getting more with less - nielsen · 80% of shoppers prefer to shop in store once in every two weeks...

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GETTING MORE WITH LESS CREATING SUCCESSFUL ASSORTMENT

OPTIMIZATION STRATEGY


With so many products available to be placed on the shelf, how do you build an

assortment strategy that captures consumer needs and achieve incremental growth to

the category?

Today, fast-paced lifestyles are moving shoppers to make fewer trips to the stores

than they did in the past. 80% of shoppers prefer to shop in store once in every

two weeks or once a month (Nielsen Shopper Trends 2018 - KSA), translating into

fewer chances to capture consumers’ attention.

The reality is that while shopping trips per shopper are becoming less frequent, 54% of

FMCG purchase decisions are still made in store. In addition, as shoppers spend

lesser time in stores, 6 seconds is the average time spent by shoppers looking for a

specific item before they settle for an alternative.

It is observed across a basket of categories that the number of FMCG active SKUs

has continued to steadily increase over the years. In UAE alone, active SKUs in 9

basket categories of FMCG have moved from about 112,000 in 2016 to 116,000 in

2018. In KSA, the trend may seem to decline but in reality it is driven by very few

categories. This can be seen in the number of new product introductions seen in KSA.

There were over 7000 NPI in the top 15 categories alone in the KSA market in 2018.

The huge product proliferation in the recent years have left the shoppers

overwhelmed. Over and above that, even before a shopper enters the store, they are

exposed to products via other media channels. However, when in store, they would

typically want to find what they are looking for and they want to find it fast. Hence, it is

very important to understand what products will truly add value into the already

distended range offering in most categories. Unchecked product range additions will

eventually post more risks than benefits to the portfolio or category.

ON AVERAGE, A TYPICAL GROCERY HAS 30K+ ITEMS…

112.7

82.4

114.7

84.6

116.4

80.4

UAE KSA2016 2017 2018

Total FMCG SKUs evolution (9 category baskets) || 2016 - 2018

SKUs (in ,000)


1,064

105

2,966

715 619

1,476

418 477

143

1,058

105

3,179

779 679

1,511

427 474

148

1,061

108

2,906

764 686

1,495

429 463

161

CSD FreshMilk

Juices CookingOil

Pasta FrozenMeat

Cheese Poultry BabyProducts

2016 2017 2018

Category-wise active SKUs evolution - UAE || 2016 - 2018

Category-wise active SKUs evolution – KSA || 2016 - 2018

529

2707

2142

1150

2026

921 714

1048

1567

573

2756

2196

1428

2100

1059

755

1016

1544

Dairy Juice Biscuits Water Snacks CSD CookingOil

Cheese FrozenMeat

2016 2017 2018

This increase in active SKUs is not accompanied with increase in store sizes. The size

of stores are more or less the same if not decreasing. In fact, in some of the key

markets in the region we are seeing higher growth in smaller neighborhood stores and

convenience format stores, which presents a bigger challenge to address all shoppers’

needs in the limited space.

The limited space will lead to many logistical challenges for both retailers and

manufacturers if the assortment decisions made are not accurate. In an ideal world, a

retailer would like to present the entire spectrum of available products to shoppers,

however, in reality, it is necessary to plan the assortment well, as investment in

inventory and space available in store are both limited presenting actual constraints for

retailers and manufacturers. A poorly planned assortment can lead to increased out-of-

stock, dead inventory on shelf, dissatisfied shoppers, wastage in supply chain and man

hours: all of which affect the total sales of the Brand, Category and Store.

Thus, the pressure to fit more SKUs in the store is increasing. Now the million dollar

question – how do you determine the right level of SKU assortment for a category?


DID

YOU

KNOW?

On average % of SKUs

11% in UAE

13% in KSA

35% in Egypt

17% in Morocco

This is propelled further

by new products

introduced every year

In KSA, there are an

average of 7k NPIs in the

Top 15 categories

Looking at SKU and sales trends in the region,

Nielsen observes that while there are many

SKUs offered within a category, only a small

portion of them actually drive the category

volume. From the tail analysis below, we found

that in many countries more than 50% of the

SKUs contribute to the less than 2% of the

FMCG sales (Tail). This leads to the question -

do we really need that many SKUs?

contribute to

of category sales

% of SKU contributing to the bottom 2% of category sales || 2018

Top 80% sales

volume contributing SKU’S

81% - 98% sales

volume contributing SKU’S Bottom 2% sales

volume contributing SKU’S

We looked at the following categories across Food & Non-Food to put together this report. Period analyzed

is from January 2017 to December 2018

UAE: CSD, UHT, Detergents, Soaps, Cooking Oil, Chocolates, Biscuits, Cheese, Diapers, Rice, Infant

Formula & Frozen Meat

KSA: CSD, Juices, Cooking Oil, Frozen Milk, Cheese, Poultry, Infant Formula, Baby Products.

(From Nielsen Audit Data)

In this report, Nielsen examines assortment trends across top categories and

manufacturers and studies the impact they have on the market. By analyzing shoppers’

behavior, we have identified factors leading to and resulting from assortment

inefficiencies as well as the best approach to planning assortment on shelf to capture

shopper’s attention and get maximum returns.

16% in Pakistan

12% in Nigeria

16% in Kenya

80%

35%

16%

17%

16%

12%

13%

11%

42%

36%

33%

32%

24%

35%

27%

23%

48%

50%

52%

64%

52%

62%

EGYPT

KENYA

MOROCCO

PAKISTAN

NIGERIA

KSA

UAE


THE TALE OF THE TAIL… The retail landscape has grown ever more complicated and highly competitive as

retailers and manufacturers strive to meet shoppers fast-changing needs. Retailers

often look at maintaining high assortment levels for various reasons; to provide the

maximum assortment for best in-store shopper experience, have a steady source of

rental incomes, retain more control over inventory, drive higher category profitability,

accommodate private-label products, compress space within existing categories to

add new lines of product, and/or try to keep up with other retailers.

Manufacturers on the other hand, want to increase distribution of their products far and

wide. Given the choice, they would do the utmost to have each and every product from

their portfolio placed on every touch point available to reach consumers. This, in a

retail environment, will lead to shelf crowding.

Due to the objectives of retailers and manufacturers, inherently, in most categories the

tail (all products contributing to bottom 2% of volumes) usually tends to be very long.

In 2018, on an average 62% of products in UAE and 52% products in KSA contribute

to bottom 2% of category sales. These are the products that occupy space on the shelf

but do not sell very well. The situation is more alarming in some categories where the

tail is as long as 76% (CSD, Long Life Milk etc.).



16%

21%

21%

16%

14%

13%

10%

7%

8%

7%

52%

39%

37%

37%

36%

35%

35%

30%

28%

25%

33%

40%

43%

48%

50%

52%

55%

63%

64%

67%

BABY PRODUCTS

INFANT FORMULA

POULTRY

CHEESE

FROZEN MEAT

PASTA

FRESH MILK

COOKING OIL

JUICES

CSD

16%

17%

11%

15%

13%

9%

8%

9%

10%

7%

5%

6%

32%

31%

34%

28%

29%

30%

29%

27%

24%

25%

20%

18%

52%

52%

55%

57%

59%

61%

64%

64%

66%

68%

75%

76%

FROZEN MEAT

INFANT FORMULA

RICE

DIAPERS

CHEESE

BISCUITS

CHOCOLATES

SOAPS

DETERGENTS

OILS

LONG LIFE MILK

CSD

UAE FMCG

KSA FMCG

Top 80% sales

volume contributing SKUs

81% - 98% sales

volume contributing SKUs Bottom 2% sales



TAILS ARE NOT THE SAME… Looking at the tail at an overall country level is probably not the best way to

understand the dynamics in the market. The needs addressed and the shopping

behavior is very different when we look at different channels. It is therefore very

important to break down the assortment strategy by channels at the least.

The assortment overview may give a different picture when we split the channels. For

example, Milk Powder in KSA has 41% SKUs contributing to top 80% sales (15% to

bottom 2%) in Traditional Trade whereas it has 17% SKUs contributing to Top 80%

sales (47% to Bottom 2%) in Modern Trade. This clearly highlights that both these

channels have different dynamics for Milk Powder which in turn means specific

Assortment strategies for each of the channel.

The more granular the breakdown of the markets, the better the mix of assortment can

be worked out. The idea is to get the breakdown to a reasonable and manageable

level as more granular the breakdown, the higher resources will be required to support

the planning and execution.


KSA MT

KSA TT


22%

21%

18%

17%

19%

12%

15%

13%

13%

41%

38%

39%

36%

32%

39%

34%

34%

33%

38%

41%

43%

47%

48%

49%

51%

53%

54%

FROZEN MEAT

POULTRY

CHEESE

MILK POWDER

DETERGENT

BISCUIT

OIL GHEE

CHOCOLATE

DESSERT

42%

41%

40%

31%

20%

20%

23%

18%

10%

45%

44%

45%

42%

52%

51%

48%

45%

46%

13%

15%

15%

27%

28%

29%

29%

36%

44%

FROZEN MEAT

MILK POWDER

POULTRY

CHEESE

DESSERT

BISCUIT

OIL GHEE

CHOCOLATE

DETERGENT

Top 80% sales


81% - 98% sales

volume contributing SKUs Bottom 2% sales



THE BATTLE TO BE ON SHELF

KSA & UAE | Correlation between share and assortment changes (across Top 10 Manufacturers in multiple categories)

-15%

-10%

-5%

0%

5%

10%

15%

-30% -20% -10% 0% 10% 20% 30%

Volume Change %

Assortment Change %

The underlying assumption of increasing assortment is that offering more products

would lead to more sales. Some would assume that reducing assortment would lead to

losing market share. This is a misperception! Nielsen data from multiple categories in

KSA and UAE show that assortment size has no correlation to volume share.

Each point on the above chart is the representation of an assortment change with its

corresponding Volume change. As you can see, the plot is scattered all over the chart

area denoting no direct correlation between assortment change and volume change. This

is particularly true for saturated or mature categories.

In new segments, we may still observe a positive correlation between assortment change

and volume change. Any new product added in innovation segments / categories initially

will bring in more sales. But this is only true for new segments.

While manufacturers are increasingly pushing more products into the market, their entire

offering is rarely on the shelf. Nielsen statistics show that on an average only 18-22% of

the Food and 12% of Non-Food portfolio is handled in Traditional Trade while 28-

38% of Food and 23% in Non Food is handled in the Modern Trade channel. Larger

gaps are observed in traditional trade where shelf space is very limited. Thus, not an ideal

situation for the manufacturer with high expenditure for offering a variety of SKUs -

production costs, distribution costs, logistics costs, marketing costs - with only a fraction of

SKUs within the portfolio land on the shelf.


KSA & UAE | % (average) of portfolio* handled in the channels

On an average, less than 30% of the portfolio get placed on shelf

* Top 3 manufacturers across multiple categories

Categories analyzed:-

KSA: Cleaners, Poultry, Baby Products, Cheese, Infant Formula, Frozen Meat, Pasta, Juices, CSD

UAE: Soap, Diapers, Milk Powder, Biscuits, Frozen Meat, Snacks, Detergents, Chocolates, CSD

UAE

18% 12%

28% 23%

FOOD FOOD

22%

12%

38%

22%

FOOD NON FOOD FOOD NON FOOD

KSA TRADITIONAL TRADE

MODERN TRADE

21% 20% 16%

13% 11% 11%

Milk Powder CSD Chocolates Soaps Frozen Meat Detergents

57%

31% 27%

22% 21% 18%

Milk Juices Cheese CSD Pasta Cooking Oil

The portfolio utilization varies by channel and from the studies it is observed that the

number is usually higher in Modern Trade. However, in some Traditional Trade driven

categories utilization of portfolio is higher.

If the portfolio utilization is very low for a particular manufacturer in a channel, it could

mean an opportunity to optimize distribution costs. SKUs that are not bringing in added

value into the channel could be de-prioritized and those resources can be focused on the

important SKUs.

* Top 3 manufacturers

* Top 3 manufacturers

UAE | % (average) of portfolio* handled in the channels

KSA | % (average) of portfolio* handled in the channels


MORE DOES NOT MEAN MORE Increasing offerings in store may lead to an increase in shopper dissatisfaction (paradox of

choice). This has been demonstrated by a study1 run by psychologists Sheena Iyengar

and Mark Lepper where they observed that shoppers exposed to larger choice of products

were one tenth as likely to buy compared to shoppers exposed to limited choice, bringing

us back to the point that more SKUs does not necessarily lead to more sales.

Another issue with increasing offerings is potential out of stock losses. Our analysis

conducted on 80 manufacturers in Traditional Trade (2018) concludes that there is a

positive correlation between the increase in portfolio fragmentation and out of

stock. (Portfolio fragmentation: Share of assortment versus the share of volume. Higher

fragmentation means that more distribution investments are required for a Manufacturer to

maintain the volume share.). This can be caused due to multiple reasons such as logistics

issues due to insufficient space in the delivery van, merchandiser lapse in store due to

focus on many SKUs, limited shelf space leading to lesser facing for top selling SKUs. In

the end, having more slow moving SKUs will have an impact on the sales of top

rotation SKUs. The loss of sales due to one day out of stock of top rotation SKUs could

be more than the incremental sales that a slow moving SKU brings. It thus becomes very

important to pick the right mix of SKUs for each channel.

KSA & UAE (TT) | Assortment fragmentation vs out of stock (Top 3 manufacturers, Jan 2018 to Dec2018)

Size of OOS compared to category average

(Index)

0%

50%

100%

150%

200%

250%

300%

350%

400%

0% 50% 100% 150% 200% 250% 300% 350% 400%

Portfolio fragmentation index

= Share of Assortment/ Share of

Volume

Bought later

17% Other store

32% Did not

buy

11% Other brand

20% Within brand

20%

How Shoppers respond when faced with Out of Stock events

1https://medium.com/@FlorentGeerts/the-jam-experiment-how-choice-overloads-makes-consumers-buy-less-d610f8c37b9b

https://medium.com/@FlorentGeerts/the-jam-experiment-how-choice-overloads-makes-consumers-buy-less-d610f8c37b9b
























69% 50%

31%

31% 50%

69%

1st Time 2nd Time 3rd Time

When an out stock situation occurs, there are different ways in which Shoppers respond to

it and the impact to the manufacturer and retailer is implied by that response.

Moreover, repeated out-of-stocks will start to eventually impact the store sales. The more

out of stocks Shoppers face, the lesser inclined they are to settle for alternatives. The

initial out of stock events may be forgiven by the Shopper but if it becomes a consistent

experience they get in the store, the store perception would be impacted and their

chances of returning to the store declines.

Effect of Repeated Out of Stocks

Substitute with another SKU Postpone/Cancel Purchase

Nowadays, many manufacturers and retailers are working on rationalizing their

assortment but they typically use rate of sales as a benchmark. The rate of sale is just one

part of the equation and looking at this in isolation can lead to poor decision making.

delayed the

purchase:

a loss of immediate

sale to the retailer and

delayed sales for the

Manufacturer

17%

did not buy:

Loss of sale for

both Retailer and

Manufacturer

11%

bought another

brand:

Loss of sale for the

Manufacturer along

with Shopper

dissatisfaction

20%

went to another

store :

Loss of sale for the

Retailer along with

Shopper

dissatisfaction

32%

bought within

brand

Some amount of

Shopper

dissatisfaction

20%


The above chart shows an hybrid example where Rate of Sale and Weighted Distribution

are used as parameter for Assortment Rationalization. In this approach all SKUs below

the curve would be de-prioritized from the mix. This method is better that just looking at

ROS however Nielsen recommends to evaluate the true incrementality of SKUs and use it

along with the Rate of Sale. In the above example itself, the SKUs highlighted in dark

green were the top 10 incremental SKUs and most of them were falling below the curve.

Retaining these SKUs and de-priorotising other non incremental SKUs instead would

have worked better for the portfolio / category… so now the questions is what is

incrementality and how is it determined?

Hybrid approach to Assortment Rationalization using Rate of Sale (ROS)

and Weighted Distribution (WD)

-

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0 10 20 30 40 50 60 70

Weighted Distribution

Ra

te o

f S

ale

Average

Category

ROS = 0.32 SKU1

SKU2

SKU3

SKU4

SKU5

= Top 10 incremental SKUs


INCREMENTALITY IS KEY When we consider a set of products placed on a shelf, it is necessary to study how

these products interact with and/or whether they cannibalize each other to

understand final impact on sales. The key is to leverage the measure of

incrementality/cannibalization/interaction between SKU to maximize the total

incremental value of a category. The SKUs that have similar propositions will fight for

the share of wallet of the same shopper.

With Nielsen store level sell-out data, we can analyze how products interact with each

other in store to understand the true incrementality any product brings to the

category/portfolio. But what does incrementalilty mean? Let us consider the example of

three SKUs. By traditional rate of sales analysis, if we could list only two items, we would

pick Item A and Item B. However, if we understand the cannibalistic effects of these items,

we see that Item A and B are highly cannibalistic and eat into each other’s sales (huge

overlap). Item C on the other hand, offers a unique proposition to the portfolio and adds

incrementality. Thus, if Item C is offered along with Item A, the end result for the category

performance is higher. The traditional method of following rate of sales to decide on the

best mix overlooks this important parameter leading to inefficient assortment offerings.

Cannibalization effect

High Cannibalization

Total Sales: $110

Low Cannibalization

Total Sales: $150

Size of bubble: $ Volume

Overlap: Level of Cannibalization

Item A Item B Item C

Item

A

Item

B

Item

C

Item

D

Item

E

Item

F

Item

G

High

performing

items

Sa

les R

ate

($

Sa

les p

er

Po

int o

f D

istr

ibu

tio

n)

$1

00

$9

0

$7

0

*Cereals Category -

Assortment Analytics

study run for a leading

retailer (2015/16 US)

Size of Prize from different

assortment plans

RANKED BY

ITEM SALES

RANKED BY ITEM

INCREMENTALITY

$67.6 M $81 M

Upside:

+20% $13.5 M

Including higher incremental SKUs in the range will

give far better outcome than simply placing the best

selling SKUs to address the shopper needs in store. This

will ensure that we do not end up with a large tail that could

potentially drag the category down with it.

The assortment plan based on

incrementality gives around 20% higher

returns than the ones based purely on ROS


Another important aspect to consider and more often ignored is the physical space

available in the store and product presentation. Usually, the range or assortment

decisions for the store/channel do not take into consideration the space availability and

product placement. What happens if your best performing / strategic SKU gets insufficient

facings or is placed in a low visibility area on the shelf? The sales will most likely suffer.

Not only for the Brand but for the whole category. Therefore, even if we consider the

incrementality of SKUs while finalizing the range, when it comes to on shelf planning,

there are many other factors that need to be taken into consideration that will affect total

sales. We have seen that the frequency of shoppers visiting stores is declining. Also, the

time spent by Shoppers looking for the products of choice is really low – 6 seconds. There

is a fair chance that Shoppers will cancel their purchase if they cannot find products in

time – even if the product is available in store!! This is loss of sale.

A proper Space Management (Planogram) process can help here. Some of the points to

consider while putting the process in place are :

Because the above points impact the sales of SKUs in store, an effective range

planning strategy can only be successful in conjunction with a proper shelf plan

(especially in Modern trade where the stimulus on shelf has direct impact on sales)

It is important while finalizing the range to ensure that the Space being allocated is

sufficient to accommodate the required inventory of all SKUs to meet the demand. If this is

not verified in the planning stage, there will be lost opportunities of sale (on account of out

of stocks) when the range is presented in store but enough inventory is not planned. In

Nielsen, we call this as Inventory Models that take into consideration the historic sales of

the SKUs and the existing replenishment cycle at store to determine the ideal inventory

that should be placed on the shelf for maximum efficiency.

THE SHELF….AN

UNDERESTIMATED

NEMESIS

Shopper &

Shopping

missions

Nature of

Category –

Impulse driven or

Planned

Facings / Inventory required -

if the stocks are not

optimized, the loss of sales

due to out of stocks could

result to inefficient returns

from the available space.

Retailer /

Manufacturer

objectives


Case I : Best 115 SKUs are placed on the shelf but the stock has not been

optimized.

115 Items

Potential Sales : $5,990

Out of Stock Loss : $440

110 Items

Potential Sales : $6,100

Out of Stock Loss : $0

In the above case, although we have the best 115 SKUs based on the rate of sale and

incrementality, due to the out of stocks faced in the faster moving SKUs, the total potential

of the shelf is decreased.

On the same shelf, after inventory optimizations, even though the final number of SKUs on

shelf is lower, the total potential from the shelf is increased.

The above case optimizes the inventory, however, it does not take into consideration the

Shopper. The Category Management process is recommended here to help build a

placement (Planogram) strategy keeping the Shopper in focus and also considering

Retailer’s and Manufacturer’s objectives.

The seamless link between Demand and Supply to be efficient on shelf

As shelf inventory

requirements change, so does

the possible assortment As sales change due to assortment

changes, so do shelf inventory

requirements

INVENTORY MODELS Optimize space to

meet the demand

requirements

INCREMENTALITY MODELS

Optimize assortment

to reduce redundancy

and maximize potential

The right assortment will capture full

consumer demand: The better the

assortment, the higher the sales

DEMAND

SUPPLY

2% 2%

2% 2% SK SK

WH WH

2% SK SK 2%

ST CH OG OG

ST ST CH CH

FF FF SK SK

2% 2% 1% 1%

OG OG WH WH

2%

MILK 1%

MILK STRAWBERRY

MILK

CHOCOLATE

MILK

NON-FAT

MILK


The above process is the classical 8 steps of Category Management. It is a collaborative

process between a Manufacturer and Retailer, managing categories as strategic business

units to produce enhanced business results by focusing on delivering Consumer /

Shopper value.

With the understanding of Shopper, the Shelf design (Planogram) can be created to

achieve business objectives. However, in this paper, we will focus on the assortment

process and highlight the Nielsen approach to an effective assortment plan.

8 Step Category Management Process

Definition Roles Assessment Objectives Strategy Tactics Implementatio

n

Review


6 STEPS APPROACH TO EFFECTIVE ASSORTMENT OPTIMIZATION There is no unique and versatile formula for assortment optimization. Each country,

category, SKU and channel will have its own truth. However, it is possible to adopt a

more structured approach towards optimizing the ideal MUST stock list. It starts by

following these 6 key steps below to navigate the decision process:

1. Understand the objective and shopper decision tree

2. Work with store level models to estimate rate of sales and

incrementality. Supplement with profitability to improvise

3. Plan optimal assortment or hit list by channel

4. Simulate scenarios before execution to understand size of prize

5. Optimize range based on space

6. Ensure ongoing monitoring and adjustments


STEP 1

When it comes to assortment rationalization, there are essentially two scenarios :-

1. Category Management – Retailer focus- the best range for total category growth

2. Portfolio Optimization – Manufacturer focus - The best mix of SKUs for Brand growth

Insights begin and end in the category structure, thus the first critical step in any

assortment rationalization exercise is to understand how shoppers buy into the category.

In the Category Management process, assortment management is one of the tactics.

In order to get the right direction for any assortment strategy, the steps have to be

followed through and the most important one is the Category Definition and Decision

Tree. This gives an understanding of how shoppers purchase the category and

therefore how the category must be segmented.

1. Understand the rationalization objective and shopper decision tree

CATEGORY MANAGEMENT 8 STEP PROCESS

Assortment Optimization

Assortment Management

Category Definition/

Decision Tree Roles Assessment Objectives Strategy Tactics Implementation

Review

Similarly, in Portfolio Optimization, it is very important to understand the Category

Structure (decision tree). This determines which SKUs normally compete with each other

closely – in the eyes of the Shopper.

Assortman# then enables to structure the analysis from a macro to micro vision.

CATEGORY

Segment A

Brands

Items

Segment B

Brands

Items

Segment C

Brands

Items

# Nielsen Assortman is a regression based modelling study that gives range recommendations using incrementality based ramking.

*McKinsey 2016. A tight race in consumer packages goods. How to break out and win with big data, tools, and insights.

The sales data is used to run models for each level of the shopper decision tree.

Incremental sales are calculated on the upper level (e.g. what is the impact of adding 1

SKU in segment A within a given category?)


SL

OW

F

AS

T

2.2x Performance of companies

using store-level data vs. those

using aggregated national

(or regional) level data*

Nielsen runs an econometric model that uses store-level weekly scanning data to identify

cannibalization between items and assess if listing an additional items adds incremental

value to a category, segment or brand. It is recommended to use disaggregated store

level data based on actual shopper decisions to ensure robust model results.

STEP 2 2. Work with store level models to estimate rate of sales and incrementality.

Supplement with profitability to improvise

NEGATIVE POSITIVE INCREMENTALITY

RA

TE

OF

SA

LE

RATIONALIZE DEVELOP

NURTURE RESTRAIN

Key driver of category

• Increase items

• Increase visibility

Saturated & restricting category growth

• Maximize Profit

• Ensure you have the best items in distribution

Help to maximize category sales

• Review Slow movers for de-listment

Detrimental to category performance

• De-list worst performers

• Reallocate space

Individual product interactions can be understood when store level data is

analyzed which is the basis for Incrementality to be computed. As the data is by

store by period, the impact of all other parameters such as store type and size,

promotions, regional differences, seasonality etc. can be isolated and the true

interaction between SKUs (i.e. adding one additional SKU on sales alone) can be

studied using a regression based model.

Using the outputs of rate of sales and incrementality for each SKU, we can then place

every SKU on the segmentation below to make informed decision on the assortment

strategy to adopt. SKU profitability can be added into the Index to improvise SKU ranking

and ensure model results align with business decisions.

#1

#4

#5

#67

#99

1 2 3 5 6 8 9 10111252

SKU 1 SKU 1 & SKU 2 SKU 2



One size does not fit all - each CHANNEL must be treated

separately as shopping missions differ across channel.

The end result is thus a hit-list of SKUs (Minimum Stock List) by channel to understand which

SKUs should be pushed to distribution and which should be de-prioritized. This can also be

done at region level if the manufacturer has a different assortment strategy per region.

STEPS 3 & 4

3. Plan optimal assortment or hit list by channel/region

4. Simulate scenarios before execution

Hit List by Channel

Item Supermarket Self Service Grocery

SKU 1 7 6 7

SKU 2 1 1 2

SKU 3 2 2 1

SKU 4 6 7 6

SKU 5 3 3 3

SKU 6 4 5 5

SKU 7 5 4 4

SKU 8 10 10 10

SKU 9 8 8 8

SKU 10 9 9 9

To ensure maximum impact, Nielsen also provides simulations where we create multiple

scenarios to understand how changing the selection of SKUs and their distribution will

impact sales value % and market share.

Below is an example from the results of such a scenario. Here we have SKUs sorted by

their incremental ranks and we also know their current weighted distribution. Based on the

model results, we then recommend distribution changes for each and every SKU i.e. either

by pushing distribution up or de-prioritizing and then estimate the sales impact. Multiple

scenarios can be created to ensure the right level of distribution targets are set.

Item Volume share Current WD Recommended WD Share impact from WD change

SKU 1 3.97% 92% 97% 0.29%

SKU 2 2.55% 90% 95% 0.18%

SKU 3 0.56% 82% 87% 0.02%

SKU 4 0.60% 69% 74% 0.04%

SKU 5 1.27% 74% 79% 0.03%

SKU 6 0.13% 47% 52% 0.01%

SKU 7 0.18% 39% De-prioritize -




Simulation output for 1 channel



STEPS 5 & 6

The final part of the exercise involves creating scenarios to understand how changing

the selection of SKUs and manipulating the distribution will impact sales value %

5. Optimize range based on space

6. Ongoing monitoring and adjustment

Fitting the range on the shelf is important :

unchecked Out of Stock losses of fast moving SKUs

will impact overall sales of Category. Nielsen ASO

cloud-based platform has the capabilities to run

these scenarios and validations. The output from

this can then be uploaded into Nielsen Spaceman to

build Planograms based on guidelines

Once the range decision has been made and implemented, it is important to have an

ongoing monitoring in place to check the impact and make tactical changes. Also, there

would be new product introductions in the market which need to be taken into

consideration during reviews.

The Nielsen ASO platform is an “Always ON” platform that gives you the capability to

monitor the assortment on an ongoing basis. The platform uses the incrementatility

derived from the regression model and updated sales from the Nielsen Audit data to

help track plans.

Category Current State : Current performance of the category (with up to date sales)

Plan modifications and simulations: Create and simulate scenarios to alter plans and

add new introductions in the range. The scenarios can then be compared to each other

and the best outcome can be used for implementation.

Assortment

Opportunity

Sales Trends

Recommended

Assortment Strategy

Space Validation

Add / Remove SKUs

Simulate distribution

Compare Scenarios

Current Sales

Simulation 1

Simulation 2



FINAL RESULTS

1

2

3

Understand which SKUs are

driving or restricting growth

and use this knowledge to

streamline the portfolio

Use freed up space to solve

out of stock issues and

increase visibility of remaining

portfolio to drive performance

Use freed up space to push

distribution of stronger

performing SKUs

Use freed up space to push

distribution of stronger

performing SKUs and optimize

the portfolio mix in stores

In summary, the assortment process will allow you to understand and identify the SKUs

that are relevant and important for specific channels. It will help cut the tail which in turn

will unlock space on the shelf that can be utilized in one of the following ways:-

1. Solve out of stock: By giving the unlocked space to fast moving and more deserving

SKUs, the out of stock risks can be reduced. This will have a direct impact on sales.

2. Push distribution of relevant SKUs: Once incrementality is identified, we can push

the distribution of stronger SKUs to bring true incremental sales to the portfolio /

category.

3. Enhance Range / Portfolio Mix: With the help of Incrementality, we can identify the

best mix of SKUs that will not only address the Shopper needs but also bring in true

incremental sales to the category / portfolio.



ASSORTMENT CASE STUDY

EVERY BRAND’S SKU DILEMMA: DOES VARIETY ALWAYS WIN? NIELSEN ASSORTMENT AND SPACE OPTIMIZATION HELPS YOU FIND THE

SWEET SPOT ON THE SHELVES AND IN THE STORE

Choices are aplenty when it comes to buying shampoo: ranges of regular and

antidandruff ones, with different ingredients and effects, organic ones, for males and

females.

To help the client side step the guessing game between variety and focused

effectiveness, Nielsen’s Assortment and Space Optimization (ASO) solution was put

into action for a 52-week period, studying the entire Shampoo category within Modern

trade. The assortment model analyzed the interaction among items of the category

(item/week/store), accounting for two main segments: regular & antidandruff. Taking into

consideration incremental sales which each SKU brings, but as well cannibalization

which is happening between products, Nielsen came up with optimal portfolio

recommendation –that will benefit both client and category growth possibilities.

Leveraging market data while harnessing a combination of capabilities including

assortment planning and merchandising strategy, Nielsen was able to address client’s

questions in effective way.

Who: Shampoo Brand

Where: UAE

Business issue:

• Which SKUs to delist?

• Which SKUs to increase distribution?

• How to grow category sales?

Goals: To strengthen market performance and gain a

larger share of the Shampoo category within UAE modern

trade , while avoiding cannibalization within portfolio

HOW WE DID IT?

An established brand in Shampoo category in

UAE consulted Nielsen on a perennial mystery

puzzling all manufacturers:

“IS IT POSSIBLE TO SATISFY SHOPPER’S

NEED FOR CHOICE, WITHOUT DROWNING

IN A SEA OF SKUs?”


PROFITABLE OUTCOMES

Nielsen’s ASO solution demonstrated that success lies in the ability to better leverage

the concept of incrementally when designing their assortment strategy.

We provided valuable insights on each SKU within the Shampoo category, giving push

to the incremental ones, while cutting down on space for the least effective ones. Thus

unlocking opportunity for high performing SKUs to bring incremental sales and grow

category value.

Nielsen recommendations and results:

• Increase distribution of 40 SKUs

• Delist 12 SKUs to gain share

• By reducing the number of SKUs within portfolio, client was able to obtain both shelf

space and focus on production of items which are delivering best results.

• Shelf space - number of facings for winning SKUs increased and production costs for

non-effective products were avoided. A win-win situation.

For more information about Nielsen Assortment & Space Optimization or our Sales Effectiveness solutions,

contact your Nielsen representative or visit www.nielsen.com/seff.

ASSORTMENT

& SPACE OPTIMIZATION

ON PRICE ON THE MARK ON STRATEGY

SELL ON ON TARGET ON SHELF

Unlocked opportunity:

2.5 Million USD

ASSORTMENT CASE STUDY


NIELSEN TRAINING MODULES EASY-TO-FOLLOW TRAINING FOR PROFESSIONALS

EFFICIENT ASSORTMENT MANAGEMENT (EAM)

EAM is a 2-day classroom program designed to teach you the benefits and principles of Assortment

Management, as well as the factors, techniques, and analysis KPIs that are essential for achieving an optimal

assortment, for the benefit of manufacturer, retailer and shopper/consumer. The training is interactive with

hands on exercises and case studies.

DRIVING PERFORMANCE WITH RETAIL AUDIT ANALYSIS (DPRAA)

DPRAA is a 2-day classroom program designed to teach you how to best use and analyze retail audit data,

and to identify performance opportunities using distribution, visibility, stocking, promotion, price, and portfolio

analysis. The workshop is loaded with exercises and real-life scenarios, and aims to enable executives and

managers to best utilize the data for shaping decisions and strategies within their organization.

PRACTICAL CATEGORY MANAGEMENT (PCM)

PCM is a 2-day run-through of the category management process. This hands-on workshop, which includes

several case studies, covers topics such as the 8 steps of category management, retailer-supplier

collaboration, shopper decision tree, product range and merchandising, in-store activations, and review

metrics. The aim is to enable executives to apply efficient and effective in-store category management for their

brand.

IMPACTFUL SPACE MANAGEMENT (ISM)

ISM is a 2-day workshop on how to design store and category layouts. This hands-on workshop covers topics

such as store layouts, adjacent categories and dual placement, space allocation, category strategies, in-store

shopper behavior, traffic flow and the planogram creation process. It aims to enable executives to appreciate

store operations and to use space management techniques for practical and impactful space-management

decisions.

SHOPPER-CENTRIC CATEGORY MANAGEMENT (SCCM)

SCCM is a 2-day workshop designed to teach you how to apply a more shopper-centric approach to your in-

store tactics, as part of a Category Management projects. The topics covered include category management

review, shopper-centric framework, category opportunities, shopper decision trees, shopper assessment,

shopper segmentation, insights generation technique, merchandising principles for shoppers, promotional price

elasticity, promotional mechanics, and more.

E-COMMERCE CATEGORY MANAGEMENT (ECCM)**

ECCM is a 2-day workshop that will power you to win the online war. With the online shopping growing in size

and acceptance day by day, it is very important to understand how can you be an effective and efficient player

in this channel. This training exposes the participants to strategies that will help leverage ecommerce into an

engaging shopping option. It gives a process to overlay the e-catman process in ecommerce.

** Coming Soon


ABOUT NIELSEN

Nielsen Holdings plc (NYSE: NLSN) is a global measurement and data

analytics company that provides the most complete and trusted view available

of consumers and markets worldwide. Our approach marries proprietary

Nielsen data with other data sources to help clients around the world

understand what’s happening now, what’s happening next, and how to best act

on this knowledge. For more than 90 years Nielsen has provided data and

analytics based on scientific rigor and innovation, continually developing new

ways to answer the most important questions facing the media, advertising,

retail and fast-moving consumer goods industries. An S&P 500 company,

Nielsen has operations in over 100 countries, covering more than 90% of the

world’s population. For more information, visit www.nielsen.com.

THE SCIENCE BEHIND WHAT’S NEXT TM


THE SCIENCE BEHIND WHAT’S NEXT TM

getting more with less - nielsen · 80% of shoppers prefer to shop in store once in every two weeks...

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