Building Strategy Using Product Categories

by Andrew Hoeft | Jun 28, 2016 12:00:00 AM

Here is a quick fact to consider:

The “average” supermarket in the US generates about $15-$20 Million in revenues per year with the the annual revenues reaching as low as $5M to over $50M. We have broken down the most volume by category to give you a better idea of where the revenue is coming from for future reference in regards to inventory, marketing, and shopper satisfaction.

Here are the average supermarkets “cutout” of total sales breaks down:

  • 50% in grocery (the stuff in the aisles and on displays)
  • 15% in dairy and frozen foods
  • 10%+ in produce/floral
  • 10% in meat
  • 4% in deli and fresh bakery
  • 11% in general merchandise/health & beauty care/Rx and wine/liquor and beer

These numbers are influenced by the strategy being executed by the store or chain.

In considering these numbers, remember what drives shoppers: Regardless of the size of your store, the price, quality, convenience and selection are key drivers of store choice. As a retailer, you need to show shoppers how you’re delivering value in every interaction, no matter where the value occurs.

Knowing consumers’ wants and needs is critical when developing strategies for ordering inventory and product placement. As consumers demand a more personalized shopping experience, retailers should not strive to provide all things to all people.

For example, Whole Foods have significant focus on fresh foods where price impact chains, on the other end of this; Aldi’s have most of the revenues in grocery packaged goods.

In most grocery retailers, perishables departments have higher margins but also have higher labor costs, capital expenditures, energy costs, and transportation costs. It is obviously much cheaper to warehouse, ship, and pack-out packaged goods versus refrigerated and frozen merchandise. When a retailer is able to lower the gross margin percent on an individual item, the sales volume will increase because of competitiveness.

Lastly, be sure to measure and adjust. Retailers should continuously monitor performance to understand how shoppers are responding to marketing touch points and ensure they’re optimizing their product category to yield the highest ROI.

All things considered, there are best sellers throughout any given store and the sales can be categorized by volume. Be sure to know your numbers to ensure your marketing efforts and inventory is properly managed so that overall sales revenue and shopper satisfaction is maximized.

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