damage, or errors can have a substantial financial impact on retailers.

Addressing these operational inefficiencies can significantly enhance operational efficiency, save time, and optimize retail operations.

Leveraging Technology for Better Merchandising

Technology Driven Merchandising

Leveraging technology solutions like AI and machine learning can transform merchandising strategies. AI can provide advanced shopper insights that facilitate better decision-making in merchandising. Machine learning algorithms can optimize inventory management and enhance customer personalization. Adopting AI-driven solutions can lead to improved operational efficiency and increased customer satisfaction.

In the following subsections, we will explore how real-time tracking, AI-powered inventory management, and personalized shopping experiences can revolutionize retail operations.

Real-Time Tracking and Data-Driven Insights

Real-time data tracking allows retailers to swiftly adapt their strategies based on current sales and customer behavior. Merchandising analytics software provides insights into customer behavior to optimize product offerings and sales strategies. Using AI algorithms, retailers can create tailored product recommendations based on individual customer data, improving conversion rates. AI-driven personalization enables the creation of tailored shopping journeys, enhancing customer engagement and satisfaction.

Machine learning techniques can analyze customer data to tailor shopping experiences, resulting in increased customer retention. Utilizing machine learning can tailor shopping experiences to individual customer preferences, increasing conversion rates and fostering customer loyalty.

Leveraging data-driven insights allows retailers to adopt a holistic approach to merchandising, enhancing customer experiences and boosting sales.

AI-Powered Inventory Management

Utilizing automated inventory management systems significantly reduces human errors and helps maintain accurate stock levels. Product information management software aids in maintaining accurate and consistent product data across different sales channels. AI in inventory management streamlines operations by automating various tasks and improving accuracy.

AI-powered tools assist in monitoring and adjusting stock levels in real-time, thereby enhancing inventory management. By integrating artificial intelligence and machine learning, retailers can achieve seamless inventory management and enhance operational efficiency.

Personalized Shopping Experiences

AI and machine learning technologies can analyze consumer behavior and preferences in real-time, enabling retailers to optimize product offerings and streamline the shopping process. Retailers can utilize AI to deliver personalized recommendations based on past purchases and browsing behaviors, creating a unique shopping journey for each customer.

Machine learning algorithms can segment customers into personalized groups, tailoring marketing efforts and product displays to better meet the needs of each segment. Providing personalized shopping experiences can significantly increase conversion rates, as customers are more likely to purchase items that match their preferences.

Tailored shopping experiences enhance customer satisfaction and can lead to higher retention rates, thereby fostering brand loyalty in the long term. Incorporating personalized interactions not only strengthens customer relationships but also drives repeat business and increases the lifetime value of customers.

Integrating POS Systems with Ecommerce Platforms

POS Ecommerce Integration

Integrating ecommerce with POS systems is essential for creating a seamless shopping experience that enhances customer satisfaction. Utilizing APIs for integration is a straightforward method to synchronize data between POS and ecommerce systems. This integration allows businesses to conduct cross-channel promotions, enhancing customer engagement.

Ensuring smooth sales data flow between different sales channels allows online retailers to provide a cohesive shopping experience that meets modern shoppers expect expectations.

Case Studies: Merchandising Automation

Merchandising Automation Cases

A leading trade marketing agency in eastern Europe needed to automate the checking of product displays on store shelves. They implemented a cloud-based AI solution Goods Checker that allows users to create planograms, verify displays, and generate analytics with 95% recognition accuracy.

During the pilot project across 6 cities and 45 retail chains, the system achieved remarkable results after just two weeks. The time merchandisers spent on reporting decreased by 70%, allowing them to either take on new responsibilities or visit additional retail outlets. The solution enabled the agency to conduct audits 80% faster, provide reliable shelf analytics to clients, and process all photos efficiently.

Steps to Implementing Automated Merchandising Solutions

Automated Merchandising Steps

An inefficient warehouse layout can slow down operations and lead to higher labor costs due to time wasted. Artificial intelligence can significantly enhance merchandising strategies by providing automated solutions that optimize inventory and improve customer interactions. Technology such as AI and predictive analytics can significantly enhance merchandising strategies by providing deeper insights.

Visual merchandising software allows retailers to design and execute retail store layouts efficiently, enhancing customer experience. By following these steps, retailers can implement automated merchandising solutions that improve efficiency and customer satisfaction.

Summary

In summary, manual merchandising carries significant hidden costs that can erode profitability and hinder growth. From labor costs and human errors to missed sales opportunities and excess inventory, the challenges are numerous. However, by leveraging technology such as AI and machine learning, retailers can improve inventory management, enhance customer experiences, and optimize operations. Adopting automated merchandising solutions can lead to better decision-making, increased efficiency, and higher sales.

To stay competitive in today’s retail landscape, it is essential for retailers to embrace technology and move away from manual processes. By doing so, they can provide a seamless shopping experience that meets the expectations of customers and drives long-term success. Take the first step towards transforming your retail business by implementing automated merchandising solutions today.

Frequently Asked Questions

What are the hidden costs of manual merchandising?

Manual merchandising can lead to significant profit loss from human errors, outdated practices, and poor product placement, ultimately resulting in inefficiencies and wasted space. Addressing these hidden costs is crucial for maximizing profitability.

How do labor costs and human errors affect retail operations?

Labor costs and human errors significantly impact retail operations by reducing profitability, disrupting inventory accuracy, and leading to costly mistakes that hinder overall efficiency and sales.

What are the benefits of leveraging AI for inventory management?

Utilizing AI in inventory management significantly enhances operational efficiency by automating tasks and minimizing human errors, while also ensuring accurate stock levels and providing real-time insights. This leads to reduced discrepancies and improved decision-making.

How can personalized shopping experiences improve customer satisfaction?

Personalized shopping experiences enhance customer satisfaction by tailoring the journey to individual preferences, which increases conversion rates and fosters brand loyalty. This personalized approach creates a more engaging and fulfilling shopping environment for customers.

Why is integrating POS systems with ecommerce platforms important?

Integrating POS systems with ecommerce platforms is crucial for ensuring a seamless shopping experience and synchronizing data across channels, which enhances customer engagement and satisfaction. This integration allows for efficient operations and unified marketing strategies.

Merchandising in retail involves the organization, display, and promotion of products to boost sales and improve shopping experiences. It’s about how products are presented to attract customers and encourage purchases. This article will dive into the merchandising definition and explore essential strategies like store layout, product displays, and pricing. You’ll also discover the benefits of effective merchandising and how it can transform your retail success.
  • Effective retail merchandising combines store layout, product displays, and pricing strategies to optimize customer engagement and drive sales.
  • Utilizing technology, including automation tools and data analytics, enhances merchandising efficiency, improves inventory management, and tailors marketing efforts to consumer behavior.
  • Small businesses can compete effectively by implementing budget-friendly merchandising tactics and building a strong brand identity that resonates with customers. 

Understanding Merchandising

Retail Merchandising Basics

Retail merchandising encompasses the strategies that retailers employ to effectively market and sell products. It involves organizing merchandise in a way that is appealing to customers, encouraging them to make purchases. This includes retail merchandisers determining quantities and pricing, designing displays, implementing marketing strategies, and offering discounts.

At its core, merchandising refers to the promotion and sale of products. It is a crucial element in influencing consumer buying decisions and can significantly impact sales. Positive customer interactions and a well-enhanced retail environment can drive sales and boost profits.

Mastering merchandising maximizes space, reduces customer confusion, and aids quicker product selection, leading to higher sales and fewer retail challenges. Effective merchandising appeals to customers, creates urgency, and encourages purchases, sustaining retail success.

Key Elements of Effective Merchandising

Merchandising Key Elements

Effective merchandising strategies involve a cohesive approach to store design, product displays, and pricing strategies. These elements work together to create a more engaging customer experience and maximize sales.

Each of these crucial elements merits a closer look.

Store Layout

A strategic store layout significantly influences customer purchasing behavior by improving the flow of movement within the retail setting.

Small retailers can enhance the customer experience by optimizing their store layout to facilitate easier navigation, which ultimately encourages customers to explore more and make purchases.

Product Displays

Displays play a crucial role in retail merchandising by attracting customer interest and conveying product stories.

To create attractive product displays, retailers should:

  • Vary item heights.
  • Use props.
  • Add lighting.
  • Keep the displays simple yet engaging.

Special, new, or featured items should always be displayed at the front of the store for maximum visibility. Additionally, using complementary items together in in store displays helps customers make better purchasing decisions and enhances the overall shopping experience.

Managing displays to ensure they are accessible from all angles and unobstructed can prevent missed sales and improve customer satisfaction.

Pricing Strategies

Pricing strategies play a pivotal role in effective merchandising. Competitive pricing not only attracts customers but also ensures that products are sold at a profit. Dynamic pricing strategies can adapt to market changes, appealing to different consumer segments and maximizing sales.

One effective approach is the concept of three price tiers, which strategically guides customer choices. Offering products at various price points caters to a broader audience and encourages purchases across different budget levels.

These pricing strategies, combined with effective merchandising tactics, can significantly boost retail sales and profitability.

The Benefits of Retail Merchandising

Retail Merchandising Benefits

The benefits of effective retail merchandising are manifold, ranging from increased customer traffic to higher sales and enhanced customer loyalty.

These advantages warrant a detailed exploration.

Increased Customer Traffic

Effective merchandising encourages foot traffic through attractive store and window displays. Variety in displays and the expectation of new items significantly influence customer visits. Factors such as cleanliness, organization, accessibility, and promotional offers affect a customer’s decision to return to a store.

Proper lighting enhances product visibility, making it easier for customers to see products and thus impacts sales. Retailers should balance showcasing shopping experiences with the urgency to drive product sales. A well-designed folding sign at the store’s entrance can effectively boost foot traffic.

Higher Sales and Inventory Turnover

Effective merchandising can stimulate immediate purchasing by engaging customers visually. Increased exposure to products through effective merchandising leads to higher sales. Promotional pricing and attractive displays help products sell faster.

Strategic merchandising improves inventory turnover by making products easy to find. Suggesting useful cross-sells or accessories at a discount can improve customer purchases. Signage can influence customer behavior by creating emotional connections and addressing financial motivations.

Effective merchandising helps retailers grow their brand and remain competitive.

Enhanced Customer Loyalty

Well-executed merchandising can leave lasting impressions, fostering brand loyalty among customers. A well-executed merchandising strategy can increase customer trust and reliability in the brand through consistent experiences. Engaging in-store experiences differentiate physical shopping from online purchases.

Incorporating comfort elements in merchandising, such as seating areas, encourages customers to spend more time shopping and returning. Retailers utilize data analytics to enhance customer experience by personalizing marketing efforts based on customer behavior. Using customer feedback in merchandising strategies strengthens brand identity and improves customer perception.

The Role of Technology in Modern Merchandising

Retail Innovation Tools

Technology is transforming merchandising into a more efficient and data-driven process. Automation tools and data analytics are revolutionizing retail merchandising.

Automation Tools

Merchandising software can enhance in-store merchandising, compliance with planograms, task distribution, communication, visual verification, reporting, and transparency. Next-gen product merchandising planograms improve compliance and speed execution while making execution steps easy-to-follow. Automation tools in merchandising help streamline various processes, improving overall efficiency.

The utilization of automation tools in merchandising like Goods Checker saves time and improves accuracy, allowing retailers to focus on strategic initiatives. This technological advancement enables retailers to maintain well-stocked shelves and attractive store displays, ultimately driving sales and customer satisfaction.

Data Analytics

Next-gen automation tools utilize IoT and AI to support smarter inventory management and customer interactions. Critical factors for shelf optimization include experimentation, innovation, brand adherence, aesthetics, and extensive data collection. Types of data that should be captured for in-store shelf optimization are images, qualitative information, customized surveys, and real-time data.

Retail intelligence enables businesses to quickly modify their operations. This responsiveness is crucial in meeting evolving consumer needs and preferences. Data analytics offers retailers deep insights into customer behavior, enabling optimized merchandising strategies that better meet customer needs.

Visual Merchandising Techniques

Visual Merchandising Tips

Visual merchandising aims to create appealing atmospheres that enhance customer satisfaction.

Specific marketing techniques like seasonal displays and the use of signage and lighting deserve a closer look.

Seasonal Displays

Major holidays provide opportunities for stores to refresh their displays and promotions. Items typically promoted during Easter include clothing for warmer weather and tools for outdoor activities. Utilizing visual merchandising techniques can help retailers manage low inventory perceptions, improving customer impressions.

Spring items like clothing and outdoor tools are commonly featured during the Easter season. Aligning displays with major holidays and seasons creates urgency and excitement, drawing customers into the store and encouraging purchases.

Signage and Lighting

Signage plays a crucial role in helping customers navigate a store efficiently. Well-designed signage guides customers and enhances the overall merchandising impact. Attractive colors and fonts on signs can significantly capture customer attention.

Proper lighting is vital in ensuring products are easily visible to customers. Bright lighting creates an inviting atmosphere, making shopping environments more enjoyable. Signage and lighting must work cohesively to promote product visibility and enhance customer navigation.

Merchandising Strategies for Small Businesses

Budget Retail Strategies

Small businesses often struggle with displaying and pricing merchandise accurately, making it challenging to attract and retain customers. Implementing effective merchandising strategies can help small businesses overcome these challenges by optimizing product placement and visibility.

Budget-friendly tactics and strategies for building brand identity are worth exploring.

Budget-Friendly Tactics

Maintaining a clean and well-organized store environment is essential for attracting and retaining customers. Implementing visual merchandising strategies strategies can help small retailers compete effectively without significant financial investment. These tactics ensure that small businesses can create engaging store displays and attract customers despite limited budgets.

Simple tactics include color-coordinated displays, creative use of existing materials, strategic product placement at eye level, clear signage, and better lighting. These small changes can greatly improve how a store looks and feels to customers without spending much money.

Focusing on cleanliness, organization, and strategic marketing enhances merchandising efforts and drives sales for small businesses. These budget-friendly tactics enable small retailers to create an inviting shopping experience that encourages customers to purchase products and return for future visits.

Building Brand Identity

Brand identity is crucial in differentiating a company and its products in the market. When considering a company’s products, customers often reflect on the brand’s core values. Consistent merchandising should have a core color palette or theme. This helps in identifying the brand effectively.

Focusing on brand identity helps small businesses create a strong connection with their customers. Consistent merchandising efforts are essential in creating a strong brand identity that resonates with customers. This approach helps small businesses attract and retain loyal customers, ultimately driving sales and growth.

Future Trends in Retail Merchandising

Future of Merchandising

Retailers are increasingly merging online and in-store experiences to create cohesive shopping journeys. Younger generations, especially Millennials and Gen Z, are driving demand for brands that align with their social values. The rise of social commerce is reshaping how consumers engage with brands, influencing purchasing decisions through social media.

As technology continues to evolve, retailers must stay ahead of these trends to remain competitive. Embracing these future trends allows retailers to create more engaging and personalized shopping experiences, attracting and retaining customers.

Summary

Retail merchandising is a multifaceted process that involves strategic planning and execution. From understanding the basics to implementing advanced strategies, effective merchandising can transform a retail store into a thriving business. Key elements such as store layout, product displays, and pricing strategies are crucial for creating an engaging customer experience and maximizing sales.

By leveraging technology and adopting innovative visual merchandising techniques, retailers can stay competitive in an ever-evolving market. Small businesses can also benefit from budget-friendly tactics and strong brand identity to attract and retain customers. As future trends continue to shape the industry, staying informed and adaptable will be key to retail success.

Frequently Asked Questions

What is retail merchandising?

Retail merchandising is the strategic organization and presentation of products to attract customers and drive sales, incorporating elements such as pricing, display design, and marketing.

How does store layout impact sales?

A well-designed store layout significantly boosts sales by facilitating customer flow and improving navigation, ultimately enhancing the shopping experience. This makes it easier for customers to find products, leading to increased purchases.

What are some effective product display techniques?

To engage customers and boost sales, employ varied item heights, strategic lighting, and simple displays. Additionally, placing special or new items at the forefront and grouping complementary products can enhance the shopping experience.

How can technology enhance retail merchandising?

Technology enhances retail merchandising by leveraging automation and data analytics to streamline processes and gain insights into customer behavior, ultimately leading to more effective and accurate merchandising strategies.

What are some budget-friendly merchandising tactics for small businesses?

Maintaining a clean and organized store is essential for attracting customers, along with utilizing local SEO strategies and cost-effective visual merchandising techniques. These budget-friendly tactics can significantly enhance your business’s visibility and appeal.

Merchandisers are responsible for ensuring order on merchandise shelves. Retailers and manufacturers hire specialists who will audit stores and supermarkets daily. Merchandisers do not only check the display of SKU, their responsibilities include control of the filling of the shelves and monitoring the balances in store. The results of their work are documented by a report with photos of racks and shelves.

The issue of optimizing merchandising, increasing the percentage of planogram compliance to increase sales shall be elaborated by Mikhail Savitskiy, the Tech Lead of the Goods Checker IT retail solution in IBA Group.

Most retailers have already considered optimisation of the merchandising process and prefer not to audit retail outlets manually. Manual audit methods do not cover all stages of the merchandising process and, therefore, require more time. Moreover, errors are possible, and data obtained may differ from the facts. In addition, the data collected must be manually entered into the corporate system. Manual labour always involves the human factor: even the most diligent and experienced employees can make mistakes. The situation is similar with semi-automation, where IT technologies are used to control some of the processes, but the actions of the machine must still be checked by a human.

State-of-the-art IT solutions can cover the needs of business processes and mitigate the human factor. The entire mechanism of operation becomes transparent for senior executives, the department managers, and merchandisers.

Merchandising automation allows data quality improvement:

  • no data duplication;
  • consistent form for entering information;
  • the entered data are protected from loss;
  • the whole process is confidential.

IT solutions will not only help collect and systematize data; they will also provide detailed analytics required by the senior executives with the breakdown by the relevant parameters.

Goods Checker helps to automate merchandising

Goods Checker is an international merchandising automation system. Computer vision and neural networks are used for commodity analysis and to control filling of the shelve. This IT solution covers all stages of merchandising.

Planograms For Effective Merchandising

Creating goods display rules

Marketing research shows that 40-70% of the purchasing decisions are spontaneous, only 70-80% of buyers finally decide on purchasing goods of a specific brand directly in a retail outlet store. The goods must be placed on a merchandise shelf in such a way that it is clearly visible, attracts the customer’s attention, and finally reaches the cashier desk.

Planograms are the main aid in the correct goods display. When working with planograms, managers use electronic spreadsheets: MS Excel or Google Sheets. An easy interface and availability on every PC are clear advantages.

But there are also several disadvantages associated with building planograms using these tools:

  • complex planogram building;
  • one has to have constant access to a computer to update the planograms;
  • lack of visualisation, as it is difficult to insert an image into the relevant cell.

You can compare planograms created using MS Excel and Goods Checker. The latter has better visualisation: it provides photos, names of the goods, and a clear location on the shelves.

Drag And Drop Planogram Solutions

The convenience of Goods Checker is based on drag-and-drop functionality. In such a way, managers can build planograms and save them in MS Excel or PDF format. 

Conclusion: it takes less time to create, edit, and update a planogram.

It requires only a couple of minutes for a competent manager to build a planogram including 100 goods items in Goods Checker.

Streamlining Field Work With Goodschecker

Field work

The efficiency of merchandiser’s work directly affects the sales of a retail outlet. Specialists obtain data in a live situation, which are subsequently used to plan sales and to evaluate actions of competitors.

The responsible representatives of the company and merchandisers mainly use messengers to communicate. Telegram, Viber, and WhatsApp allows setting tasks and supervising over their execution.

But one should bear in mind that messengers have several disadvantages:

  • all data appear only in the messenger, they have to be entered separately into the corporate system;
  • chats with different employees do not provide an overall picture for all stores in the retail network;
  • there may be difficulties arise in organising the work of merchandisers and controlling their movements;
  • confidentiality may be threatened;
  • all data may be lost in case of a failure.

The developers of Goods Checker provided their solution aimed at merchandising automation. They have been focusing on simplifying processes and the ability to control the work of specialists at different stages. To solve the said problems and to automate merchandising Goods Checker presented a web version for managers and a mobile app for merchandisers.

A full-fledged app makes it possible to set tasks and to adjust the merchandiser’s route. Using it, employees can leave remarks and upload photos in the course of work.

Real Time Shelf Analysis With Goodschecker

A mobile Check&Go is available to merchandisers. It is required to perform managers’ tasks, and to conveniently check the display of goods in real time.

The goods display analysis is AI-aided. The so-called “computer vision” in Goods Checker is able to process a photo, identify the products in the image, compare them with a planogram, reveal any deficiencies, such as in the packaging volume, and give notice on the absence of a particular commodity item on the shelf.

If there are no relevant products in stock or there is any other reason for the deviation from the planogram, a relevant indication is made with a comment.

Accurate, Transparent, And Time Saving With Goodschecker

Check&Go makes all required documents, planograms, and forms easily available. No time is wasted for searching for documents and printing new forms. One cannot lose them and they are protected from errors. The main advantage is that company’s managers can always be sure that accurate and timely information is entered in the system.

Conclusion. Following merchandising optimisation, all employee operations become transparent. Only accurate information is obtained via Goods Checker. It is easier for managers to check and close tasks completed by merchandisers, and supervisors can view photos from the outlets at any time.

The main advantage is that the compliance of goods display with planograms is increased, and the sales of the relevant products grow accordingly. The time the merchandiser spends at an outlet is reduced, so that employees are able to dedicate themselves to other tasks.

Customers share with their success: “Goods Checker has helped to increase planogram compliance from 60% to 90%”.

Analyzing Merchandising Effectiveness Through Retail Photos

Analysis and reporting

Preparing analyses is an important process in the operation of an outlet. During a working day, the manager in charge can receive several hundred photos from retail outlets, which are used to assess the merchandiser’s work and to prepare reports. The photos make it possible for the marketing experts to visually assess how the goods display works, what should be changed in it, how competitors work with similar products – these actions for the allow development of a further strategy.

Photos are often reviewed and analysed manually. Such approach is possible when photos are few.

Large retail networks have much greater volumes, and employees are confronted with the following issues:

  • managers gradually become less perceptive and evaluation of photos becomes subjective;
  • the task is time-consuming;
  • it is difficult to prepare final analytics on the performance of a specific employee, group of goods or outlet.

After the decision to automate merchandising has been made, AI comes into play. Goods Checker analyses photos quickly and collects reports based on information from merchandisers.

The form of the final report is easily customisable. It can be presented in several versions:

  • with regard to employees – it will show the most efficient employees, the number of stores visited by a merchandiser and the results of the merchandiser’s work;
  • with the breakdown by outlets – it will display generalised information on all retail outlets where your branded products are located;
  • with the breakdown by product groups – the platform allows you to upload separate analytics for various products;
  • in dynamics in relation to the previous period – it will show progress or retrogression.

All reports are available to users of the web app.

Goods Checker allows you to obtain the following data:

  • the share of your products on shelves at a given outlet;
  • the share of competitor’s products on the shelves;
  • reasons for non-compliance with the planogram and the products being not in their place;
  • data to calculate employees’ bonuses;
  • analysis of photos, showing the level of compliance with the specified SKU arrangement on the merchandise shelf.
Training AI For Product Recognition

Merchandising automation makes it possible to train the system to recognize a new product even before it is placed on the shelves: to do this, you have to load about one hundred photos of the relevant SKU in Goods Checker.

Conclusion. Top managers always see the real situation on the shelves, they can precisely calculate the KPI for each employee and assess the strategy efficiency.

How business automates display control: implementation examples

Goods Checker for automation of goods control in food outlets

AVS Services client offers video surveillance services for retailers and catering companies. Their customers required constant monitoring of the availability of goods on display, but the employees were busy servicing the guests.

Goods Checker was set to identify empty spots on the shelves without preliminary training based on specific goods. The system is integrated with a messenger bot that automatically notifies the staff about the absence of goods of a certain category.

The introduction of the Goods Checker made it possible to establish constant control of filling of the shelves; at the same time, the employees received immediate reminders on the need to supply the goods. It reduced the number of spoiled products and made it possible to optimize procurement planning. 

Premium goods display control

A large distributor of food products with a staff of 2,700 employees faced the problem of inconsistency between the planograms and the actual display of products in retail outlets. The existing application was unable to recognize the goods and check the planograms.

Premium chocolates were used for the pilot project. For 3 months, the developers trained the computer vision models, while another 1.5 months were spent for field testing of the system.

The introduction of Goods Checker made it possible to boost the compliance with the planograms from 60% to 90%, significantly reduce the audit time thanks to fast and accurate processing of photographs (not exceeding 30 seconds per photograph). The managers obtained a transparent display monitoring system, which made it possible to improve the interaction with sales networks regarding representation of products.

A case with a juice producer

The products of the brand are sold in 10,000 stores. The stores are visited by 150 merchandisers, who adjust the display, assess the quantities of goods remaining in stock, take photos of the shelves and send them to the manager.

On a monthly basis, a manager receives and processes about 80,000 from various retail outlets. It is physically impossible, so a decision was made to automate merchandising.

After Goods Checker has been introduced, the number of analysed photos has increased from 5% to 100%. In addition, Goods Checker helps to evaluate the merchandisers’ performance and identify and deficiencies in the placement of goods on the shelves.

Automation penetrates modern business

Modern companies need innovation to simplify work processes. Merchandising is a significant link in the sales chain; resolving bottlenecks in merchandising will make it possible to boost sales by 5-7%.

Goods display control automation solves several tasks at once: it reduces the effect of the human factor, accelerates collection and analysis of data, improves the accuracy of reporting and ensures transparency of all processes.  As a result, companies not only optimize staff costs, but also get a tool to improve the efficiency of sales thanks to timely control of goods on the shelves.

Introduction of modern technologies to merchandising is no longer a matter of choice; it is a necessity to remain competitive in the market. The first companies to automate these processes gain a significant advantage over others regarding the speed of decision-making and the quality of cooperation with sales networks. 

Consumer market across the world is experiencing transformation. Traditional approaches to user segmentation and sales organization are no longer as effective as they used to be. According to research data, companies lose over 4 billion dollars per year due to ineffective management of retail sales.
FMCG companies must quickly adapt to the new realities. The changes concern every aspect of the business, from our understanding of the customer to organization of work in retail outlet. Success in today’s market depends not only on the deep understanding of new consumer trends, but also on implementation of modern tech solutions.

Who are our new consumers?

Who are our new consumers

Young people in the developing countries are turning into the main propelling force of the market. By 2030, 75% of the consumers in these marked will be aged 18-34. These buyers demonstrate a high level of readiness to purchase premium products. For example, young consumers in Asian and Middle Eastern countries spent up to three times more on premium products than their peers in developed countries.

Elderly consumers are also keeping up. Contrary to the popular belief, they actively purchase household items and spend money on traveling. In Western countries, 30% of elderly consumers have a high income exceeding $100,000 per year. This group more frequently purchases goods for house or garden.

The middle class, despite instability, continues to spend money on the goods beyond essential. Studies demonstrate that consumers with average income in Europe intend to increase their spending on leisure and travels.

All of this indicates that FMCG companies are forced to review traditional ideas about the purchasing power of various segments. This implies the necessity of a differentiated approach to different markets. In Europe, for example, it is the segment of household items adapted to the demands of wealthy elderly customers that requires attention. In the middle price segment, an effective strategy may involve adding premium characteristics while maintaining affordable prices: using environmentally friendly packaging for household chemicals, adding natural ingredients to homecare products, creation of unique flavors for snacks or beverages, or development of innovative packaging formats for traditional products. 

What are the changes in the consumer behavior?

What are the changes in the consumer behavior

Brand loyalty is decreasing in all age groups. In developed countries, over a third of consumers have tried new brands, while 40% have changed stores in search of better prices and discounts. Inflation and economic uncertainty further amplify this trend.

Environmental friendliness of products, while remaining an important factor, is giving way to price availability. In Europe, the number of young consumers willing to pay more for ecological products has decreased by several percentage points from the beginning of 2024.

Wellness industry demonstrates stable growth. Global market of health and well-being goods is estimated as $1.8 trillion with an annual growth of 5-10%. In developing countries, consumers spent two to three times more for wellness products that the residents of developed countries.

Changes in the consumer behavior require FMCG companies to quickly adapt their product strategies. Reduced brand loyalty opens the possibilities for presenting new products and seizing a share of the market. Growing demand for wellness products allows developing new categories with high margins. At the same time, it is important to find balance between environmental friendliness and price affordability of products. 

Where to find consumers?

Where to find consumers

In developed countries, the focus of sales is shifting towards the cities of the second tier, where the cost of life is lower, and the possibilities for remote work are wider. The situation in developing countries, where the growth of population continues in large cities, is completely opposite.

The success of FMCG brands depends more and more on the precise understanding of local specifics and adapting the sales channels to new geography of demand. Expansion to small and medium towns requires changes in the packaging and promotional activities in accordance with the distinctive features of local retail. The rate of distribution is becoming the key factor in the cities and towns of developing countries.

Social commerce, which involves sales through social platforms, is playing a more and more prominent part. Zoomers and millenials are the most active supporters of this growth: they use social media three times more often than other generations.

Despite active development of social commerce, physical stores remain a critical sales channel; that said, they require special attention to organization and efficiency of all processes. When goods are missing from the shelves, planograms are not followed, or price tags are incorrect, it creates a negative experience for the buyers. In the age of social media and the internet, it becomes even more dangerous: many unhappy customers share their experience online, which results in FMCG companies losing their reputation and buyers. 

How to attract offline buyers? Answer: process automation

How to attract offline buyers

Traditional control of the display of goods through merchandisers and trade representatives has some serious limitations. Manual data collection requires a lot of time, is prone to mistakes, and cannot present a complete picture. As a result, the manufacturers have no idea how their products are actually represented in stores, whether their marketing activities and promotional materials work, and whether the agreements with retailers about the share of the shelves are complied with. All these factors have a direct effect on sales: according to our experience, correct display can boost their rate by 6-8%.

A solution to these problems is presented by merchandising automation. For example, computer vision-based service Goods Checker allows the manufacturers to control the situation on the shelf. A merchandiser simply takes a photo of the shelf, while the system automatically analyzes the correspondence between the display and the planogram, the availability of goods, the correctness of price tags and promotional materials.

As a result, the manufacturer receives accurate data on representation of their goods in each store. This allows for a quick response to the problems, optimization of the work of the field personnel, and a substantial dialogue with retailers. After introduction of Goods Checker, merchandisers draw up reports 70% faster, while the complete audit time is reduced in half. At the same time, the managers always have up-to-date information for decision-making, including violations of the display standards, absence of goods on shelves, and efficiency of promotional activities.

The implementation of merchandising automation systems becomes a necessary condition for successful operation of FMCG companies. It allows to optimize spending for field personnel, improve the representation of products in stores and acquire relevant data for decision-making. 

Complexity of the consumer market

Complexity of the consumer market

The consumer market is becoming more and more complex and fragmented. Technology solutions allow companies to adapt to these changes. Automation of merchandising through computer vision systems makes it possible to boost the efficiency of sales and quickly respond to changes in the consumer behavior.

The companies that implement modern technological solutions faster gain a significant competitive advantage. They understand their customer better, manage the range of products with greater efficiency, and ensure a high quality of service in all sales channels. 

Beauty retail merchandising plays an integral role in how customers view brands and whether they will decide to purchase a brand product. In this case, every centimeter of shelf space should be used to achieve the desired effect, because improper display of goods on the shelves can lead to a significant decrease in sales.

This article examines the difficulties that may arise when displaying beauty products in shops, and the methods for eliminating problems that beauty brand owners resort to.

Merchandising Challenges Faced by Beauty Companies

Merchandising Challenges Faced by Beauty Companies

Display maintenance is one of the most difficult tasks in beauty merchandising. Problems can arise at any stage, from storing products properly to keeping shelves in order. The main difficulties are discussed below.

Large Assortment

Today, companies deal in a variety of beauty products. Most beauty products, for example, foundations, can offer dozens of options developed for different skin types and needs. Checking the proper layout of each beauty product on the shelves becomes a challenge because jars are not very different from each other and the merchandiser needs to be very careful to distinguish one jar from another.

Continuous Product Line Extension

Beauty brand owners release new seasonal collections and limited sets of their brand beauty products and update the packaging design of their beauty products on a regular basis. This requires changes to planograms in each case of release or update, monitoring the proper layout of novelties and timely removal of previous collections.

Expiration Date Monitoring

Cosmetics are products that have a limited shelf life, and since they are applied to the skin, expiration dates must be strictly monitored, followed by timely removal of expired products and testers from the shelves.

Rules for Product Adjacency

Some beauty products should be placed on different shelves. For example, perfumery products should be kept away from strong-smelling products, and sunscreens should be protected from direct sunlight. The proper placement of a product should be determined by its category, with ongoing monitoring.

How to Effectively Monitor Product Display

How to Effectively Monitor Product Display

Today, beauty companies monitor proper product display using two methods – they either hire their own merchandisers or use third party services. The second option involves regular audits of shops by the manufacturer’s employees to ensure quality control of the contractor’s performance and control over compliance with contractual obligations for the provision of merchandising services. 

The most common form of auditing retail outlets is when a merchandiser or auditor visits the shop, manually checks the completed product displays against the planogram, prepares a report and moves on to the next retail outlet. The field employees provide the manager with the photos of the display, the number of which can be measured in hundreds or even thousands. The manager then manually checks the received photos for compliance of the goods displays against the planogram. This type of audit has many minuses – it is slow, and mistakes are inevitably made due to factors such as inattention, fatigue, and others. Managers only process 2–3% of the photos because they are physically unable to check more photos. As a result, the reports contain inaccurate data, which is then presented to senior managers for review. Ultimately, critical decisions regarding the effectiveness of the applied tools and methods of product promotion are made based on invalid data.

To obtain accurate and error-free analytical data, some manufacturers have already begun to implement special-purpose tools that help automate the control of product display and minimize the occurrence of human errors.

Let’s take Goods Checker as an example to see how such tools work. Goods Checker is a system designed to automate merchandising processes, from preparations of planograms and product display control to generating analytical reports.

Goods Checker checks the product display in the following way – the merchandiser takes photos of the products on the shelves, and artificial intelligence automatically analyses whether the products are displayed properly. The system compares the actual product display with the planogram and finds discrepancies in the product display, price tags and POS materials. Goods Checker also identifies those places where the product is missing from the shelf but must be placed there according to the planogram.

In addition to checking whether the product display complies with the planogram, the IT solution also monitors the availability of critical products on the shelves. The manufacturer can provide its master stock list, for example, a list of its brand’s popular foundations, and the system will track the availability of the listed items on the shelves.

Goods Checker analyses every photo taken by merchandisers and generates consolidated analytics. Reports provide senior managers with critical information, such as where their brand and competing brands are placed on the shelves, the extent of compliance with the planogram, and the existence of empty spaces, in near real time. The system can display this data by categories such as region, country, brand, or employee.

What is the Benefit of Automation - Necessary Merchandising KPIs Can Be Controlled

What is the Benefit of Automation - Necessary Merchandising KPIs Can Be Controlled

Technology helps speed up and improve the quality of shop audits. Merchandisers can visit more shops, and managers will not have to deal with photo processing and will have more time to perform tasks of higher importance.

Solutions like Goods Checker allow cosmetics manufacturers to monitor the performance of merchandising activities, such as whether the desired products are shelved, whether products are displayed properly on the shelves, or how promotions are progressing. They also provide information on what the best places where the product is sold – standard shelves or special-purpose merch tables. This information helps to display products in a way that will increase sales.

Today, the battle for customers is won not in the boardroom, but on the store shelves. With an average out-of-stock rate of 7.1%, the industry loses about $4.3 billion a year — and that’s only counting the 9% of shoppers who abandon their purchase entirely if they can’t find their product. Out-of-stock, incorrect price tags or labels, non-compliance with planograms – all these are the consequence of inefficient retail execution, which is now becoming a critical success factor in retail.

In this article, we will look at what retail execution is, what problems managers face when managing sales, and how to address them.

What's behind the term Retail Execution

What's Behind the Term Retail Execution?

Retail execution refers to management of product representation or penetration in stores, which includes supervision over display standards, monitoring of service quality, and coordination of sales representatives to achieve maximum sales efficiency.

But solid plans often exist on paper only. Eye-pleasing planograms, successful promotional campaigns and carefully considered commodity matrices are rarely implemented correctly.

These problems cause FMCG companies to lose up to a quarter of their potential sales. At the same time, even minor improvements affect profits: an increase in the on-shelf availability by just 3% equals a 1% increase in sales.

Gaining perfect shelf presence

Gaining Perfect Shelf Presence

Bad customer experiences are most often associated with fundamental problems in the store: missing items on the shelf, incorrect price tags, and outdated promotional materials, non-compliance with planograms or expired products. So businesses will pay a high price for these mistakes. In the age of social media and the internet, this is becoming even more dangerous – many dissatisfied customers share their experiences online.

Technology rises to the challenge: how companies are already using IT solutions

Retail Execution of the Future: Data, Monitoring, and Sales
What is to be done with empty shelves, incorrect price tags and disrupted planograms? The answer is rather simple – automate. Below are some examples of how technology solves the main problems in retail management.

Compliance of display with planograms and monitoring of promotional materials (POSM)

Product display according to planogram is an essential part of any promotion strategy. Studies show that proper goods presentation can increase sales by 6-8%. Of prime importance is the “golden shelf” – the buyer’s eye level, where sales are on average 35% higher.

But how compliance with planograms can be monitored in hundreds of stores? Use computer vision systems. For example, Goods Checker analyzes photos of shelves taken by merchandisers, automatically recognizes compliance with the planogram and correct POSM location.

For example, after introducing Goods Checker, a merchandising agency from Eastern Europe made the reporting process for merchandisers at the point of sale 70% faster. In addition, the time for a full audit of some stores was reduced by 50%.

The above results were achieved thanks to automatic comparison of the display with the planogram. Now the merchandiser takes a photo of the shelf, Goods Checker instantly analyzes the display and shows what needs to be adjusted. All data automatically goes to analytics database, where managers can view key figures: compliance with the planogram, shelf share and other metrics.

If perfect display is not possible, for example, due to lack of stock in the warehouse, this is recorded in the application. This approach guarantees complete transparency of processes, monitoring of merchandiser performance and obtaining accurate, complete and up-to-date data.

Fighting out-of-stock

The issue of empty shelves is particularly critical for cafes and stores with ready-to-eat food: the lack of goods on display cases leads to an immediate loss of sales. At the same time, employees often do not have time to check if display cases are full due to the need to serve customers.

To address this issue, a Western European video surveillance system integrator offered its clients to use computer vision to monitor the occupancy of display cases. In this project, Goods Checker identifies empty spaces on cafe display cases even with a varying product mix. If empty spaces are detected, the system notifies the staff via a chat bot in a messenger.

Hence, cafe managers got a solution for continuous monitoring of the occupancy of display cases and employee performance. Goods Checker allows determining when products are most often out of stock and in which categories. In the future, this will allow for more accurate planning of employee workload and production volumes by reducing sales losses and the amount of spoiled products.

Price tag monitoring

Prices on the shelf sometimes do not match the prices at the checkout, as employees just do not have time to update all the price tags or shelf labels in the store manually. Electronic Shelf Labels (ESL) are the solution to this problem.

French hypermarket Migros Etrembières has introduced modern electronic shelf labels with automatic updating of prices, promotions and other information important for the buyer. Before the store opens, the system displays data on shelf labels for employees about the remaining stock and the next deliveries of goods. This is particularly important for departments with dynamic product mix – fruits, vegetables and seafood. The solution frees staff from manual handling of shelf labels and allows centralized management of information in the store.

Preventing expired products

A salient issue is control over product expiration dates. Buyers may not come to the store again or file a complaint after purchasing an expired product.

Modern inventory management systems allow for automatic tracking of expiration dates and creating assignments to check goods. Regular monitoring helps reduce write-offs and sales of expired products.

Retail execution of the future: data, monitoring, sales

Improving retail execution requires a systematic approach. Technologies help automate routine processes and reduce human error: smart shelves track the availability of goods, computer vision systems analyze the display, predictive analytics forecasts demand.

Managers obtain accurate data on the situation in stores in real time: non-compliances with display standards, types of missing products, location of incorrect price tags or shelf labels. This allows them to make quick decisions and prevent sales losses.

Owing to automation, companies improve the quality of store operations, reduce operating costs and push up sales.

Traditional methods of checking goods display for compliance with the planogram are time-consuming for employees: managers and merchandisers. The major consequence of such a process is its labor intensity and, therefore, low accuracy and irrelevance of analytical reports used as the basis for making assumptions about the success of a particular promotion strategy and for managerial decision-making. Management decisions are made too late.

Let’s look at a specific example of how neural networks help improve the process, save time for managers and merchandisers, and enhance operational efficiency.

Traditional display check process: only 3% of photos from merchandiser processed

Manual Merchandising Check Only 3 Percent of Photos

Products are displayed on the shelves according to a planogram approved by the retail chain, manufacturer or supplier of the products. To monitor the display, the CPG company sends merchandisers to the retail outlets who check whether the product is displayed correctly and whether the display standards are met.

Merchandisers ensure that each product is in its place, labels are facing the customer, price tags and POSM are available and placed correctly, and deliver products according to planograms. For reporting purposes, merchandisers fill out paperwork, take photos of shelves, and send these photos to managers.

Several managers manually review the images and evaluate the performance of merchandisers. The process is quite lengthy and labor-intensive, since there are thousands of visits to stores. The manager is becoming less perceptive, and the assessment of photos becomes subjective; it is difficult to aggregate final analytics on the performance of a specific employee, group of goods or outlet.

Let’s look at the numbers. In our experience, merchandisers send about 2,000 photos per day. To process one photo – compare the products in the photo with the planogram – a manager needs about five minutes. This means that it takes more than 166 hours to process all the photos per day, which is more than 20 working days. Merchandisers send tens of thousands of photos per month. For example, a tobacco manufacturer processes 60,000 photos monthly, and a drug manufacturer processes 30,000 of them. With this approach, not only will there not be enough time for other tasks, but you won’t even be able to view the photos received. From our experience, only about 3% of all photos are viewed.

As a result, managers have to deal with incomplete, inaccurate and outdated reports on the presentation of goods in stores. There are no tools to effectively monitor merchandiser performance: unscrupulous employees can briefly check the display, send managers old photos or even skip a visit to the store.

It is impossible to abandon checking the photos, since reports are based on the data obtained after the photos are analyzed. They show how the goods are presented in stores, how much the display corresponds to the planned layout, whether the merchandisers are performing their duties, and also what the competitors are doing. This is necessary at least to make sure that the product is available on the shelf. This directly affects sales.

Checking the display with Goods Checker: managers no longer review photos from merchandisers

Checking Display With Goods Checker

Goods Checker changes the process fundamentally by eliminating errors and inaccuracies. Thanks to this IT solution, a manager does not need to waste his time viewing photos from merchandisers and preparing reports based on them. The application generates detailed analytics by brands, categories, retail chains, merchandisers and adds data to reports after processing each photo.

Let’s see what the process is now. The merchandiser takes a photo of the product display using Goods Checker or another application integrated with Goods Checker. Neural networks process the photo in real time mode. After processing, the photo shows which products are positioned correctly, which need to be rearranged, and how many products are placed on the shelf.

Managers are relieved of the task of processing photos, and can devote their time to strategic tasks, non-routine cases and analytics. In our experience, with Goods Checker, the number of analyzed photos increases from 3% to 100%, and planogram compliance rate – from 60% to 90%. All this leads to gain in sales and, accordingly, growth of profits.

Automation = time savings and focus on strategy, not routine

Automation With Goods Checker Time Savings Strategy Focus

Implementing IT solutions such as Goods Checker not only solves the problem of manager overwork, but also improves data quality significantly. All this helps manufacturers and retailers to add to marketability through accurate analysis of product availability and better supervision over merchandising processes at retail outlets. Managers will be able to make timely fact-based management decisions in reliance on accurate, complete and up-to-date data.

Business without automation is a dead-end road. Nowadays, even small companies automate their processes, for example, using CRM, BI or chatbots. However, many IT projects do not provide the efficiency expected by managers at the start. What could be done? Assess the feasibility of investments in advance. Most often, this is calculated using the return on investment – ROI.

ROI is a key figure for business that helps managers understand the viability of investments in new technologies. After all, the introduction of IT solutions is not only a technological novelty, but also a real impact on business processes, profits and competitive capacity of the business. In today’s article, we will study this process in detail and understand how to apply it to your business.

How automation in business pays off

Automation of merchandising improves the efficiency and transparency of processes significantly. With this feature, one employee is able to check product display faster and visit more retail outlets. In addition, IT solutions reduce the number of errors in reports, thus improving their accuracy and reliability.

In general, business automation solves three main problems:

  1. Time saving and cost reduction. Automation helps speed up processes and complete more tasks for the same or even less money. For example, a merchandiser used to spend almost an hour on reporting at a retail outlet, but with an IT solution it only takes 18 minutes. This is 70% faster.
  2. Scaling. This follows from the previous issue. With automated processes, you can expand your business without hiring new employees.
  3. Understand the actual situation. Automation allows collecting data at every stage of the process, with breakdown by each employee, SKU or otherwise. This detailed analytics allows marketers to analyze the display, sales of individual brands or product categories, avoid out-of-shelf situations or oversupply.

It should be kept in mind that the benefits of automation are not measured only in money. It also provides “soft” benefits that are difficult to measure in numbers, such as public image enhancement or improvement of working conditions for employees. Such benefits are difficult to assess, but they cannot be ignored.

What are automation costs and how to calculate ROI

What are automation costs and how to calculate ROI

Automation of processes requires investments and also increases costs for individual items, for example, the costs of supporting the company’s IT infrastructure will become higher. Therefore, before implementing an IT solution, managers evaluate whether it will pay off in the future.

ROI is one of the indicators within such evaluation.

ROI is a measure of long-term performance of a project. It answers the question of how much profit each dollar of investment brought to the company. ROI is calculated based on the profit produced by investment compared with the amount originally invested in the project. The main metric is the difference between the growth of profit and the initial investment. For example: If the system enjoyed rise in sales, reduced personnel costs and decreased losses, the total benefit is compared with the costs of automation.

First, let’s figure out what automation costs include. Most often, they are as follows:
  • cost of software (licenses or subscriptions under the SaaS model)
  • cost of equipment, if required,
  • integration of a new solution into the company’s existing IT infrastructure,
  • staff training costs,
  • solution support and maintenance.
It is also necessary to pay due consideration to the change in the company’s cost structure: which expenditure items will grow, and which will be lower and by how much. The next step is to determine the criteria to evaluate the effectiveness of the implementation. For example, if the project objective is to reduce the costs of checking the display of SKUs at retail outlets, you need to do the following:
  1. Break down the display checking process into individual stages and determine their performance indicators and cost:
    • Average monthly salary of one employee engaged in merchandising.
    • Number of product display checks or store visits that one employee completes during the year.
    • Percentage of time an employee spends checking the display of goods out of the total working time.
    • Average time an employee spends checking one display.
    • Number of employees engaged in checking the display of goods.
    • Percentage reduction in time for checking the display due to the implementation of automation (usually this can exceed 50%).
  2. Identify the risks and disadvantages of the existing process that will be eliminated by automation, for example:
    • less errors in reports,
    • low planogram compliance rate,
    • data irrelevance.
This data will form the basis for ROI calculations. This approach helps to focus on the most important aspects of automation and more accurately assess its cost effectiveness. The calculation formula is simple: subtract total costs from total revenue, then divide the result by those costs and multiply by 100 to get your ROI. This is how you can calculate the overall ROI for a business. If we take ROI for an automation project, then subtract the costs of IT project from the net revenue from implementation, and then divide the result by these costs and multiply by 100.

ROI = (income – costs) / costs * 100%.

Example of ROI calculation for an automation project:

Let’s assume that a company is going to implement IT solutions for merchandising automation.
  • Automation costs will amount to $100,000: system refinement and deployment, integration with the company’s existing applications, staff training.
  • Annual cost reduction: 80,000$. IT solution reduces time and costs of manual comparison of display with planogram,
  • Gain in sales by optimizing display, reducing out-of-stock situations, and improving merchandising efficiency: +$50,000 per year.
  • Payback period: 1 year.
Let’s calculate the income from automation = $80,000 + $50,000 = $130,000 per year. Automation costs = $100,000.

ROI = (130,000 – 100,000) / 100,000 *100% = 30%

ROI of 30% means that the company not only returned its investment, but also earned 30% additional profit. Considering the system operation in the second year, we get:
  • Costs of the second year will include only support and maintenance: $20,000 per year.
  • Income from automation remains the same – $130,000 per year

ROI = (130,000 – 20,000) / 20,000 * 100% = 550%

The company is now set to make significant profits in the coming years. At the end of two years, the ROI will be 116%: сosts for two years – $120,000, income from automation: $260,000.

ROI = (260,000 – 120,000) / 120,000 * 100% = 116%

In this way, the company will recoup its investment in business automation. Project ROI should be assessed several times during project implementation. The first calculation should be made at the preliminary analysis stage, using the experience of previous projects and expert opinions. The second calculation should be made after a pre-project survey (initial investigation) which describes the company’s processes and analyzes them for optimization. The third calculation should be after the system is deployed, when you can observe actual results using actual data or expert assessments where precise calculations are impossible. After each stage, the ROI calculation becomes more accurate and you can make a more informed decision about automating the process.

ROI helps you evaluate the profitability of your project

ROI helps you evaluate the profitability of your project

Calculating the benefits of merchandising automation helps you understand whether it is worth investing in new technologies or whether it is better to consider another solution to the problem. It is essential to consider not only the reduction in costs, but also other benefits: the availability of goods on the shelves is monitored continuously, sales information becomes more accurate, and employees spend less time on routine tasks.

Regularly calculating ROI allows you to assess whether the system is working well right now and identify ways to make it better. Ultimately, this helps gain higher sales and make customers happier.

No product, no revenue. According to NielsenIQ survey, companies lose up to 46% of possible sales due to lack of products on the shelves. When confronted with empty shelves, 20% of consumers postponed their purchase, 10% of consumers purchased the item elsewhere, and 16% of consumers shifted to an online source. Empty shelves ultimately result in financial and reputational losses. But what causes empty shelf space and how can it be avoided?

Why shelves become empty and what is the solution?

Why shelves become empty and what is the solution?

There are many reasons why goods are not available on the shelves. They can be divided into two types:

  • the item is neither available in stock nor on the shelf
  • the item is available in stock, but it is not displayed on the shelf.

In the first instance, the lack of goods is due to inaccurate calculations of the required stock level or demand forecasts, problems in the supply chain, or non-availability of goods from the supplier.

In the second case, it is the workload of employees and the human factor. Employees in the sales area have many tasks: displaying goods, correcting the layout, checking expiration dates and price labels, packing goods if necessary, and many others. There is not enough time for all the tasks. And there is no opportunity to continuously go around all the shelves to check the availability of goods.

To monitor the availability of goods, some companies have already started using dedicated solutions that send employees a notification if the product is out of stock.

It works as follows: Computer vision is built into the surveillance cameras. It recognizes gaps on the shelves and lets the right employees know that the goods need to be displayed. This approach helps automate the process, collect and accumulate analytics on demand fluctuations over the required period of time. The information will be accurate, relevant and complete. This data will help in the future to track swings in demand and purchase the required volumes of goods.

In Spain, computer vision monitors products on cafe display cases: details

Computer vision monitors products on cafe display cases

Computer vision monitors products on cafe display cases

AVS Services offers video surveillance services to retail chains and catering companies. It is important for AVS Services clients to monitor the availability of goods on display cases, as they handle ready-made food products. Employees need to serve customers, and there is no time left to monitor gaps and replenish the display case.

AVS Services offered their clients to automatically detect non-available goods on display cases. For this, the Goods Checker service was used, which recognizes goods on shelves using computer vision. Now Goods Checker monitors empty spaces on display cases throughout the day. Neural networks detect gaps in the display even without knowing what products are on the shelves.

The data is processed and displayed in dashboards for managers. A messenger bot has also been developed that sends notifications to employees about the need to replenish goods.

Following the pilot project, AVS Services clients got a solution that continuously monitors the occupancy of display cases and employee performance. Goods Checker helped to determine the most often time period and categories of out-of-shelf products.

When used to its full potential, Goods Checker will help ensure product availability on display, enable increased sales, manage inventory levels, and reduce food spoilage.

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Technologies Not to Be Ignored Longer

Computer vision and artificial intelligence are integrated into many business processes

Computer vision and artificial intelligence are integrated into many business processes

Computer vision and artificial intelligence are integrated into many business processes. Merchandising is not left out. These technologies tirelessly recognize products on shelves, identify empty spaces and even analyze customer behavior. Companies can obtain a comprehensive, timely and reliable picture of what is happening on store shelves.

These solutions allow for better efficiency of inventory management, product shortage prevention, optimized product mix and display, demand forecasting and better procurement planning.

Implementation of intelligent shelf monitoring systems provides improved service quality, increased sales and reduced costs. This turns to be a key competitive gain for retailers in a highly competitive environment.