The Science and Art of Retail Planograms

Planograms can help HME retailers to improve their sales. Here is why planograms should be part of your retail strategy.

Positioning your HME retail store for success involves the coordination of proven tactics in what Hamacher Resource Group – a category management, business strategy and marketing services company – calls the 5 Ps of Retail Success: Product, Placement, Price, People and Promotion.

An important tool that supports these retail tactics is the planogram – a guide that illustrates an HME retail store’s most productive product assortment based on space and sales data analysis, using units, dollars or profitability or a combination of these measurements to determine optimal placement.

Rob Baumhover quote“The merchandising art of the planogram positions products to lead shoppers through a logical and consistent journey through the department to increase sales for the retail class they are created for,” said Tom Boyer, Director of National Accounts, Hamacher Resource Group (HRG). “The appropriate product assortment and product arrangement are predetermined to maximize sales. Planograms are also useful when ordering products, as all pertinent information is listed on the product identification listing in the order of how items appear on the planogram. Information for each product typically includes item number (wholesaler), UPC (or GTIN or product item number), product description and often UOM (unit of measure). Proper use of planograms can streamline inventory, ease ordering, improve employee efficiency, ensure a professional looking department, and maximize sales with optimal item assortment.”

Rob Baumhover, Director, VGM Retail said that planogram benefits include easy set-up and maintenance of the space, top-selling products have already been researched and identified for you, and there’s usually good educational pieces attached to help train customer service employees and sell the products.

For HME retailers using product suppliers, such as McKesson Medical Surgical, planograms use sales data, multiple manufacturers and products to help boost retail sales and achieve customer satisfaction regarding choice and price.

The Elements of a Successful Planogram

One of the strategic elements of the planogram is to provide consumer choice. But regardless of the size of the space, the planogram should focus on best-selling items. As you move away from the best-sellers, you are adding ancillary items that aren’t as important as those key driving products, but they add to the sales of the department. This strategy is often called good/better/best.

“Let’s say a patient walks into a DME location,” said Boyer. “They've been discharged from the hospital after minor surgery and the hospital gave them a recommendation for a surgical wound product. If I am the store owner, I need to guide that consumer to my wound care section. Let’s say your wound care products take up an eight-foot section. My planogram is going to have the optimal mix that can cover an eight-foot section.”

So how do you determine the right product mix and merchandising strategy? “You have to complete analytics,” said Colleen Volheim, HRG’s Category Research and Analysis Manager. “You're going to have best sellers. You have to have those. From there, you need to round out your assortment with other important items that meet consumer needs. You're certainly not going to put poor-performing items on there. You're going to include products that complement the department, that are ancillary to the products in the subcategories.”

Volheim continued, “Assortments may include private label and/or store brands.” Why do store owners choose to place private label or store brands in their departments? “It's based on image – how you want your store to appear or be perceived,” said Volheim. “The cost savings of private label items is often greater than buying national brands. There are different consumer perceptions. Some people are price-point conscious, while others are national-brand focused. If private label and store brand products are stocked, the store owner will typically make more profits on the private label item than a national brand.”

When it comes to shelf space, the more room you have to display a category the bigger the product set you can offer to customers. And a wider selection can typically satisfy more consumers.

Find your top-performing products

A planogram should include top-performing items across an entire category. For example, if the planogram is for an incontinence display, you will have many different products within the category: briefs, under pads, barrier creams, underwear, pads, etc.

“What should be included are the best performing items based on data, what their distribution rates are, and availability to that store, and from there you're coming up with the top performing SKUs within each of those product types, each of those subcategories or segments,” said Volheim. “That's going to give you the top-performing assortment within a planogram. If briefs are the best performing out of the whole category, you shouldn’t stock 20 different brief items because they perform better in unit or dollar sales. You want to make sure that you have an assortment that's going to really satisfy your consumers’ needs. That is your top-performing mix.”

Use products with enticing retail packaging

Retail packaging is designed for consumer impact and for helping products move off the shelf. Retail packaging should be visually stimulating in some regard. The graphics should be easy to read, especially if your customer base includes the senior population. Typical HME packaging can look like what Boyer calls “very therapeutic or very clinical looking.” Instead, packaging must entice consumers.

“In HME outlets, you may find bed pads in clear plastic bags,” said Volheim. “And it might, if you are lucky, have a little sticker on it that says ‘bed pads.’ To have packaging that's retail ready, consumers should be able to walk up to the shelf, no matter where they are, and be able to identify, basically, the contents of that package. A product that is retail ready also includes a UPC or NDC code. That item would then be able to be scanned at the cash register or with a POS system. That's one of the things that HME providers need to focus on: making sure that sales can be tracked appropriately and the best way to do that is with a UPC or NDC and not a legacy code on the back of a clear plastic bag.”

Place adjacent items strategically

You need to have upsell items in your department, but it’s really about having a well-rounded mix of items, no matter what the category is.

“Adjacency is where the products are positioned on shelves,” Volheim said. “Products should be placed near other like products so consumers can easily purchase all the treatments for associated conditions in one area. That drives up your market basket. For example, near your incontinence briefs should be your barrier creams and all your antiseptic cleansing items, so as a consumer is shopping he or she may say, ‘I need these briefs, and what is this over here? I've never seen this. That should help. I'll grab that, too.’”

A planogram lives and breathes

A planogram is not a set and forget tool. Events can change your display, such as new products coming on the market, items becoming discontinued by the manufacturer, and low performers taking up shelf space. However, Boyer said that even though you will typically make slight adjustments to your planogram throughout the year, once you get the main category set, you likely won’t see dramatic change year to year. Ultimately it’s up to the HME retail owner or merchandiser to analyze sales data regularly to confirm the planogram meets the needs of their customers.

“Also, retail management 101 says that when you have a retail space with products on the shelf, depending upon the size of the store and other factors, you really should be looking at that shelf either first thing in the morning or at the end of every day and filling holes,” Boyer said. “If consumers are buying products, you have to make sure you’re restocking those items on the shelf. You always have to maintain the shelf integrity and look and feel of the department.”

Finally, Volheim said that there are manufacturers that will create their own planograms, which can be self-serving for their products. But an ideal supplier or distributor should be able to provide a well-balanced planogram, based on the store data and the numerous brands they carry.

“This opens up more of a partnership relationship with suppliers,” said Volheim, “especially those suppliers that review categories, including vendor information, and form an objective look as to what should be on the HME retailer’s planogram.”

Points to Remember:

  • Planograms position products to lead shoppers through a logical and consistent journey through the department to increase sales for the retail class they are created for.
  • An effective planogram has a good assortment of products within the category, has an attractive layout and retail packaging, has good signage and marketing messages throughout the set-up, and offers the needed display products for customers to touch and feel.
  • The planogram should focus on best-selling items. As you move away from the best-sellers, you are adding ancillary items that aren’t as important as those key driving products, but they add to the sales of the department. This strategy is often called good/better/best.
  • Place upsell items on your planogram, but remember that it’s about having a well-rounded mix of items.

If you have questions about planograms or would like to discuss merchandising in your store, contact your McKesson Account Manager or 1-888-822-8111

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