In this blog post, we explore the application of Product Management principles to consumer retail. How do retail Product Managers decide which products to select and purchase from suppliers to stock retail shelves?
The most important concept of successful Product Management is ‘VALUE’. Understanding and knowing what buyers want and employing a solid operational model to deliver on buyer value will generate the returns anticipated by retailers.
A retail store represents a 3 way balance between the buyer or shopper, the retailer, and suppliers.
The buyer wants to:
- Find a product that satisfies a particular need
- Purchase the product at a price that represents value
The retailer has 2 objectives:
- Maximize the revenue return on limited shelf space
- Maintain buyer satisfaction to generate repeat business
The suppliers are seeking:
- Placement of the product in the most visible location in the store and on the shelf
- To entice and convert sales to buyers
Success for both retailers as well as suppliers can be gained by following these simple strategic Product Management techniques:
1. A Focus on Business Strategy
Answer this simple question, “What are we in the business of?”
If you are in the business of selling entertainment products, do not be tempted to include health products on your shelves. Your value proposition will be diluted, consumers will be confused and your products remain on your shelves.
Suppliers are trying to find a channel and can deluge retailers with product, making product selection a non-trivial exercise.
For retailers to prosper, the selection of product needs to be a considered process. One of the most important elements to keep in mind is the business’ strategy. A business strategy should provide the framework for retailers to make sound buying decisions.
For suppliers to succeed in the long term, it’s also essential to sell products to the right type of retailers. As a supplier you’ll want to supply products to retailers with comparable target markets. Whilst you may gain in the short term by selling products to varying retailers, there will be a point in time where your stock may sit on shelves longer than necessary if their customers are not aligned to your products.
2. Buyer Alignment
Be religious about knowing who your target buyers are. Retailers may say we want “all” types of buyers in our stores but like any product, retail stores cannot appeal to everyone. If it does, it will appeal to no one.
If your market consists of people that are young at heart and want the latest in entertainment gadgets, ensure that shelves are stocked with products that appeal. If you have products that are more suited to amateur cooks, then these products may not sell because your proposition and your brand speaks to a different audience.
As a retailer, if your products and your buyers are not aligned, you’re simply wasting valuable shelf space and consequently the ability to maximize revenue.
3. Trend Alert
‘Trends’ should be a component of your product selection criteria.
The pace of technology, innovative business models and social media has changed the way consumers interact and use products. To maintain the right type of products on your shelves, it’s necessary to keep abreast of:
- Technology trends
- Social sentiment
- Shifts in shopping habits
- Brand innovation
- Economic indicators
Keep abreast of trends within your product category as well as outside your category.
On a practical note, when assessing trends and new products, make sure that the products you select still appeal to your target buyers. Not all trends appeal to all people. Not all trends should be adopted. Trends should be themed according to your product range and your retail store.
For example, If your retail store sells kitchen appliances to renovators then there is a significant risk stocking the latest smart TVs. Whilst renovators may require a smart TV and some may even buy a smart TV from you, your store should focus diligently on supplying the latest in kitchen appliances. This will mean that the message to your buyers is focused and ultimately, you’ll earn more revenue from the ‘shelf space’ selling fridges than TVs.
4. Buying Experience
The buying experience consists of a range of factors that delivers value to buyers; store appeal, product placement, product descriptions, clear pricing, customer service, payment methods, ease of purchase, in-store packaging. If one or more of these factors are missing it doesn’t really matter what products you stock on your shelves. Buyers will leave for your competitors who will execute on these principles.
Don’t make buyers think – Delight and surprise with simplicity.
5. Measure. Measure, Measure
Any good Product Manager knows that reporting is key for in-life products. Reporting is an enabler – it helps Product Managers decide the next steps to take.
Likewise in any retail store, knowing which products sell and which ones linger will ensure that you’re capable of making informed decisions about how best to maximize your sales.