Noticed some discussion on retail shelf space.
- retailers allocate shelf space according to expected sales. More space if sales are expected to increase, to eliminate out of stocks. (they want to balance excess inventory vs OOS -out of stocks)
- Plan-o-grams are done some time in advance. Obviously so purchasing can order & manufacturer can produce and ship. (it takes a MASSIVE shift of thought for last minute changes)
- More shelf space ALONE, will ALWAYS increase sales. 90%+ of purchase decisions by consumers are made in the store. Shelf presence (examples: end caps, space allocation increase, multiple locations) matters!
- A rule of thumb: IF shelf space in the normal section increases 50%, sales increase will be similar. This can be higher or lower depending on category.
- Also, LOCATION alone with NO CHANGE in space can dramatically change sales. EX: 4 facings of canned corn being moved from top shelf to eye level.
Walmart like ALL large retailers track this data closely. They will measure sales and profit per linear inch & ALSO per cubic inch of air space taken at the shelf.
So if Walmart's new plan-o-gram allocates more space, sell in sales for SODA will be higher, sell through will be higher, and replenishment sales will be higher, all other factors being equal.
MartiniOracle, why haven't you weighed in on this? "More shelf space ALONE, will ALWAYS increase sales. 90%+ of purchase decisions by consumers are made in the store. Shelf presence (examples: end caps, space allocation increase, multiple locations) matters!" Since you staunchly disagree with this, why don't you comment? Or at least insult Profiteer's intelligence. Here, I'll get you started... "What if...."
I don't "staunchly disagree" with that. Where did you see me say that? What I have said is that shelf space is temporary, that there are no guarantees that it will be maintained. Perhaps the plan is to deep discount and sell a bunch more at prices that drastically reduce our margins. I don't know. What I do know is that this heavy reliance on additional shelf space at Walmart may be unjustified.
We have been hit by reduced acceleration of sales and by drastically reduced margins. I don't expect Walmart to do anything that will help our margins. Our reliance on Walmart hurt third quarter sales and probably diminished 4th qtr. margins. I know that Walmart has no affection for its vendors. They absolutely don't need us and I wouldn't pin any of my hopes for SODA future there.
As a matter of fact, I long ago expressed concern about Walmart and suggested getting to grocers first would be better for the company. I know there were reasons stated here for why that might not have been practical at the time, but I believe we have paid a price for heavy dependence on Walmart.
SodaStream's current shelf space has been solidified in the U.S. at the worlds largest retailer, using any metric you wish to use. Wal-Mart has and continues to remodel over 1,800 store home goods departments which began in week 1 of April and is being completed as we speak. A number of you may have even witnessed this operation in your own market. The goal of this transformation is to bring older stores up to plan with newer store footprints which bare greater sales per square foot. Within the new home goods plan-o-gram implementation is the architecture for supplying the SodaStream product line with an actual permanent home location and not just a temporary/rotational end-cap space. SodaStream sells 8 times the amount of product weekly when compared to the Food Saver product line which has had a home location at Wal-Mart for a number of years now. Even at its most base case outlining the future for the SODA product line, this correlation suggests SODA will have to show a negative sales rate of 100% over a 4 year period to lose its distribution at Wal-Mart. If you wish to reach that far into the Negative Nelly jar and predict that happening, be the guest that does so and by all means position yourself accordingly.
And that is just one retailer in one market with great visibility. 2015: Flavor enhancers product line. Designated for the grocery aisle and not the home goods section of department and hypermarket stores. Commonsense tells us that if you now have multiple locations within the hypermarket retail footprint, you now have expanded your shelf space and into the most rapid turn-over area of the retail market, grocery. And yet we have yet to mention product innovation related to SodaStream entering the alcohol category or global shelf space. International company with over 65% of sales coming outside of the U.S.