Space utilization and its effect on sales in hypermarkets. Which aspects should be followed by Real to increase its sales?

Table of Contents

List of Figures

List of Tables

1 Introduction
1.1 Problem Definition
1.2 Learning Objectives

2 Analysis of the Space Utilization
2.1 Qualitative Space Allocation
2.2 Quantitative Space Allocation

3 Management Recommendations

Reference List

List of Figures

Figure 1: Shelf with biscuits in a Real store in Muelheim an der Ruhr

Figure 2: Shelves in a Real store in Essen

Figure 3: Coffee shelf in a Real store in Essen

Figure 4: Height of shelves in a Real store in Essen

Figure 5: Coffee shelf in the Markthalle store in Krefeld

Figure 6: Height of shelves in the Markthalle store in Krefeld

Figure 7: Overview in the Markthalle store in Krefeld

List of Tables

Table 1: Key factors of space utilization – Definition and current situation in Real stores

1 Introduction

1.1 Problem Definition

Real is one of the leading hypermarkets in Germany.¹ But its revenue decreased from 8.43 billion € in 2014 to 7.48 billion € in 2016 by 11.3 percent. There could have been several reasons for this, for example closed stores or image problems.² The most probable reason however seems to be the strong competition in the hy­permarket sector with Kaufland whose revenue increased from 13.60 billion € to 15.23 billion € in the same time.³

Another important reason for the reduction of sales could be an insufficient space utilization because product placement and shelf utilization are general topics in the retail industry and their importance constantly increases.⁴

Real could increase its revenue with an optimized space utilization because product and shelf placement influence customer’s behavior to purchase more.⁵

1.2 Learning Objectives

The last chapter mentioned several possible reasons for Real’s revenue decrease. The following report deals with the question: "Which aspects of the space utiliza­tion should be followed by Real to increase its sales?" Following learning objectives can be derived from this question:

- What are the key factors of a successful space utilization?
- Which are the most potential problems of space utilization for Real at the moment?
- Which recommendations could be helpful for Real?

In the beginning, the definition and the importance of the space utilization will be explained. Next, applying these key factors it will be analyzed which kind of space utilization Real currently uses. Finally, recommendations based on this analysis will be formulated.

2 Analysis of the Space Utilization

The importance of the space utilization has grown in recent years. The way where and how a product is placed has an influence on customer’s purchase behaviour. Therefore, the presentation policy plays an important role. The retailers have the challenge to facilitate the search for products that are needed and to stimulate the customer to make impulse purchases. The space utilization includes qualitative and quantitative aspects.⁶ The qualitative aspect describes the placement of articles within the sales area and within the shelf. The quantitative aspect deals with the size allocation of products.⁷

Table 1 represents the space utilization with its key factors and the current solution of Real. The key factors will be explained in the next subchapters.

Table 1: Key factors of space utilization – Definition and current situation in Real stores⁸

Abbildung in dieser Leseprobe nicht enthalten

2.1 Qualitative Space Allocation

The qualitative space allocation includes placement of articles within the shelves. More specifically, the main objectives are easy accessibility of the products for cus­tomers and an optimum use of the shelf space. The retailers have to decide how the limited shelf space can be divided. The shelf placement includes two possibilities, horizontal and vertical placement. Looking at the horizontal placement, the middle and the fields on the right of the shelf are high grade zones. The vertical placement is divided into four levels, into top-level, eye-level, waist-level and ankle-level. The most favourable shelf positions are on the eye-level and top-level, followed in ef­fectiveness by waist-level. The ankle-level on the bottom area of a shelf is the most ignored field. In this way, expensive goods should be placed on the top-level, im­pulse items and premium products should be on the eye-level, the middle segment on the waist-level and low-quality, cheap products, heavy products and also big packages should be placed on the ankle-level.⁹

As figure 1 shows Real placed low-price products in this shelf on all levels. In ad­dition to that, the top level is overcrowded with the effect that customers get prob­lems to take goods out of the shelf. In this way it is also not possible to gain a good revenue because low-price products have a little profit and belong to the ankle-level. ¹⁰

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Shelf with biscuits in a Real "store in Muelheim an der Ruhr

Source: author’s own photograph

Moreover, the products should have a clear and structured presentation.¹¹ As figure 2 illustrates there are too many promotion tips in the shelf with its effect to confuse the customer. In this way, it could happen that customers do not find the desired goods fast enough because of an information overload.¹² Furthermore, some shelves of Real are not refilled (see figure 2). This fact could have a negative effect on the customer satisfaction. In the worst case, the customers leave the store because they do not find their desired products.¹³

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Shelves in a Real store in Essen Source: author’s own photograph

2.2 Quantitative Space Allocation

The quantitative aspect of the space utilization deals with the question: How much space needs a product?¹⁴ Size allocation of the goods is a permanent problem in the retail industry because the portfolio of a store constantly grows. New products must be added into the store and the shelf regularly.¹⁵ An appropriate example for this is shown in figure 3 where Jacobs’ products are placed on the waist-level, whereas these products should better being placed on a higher level of the shelf because Jacobs’ products have a good quality.¹⁶ Perhaps Real made this decision because they currently need the eye-level shelf for the advertised Dallmayr’s products (red sign on the left of the shelf).¹⁷ Furthermore, the coffee shelf contains many items of the same type. That leads to a small product choice.¹⁸

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Coffee shelf in a Real store in Essen Source: author’s own photograph

Appropriate software programs should be used, for example Apollo or Space-Max, to optimize the allocation of the shelf space. These software programs determine the space requirement for the individual products and they also give recommenda­tions how much space the individual articles should get.¹⁹

Real places many products on the top-level (see figure 1 and 4). Furthermore, there are high walls behind the shelves (see figure 4) with the result that the customer is unable to have a look into the nearby compartments.

[...]

¹ Cf. real,- SB-Warenhaus GmbH: real,- als Vertriebslinie der Metro Group (2017).

² Cf. Metro Group: Geschäftsbericht 2015/2016 (2016), p. 2.

³ Cf. Lebensmittel Zeitung: Top 30 Lebensmittelhändler Deutschland 2017 (2017).

⁴ Cf. Schröder, Hendrik: Handelsmarketing, Strategien und Instrumente für den stationären Einzel-handel und für Online-Shops mit Praxisbeispielen, Wiesbaden (2012), p. 157.

⁵ Cf. Mueller-Hagedorn, Lothar: Handelsmarketing, Stuttgart (2011), p. 434.

⁶ Cf. Mueller-Hagedorn: (2011), pp. 434-435.

⁷ Cf. Zentes, Joachim; Swoboda, Bernhard; Foscht, Thomas: Handelsmanagement, München (2012), p. 533, 537.

⁸ Adapted from: Zentes/Swoboda/Foscht, 2012, p. 533 and designed by the author.

⁹ Cf. Zentes/Swoboda/Foscht: (2012), p. 535.

¹⁰ Cf. Liebmann, Hans-Peter; Zentes, Joachim; Swoboda, Bernhard: Handelsmanagement, München (2008), p. 603.

¹¹ Cf. Ahlert, Dieter; Kenning, Peter: Handelsmarketing, Grundlagen der marktorientierten Führung von Handelsbetrieben, Berlin, Heidelberg (2007), p. 276.

¹² Cf. Ahlert/Kenning: (2007), p. 273.

¹³ Cf. Frey, Ulrich Dirk; Hunstiger, Gabriele; Dräger, Peter: Shopper-Marketing, Mit Shopper In­sights zu effektiver Markenführung bis an den POS, Wiesbaden (2011), p. 196.

¹⁴ Cf. Zentes/Swoboda/Foscht: (2012), pp. 537-538.

¹⁵ Cf. Berekoven, Ludwig: Erfolgreiches Einzelhandelsmarketing, Grundlagen und Entscheidungs-hilfen, München (1995), p. 299.

¹⁶ Jacobs Douwe Egberts DE GmbH: Jacobs-Für jeden Geschmack der richtige Kaffee (2017).

¹⁷ Cf. Zentes/Swoboda/Foscht: (2012), pp. 536–538.

¹⁸ Cf. Liebmann, Hans-Peter a. o.: Management Excellence - Unternehmensführung im Umbruch, Neue Ideen und Impulse für das Handelsmanagement, Frankfurt am Main (2006), p. 30.

¹⁹ Cf. Ahlert/Kenning: (2007), p. 276.