Is Shelf Space Still Relevant?

Getting your product on the top shelf isn’t as important any more when the shelves themselves are smart and know what you want the moment you walk in.

Gaining product presence in retail is a difficult enough challenge, and once manufacturers have gained those retail distribution outlets, they still need to jockey for position on increasingly crowded shelves. Those manufacturers with well-recognized product lines get the best locations, the aisle impulse buy spots and the end caps, while newcomers face unrelenting pushback and are relegated to the bottom shelf.

It has always been a battle — often a losing one for smaller CPG manufacturers — but three factors are rapidly disrupting the status quo, making the battle for shelf space a little less relevant: smart stores, click-and-collect buying where you shop online and collect your purchase at a pick-up spot in the parking lot, and direct-to-consumer online sales.

Smart stores, as seen in innovations like Kroger’s smart shelves experiment, Amazon.com's Amazon Go store, and what's very likely to be something similar at Amazon’s newest retail plaything Whole Foods, represent the inevitable next wave of retail. Fears of personal information being stored have for the most part been assuaged. Those who fear that smart stores would de-personalize the retail shopping experience have also come to realize that, in fact, these technology innovations will help create a shopping experience that's far more personalized than conventional stores could ever hope to achieve.

According to Ric Noreen, managing partner of Waypoint Strategic Solutions, “There's not a lot of human interaction until you get to the checkout counter in any of those formats today. There's certainly nobody selling. For the most part, the whole brick-and-mortar shopping experience has been dehumanized. Any technology that can pop a coupon onto my phone when I walk down a particular aisle, I welcome that. It only stimulates demand.”

Those engagement apps and interactive signage create that consumer interaction prior to the checkout lane, which is so typically absent in traditional retail environments. Smart shelves understand who you are, where you are in the aisle, and what you’re interested in, and can offer directions to your favorite soda, present you with a coupon for something it knows you want, and not only shorten shopping time, but make it more personal and experiential.

The ease with which manufacturers can now sell direct to consumer is also changing the game, giving smaller firms a seat at the table as they become less dependent on deals with retailers that have long-standing arrangements for top-shelf space with favored distributors.

“The Amazon effect doesn’t have to be a negative for manufacturers looking to gain market share,” said Dr. Jacobs, founder of Cold-Fix, an over-the-counter homeopathic cold and flu product. “We've been able to gain the attention of some retail outlets, but we've found that success today is less dependent on that sort of retail distribution, and more on a mix of channels, including online.”

Cold-Fix, which recently launched in the U.S. after seeing retail success in Europe, is combining outreach to distributors and retailers with an aggressive direct online sales campaign. “The healthcare products market in the U.S. in general is very strong,” said Dr. Jacobs. “There's a significant shift in healthcare, especially in how U.S. consumers interact with their healthcare providers. Consumers are doing more research ahead of time, and so it's important to first, have excellent products available, and second, make sure consumers have ready access to the information they need to make an informed decision. Cold-Fix mirrors the healthcare industry in general, and consumer education has become the focal point of our marketing initiatives.”

The new healthcare environment, according to Dr. Jacobs, affects everyone in the industry, from insurers to healthcare providers, to manufacturers of over-the-counter goods. Accordingly, it has become important for those providers to accommodate shoppers at the retail level with rich levels of online information. The same is true across all industries.

That eye-level retail shelf space will always be desirable for manufacturers of consumer-packaged goods, but manufacturers that rely on that retail shelf space alone may be at a disadvantage. Strategies which embrace the online model for distribution as an equal channel to retail distribution will be the ones which win over the coming years.

Dan Blacharski is a thought leader and PR counsel to several internet startups. He's author of the book "Born in the Cloud Marketing: Transformative Strategies for the Next Generation of Cloud-Based Businesses."