Myth-busting – “Shelf Space Should Equal Market Share”


My thanks to Omar K from the Linkedin Trade Marketing Experts group for raising a perennial question:

“What is the relationship between value sales, volume sales and share of shelf?”

At the heart of the question is one of the biggest myths of retail marketing: that a brand’s share of market should be reflected on shelf. Initially this has a ring of logic to it. If i have 30% of the market, surely I should have 30% of the shelf?  But hang about,  should that be value share or volume share? And share of what – total market? Channel? Retail sales? What about share of the profit the category makes for the retailer? Shouldn’t sales velocity and refill rates be accounted for? What about GMROII? And oh,  and where is the retailer’s strategy in all this? So it’s a complicated issue right?

But to really test the myth that market share equals shelf space, I think there are two questions we as shopper marketers need to ask:

  1. If space share is a factor of value sales, volume sales, profit delivery or GMROII, what share of shelf should be given to a new product?
  2. Is there any empirical proof of a direct link between space and sales?

The logical answer to the first question is none. Which means that the myth of space equalling share disappears in a puff of logic! But it also serves to highlight that defining a shelf layout is not a simple task.

The answer to the second question therefore becomes useful. To date (20 years in the industry, 3 continents, too many categories!) I have never seen an empirical proof that shelf space and sales are directly proportional. What I do know is that both Mars UK and PepsiCo have both researched this and have concluded that incremental facings have a decaying utility. That is to say the next facing always delivers less sales than the one before. So you will eventually reach a point where the inventory costs of more space outweigh the sales benefit of having it!

So how much space is the right amount of space for a brand? Well this depends on the behavior you want to create. To encourage shoppers into a new brand or to drive penetration of a category segment you must ensure your target shoppers can easily see your brand or segment. So it would be logical to give a disproportionally greater share of prime shelf space. The same is true if you want to drive trade up or increase purchase frequency. In this respect it’s not the absolute share of space that matters but the quality of space and the response it provokes.

To establish how much shelf space is the right amount of space, you need to do three things:

  1.  Define your target shopper group
  2.  Define the behavior you wish to create
  3.  Define the display which balances behavioral change with profitability.

Most retailers know this which is why they find it so tiresome when they are constantly barraged with complaints from manufacturers of space not equalling share.

So to Omar and the Trade Marketing Experts group  – I think the myth is busted! It’s time for consumer goods companies to get a better story!

Cheers!

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