A Conflict of Interest in the Cooler Aisle
In retail environments, the placement of products—what’s in stock, where it’s placed, and how much is available—can really make or break sales. Convenience stores rely — and rely heavily — on effective planogram management to maximize sales and customer satisfaction. Without great planograms, customer choice is stifled, supply stock can be unbalanced, and ultimately, sales go down. Planograms are the foundation of a beverage program that just works — and getting this right means happier customers and better sales.
But there’s a dilemma brewing in the cooler aisle: allowing a non-alcoholic beverage supplier to serve as the beverage “category captain” can lead to biased decision-making, negatively impacting the very goals it’s meant to achieve.
Maintaining independence is critical to the negotiating process and ensuring your consumers can find the brands they want to see. In this article, we’ll explore the risks of supplier-led category management and why objective in-house or third-party expertise is essential for a thriving beverage category — marked by growing sales and competitive pricing.
The Role of a Beverage Category Captain
A beverage category captain plays a crucial role in managing the non-alcoholic beverage category in convenience stores, overseeing a wide range of responsibilities that impact the category’s success. This can include everything from negotiating supplier agreements to allocating cooler space and determining product facings — all with the goal of actively managing the category in a way that brings together customer demand, supplier pricing, and ultimately, system profits.
Why You Might Want a Third-Party Calling the Shots
Reading the above description may make it obvious: when a supplier takes on the role of category captain, conflicts of interest likely arise. When a supplier serves as the beverage category captain, their priorities often clash with those of the convenience store:
- Supplier interests: Maximize sales, shelf space, and positioning for their products
- Store goals: Maximize overall category sales, customer satisfaction, and profit
Imagine someone from a drink company deciding which products get the best spots in your store. It makes sense to worry that they might push their products over others, doesn’t it? That’s where an independent in-house or third-party expert can step in. They look at things objectively, without any skin in the game, making sure that what’s best for your store and your customers comes first.
What’s at Stake with Supplier-Run Planograms
A supplier’s objectivity is severely compromised when managing the beverage category, leading to a multitude of biases and conflicts of interest. For instance, they may:
- Favor their own products: Allocating disproportionate shelf space and facings, giving their products (flagship or emerging) undue prominence and visibility, while relegating rival products to less desirable locations or limiting their exposure.
This can lead to less variety and choice for your customers because one brand gets all the limelight. - Limit competition: Restricting access to shelf space for rival products, making it difficult for other brands to gain traction and compete fairly, and potentially stifling innovation and choice.
The can lead to possible dips in sales if customers can’t find their favorites or get tired of the same old options.
- Manipulate or ignore data analysis: Cherry-picking or distorting data to support their own products, while disregarding or downplaying data that suggests rival products may be more popular or profitable.
New and innovative products might not make it to the shelves if they’re seen as competition.
- Managing the entire process to their benefit: When you rely on a supplier timeline for execution, it enables their influence in the process and allows them a feeling of control.
Other suppliers that you want and need won’t feel equity in the process.
The Benefits of Keeping Data Honest
Good decisions come from good data. If a supplier controls the data, there’s a risk they might highlight the good trends about their products and downplay or ignore what’s not so flattering. That’s why having control over your own data and analysis is crucial. It helps ensure you’re making decisions based on what’s truly best for your stores and your customers.
Effective planogram management relies heavily on data analysis to make informed decisions that drive sales and customer satisfaction. Data analysis plays a crucial role in:
- Identifying top-selling products: Accurately determining which products are in high demand, allowing for optimal inventory management and shelf space allocation.
- Optimizing shelf space allocation: Ensuring that products are strategically placed to maximize visibility and sales, while minimizing waste and inefficiency.
- Informing product assortment decisions: Providing valuable insights into consumer behavior and preferences, enabling informed decisions about which products to stock and which to discontinue.
Ceding Control in Negotiations
Not only is there a risk of bias and not having access to complete data, but there’s also a risk that retailers lose leverage in the supplier agreement negotiations.
- Perception in the negotiation: When retailers have direct access and control over all relevant data, they deliver a clear message to suppliers that they have ultimate control and influence over the category. This shifts the balance of power in the negotiation, allowing c-stores to more effectively negotiate better CDA’s and funding terms.
- Setting the narrative with control over the templates: With direct access to the data and control over the planogram templates, decisions can be made with relative speed, not having to wait for data or revised planograms from a third-party supplier. Retailer executives can quickly mockup proposed changes to illustrate – with great clarity – what might be at stake for the beverage suppliers depending on their proposals.
By relinquishing control and empowering suppliers to manage the category, retailers may inadvertently cede their negotiating power and miss out on valuable revenue opportunities. Instead, by maintaining control and leveraging their data, retailers can tip the scales to secure more favorable terms that benefit their business.
Conclusion
Allowing a beverage supplier to dictate your store’s product placement can be a straightforward solution, but it often comes with the cost of biased decisions that don’t align with customer needs or store profitability. Have a truly independent handling this function in-house, or partnering with an independent third party, ensures your shelf space is optimized for success, reflecting what your customers really want and maximizing your business outcomes.
Key Takeaways:
- Objective Oversight: Ensure impartial category management with independent oversight to align with store goals and customer satisfaction.
- Data-Driven Decisions: Maintain control over your data to make informed, unbiased product placement decisions.
- Retain Negotiation Power: Keep category management in-house to strengthen negotiation leverage and secure favorable terms.
- Promote Fair Competition: Avoid supplier bias by managing your own planograms, fostering innovation and diverse product offerings.
- Maximize Satisfaction and Profitability: Use impartial planogram management to cater effectively to customer preferences and boost sales.
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