Face to face with Retailer: how much I have to pay to get my products on the shelves?

“Listing” means the introduction of a product or line of products / brands in the offer of the point of sale of a retail, distribution, foodservice company in a specific store, channel (offline / online), territory, point of sale.

The decision is taken by a Buyer (can be a Category, Retail or Store Manager), after receiving all the information about new products to carefully analyze, and sometimes even simulate, to asses an interesting sales and profitability potential.

“Listing fee” is the amount of resources that may be required by the Buyer, after evaluating the potential, to cover direct costs of products introduction (e.g. the opening of a supplier code, the verification and the quality controls, the organization for the logistical information paths, etc.), but above all to cover the costs of space, the scarcest resource of retailers online and offline (see previous article).

The fee is also a way to share between retailer and supplier the risk / opportunity that will arise as a result of the failure or success of rotations and profits of the new product.

The possibilities of choosing new products for the Buyer are enormous and the need to improve the performance of the allocated space pushes her/him to confirm and support the products that rotate most because they generate turnover and profitability (also through greater “facing”, i.e. number of product lines on the shelf to avoid “out of stock”) and replace those that rotate less with new, more promising products.

Several products, even entire categories, even with a low turnover, will remain at the point of sale. These are the categories to which the Category Marketing Role of Service has been assigned. They take not relevant portion of low quality space, they have a scarce breadth of brands and shapes in the assortment (sometimes only a brand that is often the Private Label) and offer a service to the customer of the point of sale when, occasionally, she/he looks for the product of that category without showing specific needs of brands and choice variety.

The goal of the Buyer is to be able to make the best decision, his reputation, career and sometimes his salary are proportionally involved. To help the buyer in this difficult task tools with algorithms based on the company big data available, that allow quick simulations of direct and indirect impacts, deriving from the elimination of a product from the shelf, and therefore to simulate in a more reliable way the risk / opportunity level of the new products.

The historical data tell us that, when things go well, only 20-25% of the products introduced are on the shelf after two years and when it happens, they do not have brilliant performances. If we talk about the real product innovations, after three years only a bit more than 1% of new products still on the shelf are successful …

But what happens after a week, a month or a year from introduction of the new product? How is the commercial contract determined from the beginning in the event that the product is a failure, a success or achieves the expected results in a longer time than forecasted?

We’ll talk about it next time, next year! Happy 2018!