Navigating the Retail Storm: Mastering Prioritization in Chaotic Stores

Despite huge efforts made by retail teams, shoppers often find themselves navigating disorganized, cluttered, or out-of-stock stores due to the immense unpredictability inherent in their operation. But fear not — this doesn’t necessarily spell doom. In fact, under certain conditions, it might even boost sales. It all comes down to selecting the appropriate prioritization approach.

The Nightmare of every retailer

5:45 a.m.

Maria stepped through the entrance door of the 1,000-square-meter supermarket she managed. Her head was pounding, and her eyes half-closed from a restless night’s sleep. Mechanically, she reached to disable the alarm, emerging from the dimness that enveloped her.

Gradually, the unmistakable shapes of pallet trains began to reveal themselves before her. Leaning against the walls, squeezed into the narrow aisle that led into the store, they stood like skyscrapers dotting the horizon of a bustling metropolis.

She couldn’t believe it. The store was a mess, and it would open in less than two hours.

Maria glanced at the faint morning sunlight filtering through the warehouse skylight, hoping it might offer some divine inspiration to tackle the impending disaster. After all, not everything was lost — yet.

Nailing Prioritization

For all those who work or have worked in retail operations at some point in their careers, Maria’s little tale may sound strangely familiar. Similar situations unfold every day in millions of stores scattered across the globe.

Intuitively, common sense tells us that all stores should be perpetually organized, clean, and tidy — regardless of the time of day, month, or year. After all, this ensures that any customer would feel compelled to step inside and, in turn, maximize the retailer’s profitability.

But in an increasingly omnichannel world, where physical stores grapple with fierce competition from digital realms (whether e-commerce or q-commerce), the customer experience during each visit should be nothing short of extraordinary. Why? Because that’s what boosts the likelihood of a purchase and keeps them coming back.

In other words, the store’s operation should be nearly agnostic to:

· The bustling movements of all the humans within its walls

· The intricate dance of merchandise circulation

A study by Castro, Morales, and Nowlis (2013) attempts to question this seemingly irrefutable dogma. In reality, the disorderliness of store shelves, one of the biggest nightmares for any retailer, may not be as detrimental to certain categories or types of products as it is to others. In fact, it might even be beneficial for boosting sales of some items.

According to the insights of these authors, customer reactions to shelf disorder are largely related to the possibility that other customers have interacted with the products previously. We observe two distinct situations:

· For ingestible items, customers fear that previous interactions with other customers may have contaminated the products.

· For lesser known brands, customers are led to believe that an item is very popular (and therefore valuable) because it has been handled multiple times by other customers or because only limited quantities remain.

In summary, we can outline these conclusions as follows:

To complement a potential prioritization matrix, we need to incorporate the volume turnover factor, which can magnify the effects previously described and exert additional pressure on store teams during the replenishment of each item.

Thus, building upon the work of the cited authors, we arrive at the following priority ranking:

The utmost priority, therefore, should be given to ingestible items, from well-known brands with high turnover. At the opposite extreme, noningestible items from lesser-known brands should be placed last on the restocking lists.

A 2-step action plan to master the chaos

If we imagine the distribution chain as a river, we can design a set of simple, yet effective, measures aimed at tackling chaos in two crucial moments:

1. UPSTREAM — Before reaching the store:

· Ensure an assertive balance between well-known brands and new competitors within efficient assortment management.

· Guarantee the correct target stock coverages in the planogram, based on the previously defined priorities, with special focus on critical types of items (i.e., ingestible items, from well-known brands with high turnover) to minimize the risk of stockouts.

· Optimize the forecast for each item, considering the existing substitutability relationships between different products and varying levels of stockout probability severity in the store.

2. DOWNSTREAM — In-store management:

· Schedule the store replenishment teams’ hours to account for the most purchased items during each shopping mission, time of day, and day of the week. Strengthen teams whenever sales of critical categories over-index during specific periods.

· Design the store’s macro layout to reduce the distance between the position of critical categories on the shop floor and their respective storage area.

· Define the massive and selective restocking lists correctly, following the presented priority matrix.

Sources:

CASTRO, Iana A., MORALES, Andrea C., NOWLIS, Stephen M., Journal of Marketing, Vol. 77, No 4 (July 2013), pp. 118–133