The Need

Tesco decided in the late 1990s that they wanted to raise the stakes in the quality of their space optimization. They realised that conventional approaches to planogram production would not be able to deliver the results they now sought.

They identified a number of problems that are common to generic or mix-and-match planograms:

• Low levels of store compliance.
• Wide variations of interpretation and execution.
• Poor product availability.
• Difficulty of reacting to rapid, unforeseen product changes.

These problems are inherent with the manual production of generic planograms, and could not be solved by, say, staff training. Each store has unique physical characteristics and fixture layouts, so a standard plan can never match reality. This forces judgement calls to be made at the front line every day. At best, such decisions are sub-optimal, but in reality many of the plans were not even used. So, no matter how much effort went into producing planograms for generic store types, compliance rates were very low and unacceptable – never greater than 30%.

The Solution

The groundbreaking solution that Galleria delivered was as a result of the ambitious vision and dogged determination of both Galleria and Tesco to define and develop a system embracing the following needs:

• Each store’s unique fixture configurations and space allocation.
• Each store’s unique product assortments, which reflect their current local customer preferences plus market data.
• Tesco’s current central merchandising strategy and priorities, including product promotions.
• Product adjacencies that influence associated purchases.
• Downstream feed to replenishment systems.
• The ability to cascade from a template even when shelves have been added or removed.
• Space-specific calculations to account for visual display rules such as consumer decision tree logic.

In addition, the system uses a patented process to balance the three antagonistic drivers that are notoriously difficult to reconcile, but without which true optimization cannot be realised:

ASSORTMENT – the range of products that should be incorporated across each category segment.

INVENTORY – the number of each product to be stocked.

AESTHETICS – the visual merchandising of the fixture.

All optimized by a solution that reads the template space planogram and applies the category management rules without the need for any manual intervention.