05. 10. 2023

How do space & demand planning complement each other in retail?

The world of retail is a complex one, where many elements must come together to ensure success. Two of these crucial elements are Retail Space Planning and Demand Planning. They are intertwined in ways that can significantly impact a store's performance. Here's a simplified explanation of these concepts and their interrelation.

Retail Space Planning

Retail Space Planning

Retail space planning is the strategic arrangement of merchandise within a store to optimize sales. Like a well-arranged room, it aims to make the shopping journey smooth and enjoyable. It helps guide customers around the store, making it easier for them to locate items and discover new ones they might want to buy.

Demand Planning

Demand planning, on the other hand, is the science of predicting what customers will want to buy, how many they'll need, and when they'll want it. It's like forecasting the weather, using past trends and current conditions to predict future requirements. This helps ensure that stores have the right products in the right quantities at the right time.

Demand Planning

Retail Space Planning and Demand Planning Interaction

Now, let's observe how these two concepts work hand in hand.

1. Product Placement

Demand Planning is the compass that guides the decision on where to put products in a store. If a product is highly sought-after, it should be positioned in an easy-to-find, often trafficked area. This might be near the store's entrance or along the path that most customers take. On the other hand, products that aren't as popular shouldn't take up prime real estate. They could be placed in less prominent areas, but still accessible, thus maximizing the use of retail space.

2. Boosting Sales

The layout of a store can act as a silent salesperson. Popular products should be placed where they're easily spotted – at eye level on shelves, on end caps, or near the checkout area. This visibility draws attention to these items and can lead to more sales. Interestingly, placing less popular items next to popular ones can also boost their sales. This is due to the 'halo effect' where the popularity of one product rubs off on the adjacent ones.

3. New Product Introductions and Promotions

Introducing new products or running sales promotions can alter what customers want to buy. Store layout may need to adapt to accommodate these changes. If a new product is introduced, it may be placed in a high-visibility area to gain attention. The performance of these products or promotions can also help predict future demands. If a new product does well, for instance, it may require more permanent space within the store.

4. Seasonal Adjustments

Seasonal changes significantly influence what people want to buy. For example, beach-related items will be in demand during summer while holiday decorations will be popular during the winter season. Retail space planning needs to be flexible to allow for these changes, moving seasonal items to prominent areas during their peak times. Demand forecasting supports this by predicting which items will be popular in upcoming seasons.

5. Customer Behavior

Both Retail Space Planning and Demand Planning revolve around satisfying customer needs. The placement of items within a store can directly influence how much of each item sells and can even affect what people will want to buy in the future. For example, if a product consistently sells well when placed at the end of an aisle, it might mean customers prefer this location. Also, changes in what people are buying can give clues about shifting customer preferences, informing future store layout plans.

6. Stock Replenishment

Keeping track of which items sell quickly can help in planning the replenishment of stock. For instance, if a particular snack always sells out within a week, it would be prudent to always have enough stock on hand for at least a week. This way, stores can avoid empty shelves, and customers will always find what they need, resulting in satisfied customers and sustained sales.

In essence, retail space planning and demand planning are two sides of the same coin, each informing and being informed by the other. By understanding the interplay between these two concepts, retailers can make informed decisions that increase sales, improve inventory management, and enhance the shopping experience.

Customer Behaviour

Written for Quant Retail by

Rehan Niazi

Head of Space Planning at Whites

Highly skilled and experienced retail professional with a proven track record of success in driving business growth and optimizing operations. 

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