How to Create and Use a Retail Planogram

Shopkeeper checking inventory in boutique
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A planogram is a visual diagram, or drawing, that provides details on the placement of every product in a retail store. These schematics not only present a flow chart for the particular merchandise departments within a store layout but also show which aisle and on what shelf an item is located. A planogram should also illustrate how many facings are allocated for each SKU.

The complexity of a planogram may vary by the size of the store, the software used to create the planogram, and the need of the retailer. Planograms can be as simple as a photo of a preset section or more detailed with numbered peg holes and shelf notches showing exact placement of each item.

Creation of Planograms

Big box stores and larger retailers typically hire visual merchandising specialists to assist in developing planograms or they may have their own in-house planogrammers. Due to the hefty price tag of most planogram software packages, small and independent retailers often resort to using word processors or paper and pen to optimize shelf layout.

As competition increases, we're seeing vendors and distributors becoming more aware of the importance of correctly merchandising their products. That awareness is leading to better point-of-sale displays, planograms and other marketing aids provided to retailers directly from the suppliers at no cost.

Marketing firm Envirosell, founded by Paco Underhill, were the pioneers of finding the best spots for merchandising in the store. They placed cameras in stores and watched customer behavior. This practice led to planograms that were driven by the customer versus the store. In other words, by identifying the most "viewed" parts of the store, they could predict sales. After all, the spot that is getting the most customer eyeballs will obviously also yield the most sales. The fascinating part of their research is that it is not always the endcap.

What they did prove is that placement of merchandise had an exponential impact on its sales, thus solidifying the case for planograms.

Planogram Purpose

Product placement and improved sales are just two very basic reasons a retailer should be implementing planograms in their shops. Planograms provide many other positive benefits as well:

  • Assigned selling potential to every square foot of space
  • Satisfying customers with a better visual appeal
  • Tighter inventory control and reduction of out-of-stocks
  • Easier product replenishment for staff
  • Better related product positioning
  • Effective communication tool for staff-produced displays

Any good retailer realizes the key to increased sales is through proper visual merchandising. A planogram is one of the best merchandising tools for presenting products to the customer. If you are a small retailer, say one store, planograms are a bit harder to pull off. Don't get stuck thinking you need a piece of software to planogram your store. The key is to follow the principle of planograms not so much the fancy printouts.

Planogram Best Practices

Here are some best practices to follow when using planograms.

  • Start simple. Too many retailers make the planogram process too complicated and eventually lose steam after a few months. In other words, if it takes a ton of time to create, then your likelihood of doing it every month will grow less and less as time passes. Eventually, you will stop. Your time is limited and valuable. Do not adopt a process that you cannot sustain. It will only frustrate your employees. 
  • Train your employees. Spend time training the employees on how to use a planogram. Your veteran employees especially will think they don't need it. Simply handing them a diagram is not enough. Be specific. Have general visual guidelines they can follow. 
  • Measure your plan. Each month, pull reports on your sales and look at your planogram.
  • Assign your Champions. In your store, you should have champions or leads for each section. This person is in charge of the sales out of that area and this includes the visual merchandising. Allow them to design and plan their part of the planogram as part of the process. A well-merchandised store is the best defense against theft. It's easy to tell when you have lost something. 
  • Know Your Customer. Today's shoppers want a product at eye level. They not only want to touch and feel them, but they want to interact with them. For some stores, less merchandise on display with more interactivity is the right technique. 

    If you aren't using planograms, it's time to start. Just like having an open to buy system is critical to your inventory management success, so is the visual merchandising driven by your planogram.