Improving Sales in Small Grocery Stores

How to sell more through product placement

This case study comes from a small neighborhood grocery in Deanwood Heights, Washington, D.C., via a grant from the DC Department of Housing and Community Development (DHCD) to the Washington East Foundation (WEF).  The store is about 3,000 square feet, which is slightly bigger than a typical gas station/convenience store. The challenge with smaller grocery stores is that they usually don’t stock enough merchandise of a particular type to take up an entire section of shelves. As a result, products are often put next to other merchandise that is dissimilar in type, size, or packaging.  

The secret to accommodating this inventory is to manage the placement of products so that the store doesn’t appear visually chaotic and to place merchandise so that it can help sell other products.  For example, place batteries next to flashlights.  If paint is shelved next to batteries you’re probably losing “add-on” sales.  

Most large grocery stores will use computer programs to closely watch the gross margin return on investments (GMROI) to decide where to stock a product in the floor plan, how many to provide or “face out” on the shelf, how high up on a shelf to place an item, and when products should be offered (seasonality).  This store is being operated without a point-of-sale (POS) system. A POS is a computerized inventory that can help provide direction about where and how to locate merchandise in the store.  Without this type of information, we used intuition, shopping experience, and aesthetics to create a more convenient environment in which to shop and ultimately to create a more profitable store. 

Encouraging a store owner to install a point-of-sale computer system will help the business gain first-rate information about the store’s product lines. Sometimes, the first step in improving a business is convincing the owner to commit to improving sales and then we focus on improving their business. 

Creating Greater Shopping Opportunities by Using Vertical Shelf Layout

Case Study: Cereals/Breakfast Foods

Categories of merchandise should be shelved vertically, not horizontally along an aisle. Customers typically shop section by section, not horizontally along a line of shelves.  In the before image, all the cereal is laid out horizontally along the top shelf in one aisle.  Directly below the cereal are pasta sauce, bread crumbs, and instant potatoes. 

Before: Items at eye level, cereal in this instance, are easier to find than products below eye level, which will generally result in lower sales for items on lower shelves.

Credit: Scott Day

We started by trying to group items better by moving the pasta sauce to the next aisle with the pasta, moving the bread crumbs to sit next to the salad dressings, and the instant potatoes went with the other starches.  Laying the cereal out along the top shelf in an aisle causes the customer to shop “on the move,” which means that they really don’t come to a complete stop (see the before photo).  As they shop for cereal, customers keep moving down the aisle until they find what they want.  The impact of this approach is that items at eye level, cereal in this instance, are the easiest to find and items below eye level aren’t as visible or as easily found. As a result, there will be lower sales for items on lower shelves.  Also when customers are done shopping for cereal, they will likely leave the aisle because they don’t want to go back over sections where they’ve already shopped.  So, if product lines are displayed horizontally along an aisle, customers may only be looking at the top two shelves, thereby paying little attention to the bottom shelves. 

After: Cereal is displayed vertically in one shelf section instead of being spread across multiple shelves horizontally.

Credit: Scott Day

Instead, it’s better to encourage customers to shop section by section.  In this approach, the customer will stop and look through the section or move on to the merchandise they want. The strategy of laying out merchandise vertically rather than horizontally encourages customers to stop and look up and down in a section, which means that the items on the lower shelves will have a better chance of selling.  This is why, in the “after” photo, the cereal is shown all in one shelving standard, not spread out over several.   

Note, the bottom shelf in the both the before and after images has bags of flour and syrup, which seems to be breaking the rules.  Flour and sugar, however, are “destination” items, products that customers will search for, so they don’t need to be displayed at eye level.  Also bags of flour and sugar leak to some degree so it’s better to keep them on the bottom shelves so they don’t dust everything else below.  In a small store, which is unlikely to have an entire shelving standard for flour and sugar, it’s okay to use these products as destination, fill-in items at the bottom of a shelf. However, if possible they should be placed next to other baking items. Similarly, the cereal section (syrup and oatmeal) can flow into baking supplies, which is to the left of this area.