Facings optimization is moving quickly from art to science

May 8, 2023
By Richard Schwartz President and CEO, Pensa Systems

Based on recent discussions with leading CPG brands, it’s apparent that traditional approaches to optimization of shelf facings leave a lot to be desired. CPG category management and sales teams can sell more space with highly accurate shelf data analysis that shows the optimal number of facings by SKU required to optimize on-shelf availability (OSA) and higher OSA equals increased sales. It’s a new way of thinking about shelf optimization. Think of it as a pricing elasticity model for facings.

Space planning has traditionally relied heavily on point-of-sale analysis. But as computer vision and artificial intelligence has emerged as a source of truth of what’s really on the shelf at retail, space planning can leverage a highly accurate, direct view of what’s out of stock, and what’s running low, to improve shelf planning’s impact as a growth driver.

It was quite striking to see how some of our customers are using this to optimize the retail shelf and understand how many facings of the major products and how much of the shelf space itself should be devoted to each of the products as an optimized version of the shelf.

We all know in the industry that it’s very hard to understand the shelf design and what the right amount of shelf space is for the top moving products by looking at point of sale data only. It’s very noisy. You don’t know whether a product didn’t sell because it didn’t sell or whether it didn’t sell because it simply wasn’t on the shelf.

Retailers and manufacturers can now use the direct readout from computer vision and AI to capture real on-shelf availability. When we correlate that with the number of facings or the amount of real estate per product, we’re then able to determine with our customers what the optimal number of facings is product by product, category by category.

Let’s take a look at what I mean by that. Below, you’re looking at a major retailer channel, a major category and a major brand manufacturer as they look “in the wild.” It’s a kind of natural experimentation correlating the number of facings present with on-shelf availability or presence of the top client products, products for that client and the top number of products in a given category. We can discern overall, the top moving locations the next tier of locations and the bottom tier of locations, and what the impact is of a different number of facings in each of those categories.

What you can actually see is the optimal number of facings to be designed and present in each one of those situations. So you don’t overstock or over-inventory and you’re able to use the shelf space wisely for top moving products versus other products and top moving location versus other locations. And we’re able to do that all the way down to the SKU level to define the optimal number of facings. In the chart below you can see optimal product availability on the shelf without overstocking.

Major Retailer and Category brand MFR

*Tiers based on sales velocity (e.g., items that make up Top 20, Next 30, and Bottom 50% of sales for CLIENT) Date Range: 1/10/22-7/24/22

You can actually see that and plan that product by product, shelf by shelf, based on a kind of facings elasticity analysis, something that you simply can’t do from point-of-sale data. And something that’s too expensive to do by visual audit, manual audit, those types of traditional planning and analysis approaches.

For Category Managers, optimizing the shelf is now possible in a new way leveraging the practical power of computer vision and AI. Bringing real science from the source of truth about what’s on the shelf and available for sale, and how to plan the real estate with you as the brand manufacturer working closely with the retailer to optimize facings for mutual benefit. This analysis is very important and has never been possible before but is now possible through advanced shelf intelligence done through the innovation Pensa has brought to the market.

Pensa provides continuous, real-time understanding of actual on-shelf inventory across all channels and SKUs. Contact us to learn more.