Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Dissertation report

242 views

Published on

  • Be the first to comment

  • Be the first to like this

Dissertation report

  1. 1. SHELF SPACING COMPETITION; EFFECTS OF SHELF SPACING ON CONSUMER BUYING BEHAVIOR IN FMCG INDUSTRY Submitted By: Muhammad Umair Muneeb Reg. no: BBA-2131075 Session: 2013-2016 School of Business Administration, National College of Business Administration and Economics, Lahore.
  2. 2. Page 3 SHELF SPACING COMPETITION; EFFECTS OF SHELF SPACING ON CONSUMER BUYING BEHAVIOR IN FMCG INDUSTRY Submitted By: Muhammad Umair Muneeb Reg. no: BBA-2131075 Session: 2013-2016 Supervised By: Ms. Saima Hassan A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF BECHELORS OF BUSINESS ADMINISTRATION, NCBA&E.
  3. 3. Page 4 DECLARATION I hereby declare that this is my original research work and to the best of my knowledge it contains no material that has been previously published or submitted to any other college, institution or university other than NCBA&E. Signature…………………………. Date……………………….. Muhammad Umair Muneeb REG: 2131075 BBA (Hons) 2013-2016
  4. 4. Page 5 Approval This project has been presented for examination with my approval as the appointed supervisor. Signature………………………….. Date……………… Ms. Saima Hassan Lecturer
  5. 5. Page 6 Certification It is certified that this thesis entitled “Shelf Spacing Competition; Effects Of Shelf Spacing On Consumer Buying Behavior In FMCG Industry” has been carried out and completed by Muhammad Umair Muneeb Reg no. 2131075 student of BBA (Hons) Business Management session 2013-2016 under my supervision during his Bachelors of Business Administration (BBA) program. Research Supervisor Saima Hassan Lecturer
  6. 6. Page 7 ACKNOWLEDGEMENT I am heartily grateful to Allah Almighty, the most beneficial, the most merciful, all knowing, who blessed me with the strength to complete this study. I offer respect, regards and sincerest words of thanks to Holy Prophet (PBUH) who is light of guidance and knowledge for humanity. I would also extend our gratitude to Ms. Saima Hassan, our reputed supervisor, who cooperated, guided and facilitated us a lot during our research project. I would like to thank the very important person who helped me in collecting information and providing data of different companies for my research, Mr. Ashraf Saeed(Marketing manager Six-B Food Industries Pvt Ltd., ex-Marketing manager Fruitien Juice Pakistan, ex- Marketing manager Nestle Pakistan). It would not be possible to complete this study without her guidance, advice, encouragement, cooperation, valuable suggestion, and help. I also like to pay my humble thanks to my parents and siblings who are always been source of courage and for doing all that have done so far for me. I would like to thank my friend Mr. Mobeen Ashraf who made me confident for this and always and thanks to all my friends for their help and support.
  7. 7. Page 8 ABSTRACT Consumer’s buying behavior is influenced by multiple cues including in-door and out-door. The purpose of this research was to find the behavior of consumers while choosing different product categories in any store and what affect does store has on decision making process. It is obvious that there are multiple factors that influence the buying behavior of the consumers but we have discussed about 5 different product cues which are common among shopping. We studied the importance of five factors on the sale of 8 product categories in two stores of Lahore, Al-Fatah store and Hyperstar Mall. A survey was conducted and 50 filled questionnaires were collected from consumers of both stores. MS Office Excel 2010 tool was used to analyze the data and calculating the probabilities. Likert scale was used to know the importance of these five factors for the sale of 8 product categories. On the behalf of our research we can say that out of these seven factors, shelf space is the least important factor for 2 to 3 product categories in both the store. Manufacturers and retailers both can use our research work to make improvements in their planograms.
  8. 8. Page 9 Table of Contents ABSTRACT............................................................................................................................................. 8 Introduction........................................................................................................................................ 11 1.1 SubjectIntroduction ............................................................................................................. 11 1.2 Statement of the problem.................................................................................................... 13 1.3 ProductCategories ............................................................................................................... 13 1.4 ResearchQuestion................................................................................................................ 14 1.5 Purposeofthe research ...................................................................................................... 14 1.6 Hypothesis............................................................................................................................... 15 LiteratureReview.............................................................................................................................. 16 2.1 What is shelfspace? ............................................................................................................. 16 2.2 ImportanceofShelfspaceformanufacturers.............................................................18 2.3 ProductCategories................................................................................................................23 2.4 TermDefinitions.................................................................................................................... 26 2.4.1 Grocery Store ..................................................................................................................................26 2.4.2 ProductCategories.........................................................................................................................26 2.4.3 Manufacturer ..................................................................................................................................26 2.4.4 Retailers ............................................................................................................................................26 2.4.5 Consumers........................................................................................................................................26 2.4.6 Planogram ........................................................................................................................................26 2.5 Conceptual Framework .......................................................................................................27 2.5.1 PriceOriented Tactics..................................................................................................................28 2.5.2 PerformanceTactics.....................................................................................................................28 2.5.3 Affect-relatedTactics....................................................................................................................28 2.5.4 Normative Tactics...........................................................................................................................28 2.5.5 In-store related Tactics(shelf space)..........................................................................28 Methodology........................................................................................................................................ 29 3.1 MethodologicalAssumption..............................................................................................29 3.2 ResearchStrategy.................................................................................................................29 3.2.1 Choice of Industry...................................................................................................................... 29 3.2.2 Why we selected more than one store.............................................................................. 30 3.2.3 Description of Stores................................................................................................................. 31 3.2.4 Choice of Product........................................................................................................................ 33 3.3 ResearchApproach...............................................................................................................33 3.3.1 Instrument to collectthe data .............................................................................................. 33 3.4 Structureof the questionnaire........................................................................................34 3.4.1 Priceof this product is ............................................................................................................ 35 3.4.2 I buy the most familiar product among this product category .............................. 35 3.4.3 I buy the product, whichstands out on the shelf......................................................... 35 3.4.4 I buy the product, whichI always buy............................................................................... 35 3.4.5 I buy the product, whichis on sale ..................................................................................... 35 3.5 Sampling...................................................................................................................................36 3.5.1 Non-Probability Sampling ...................................................................................................... 36 3.6 ConvenienceSampling.........................................................................................................36 3.6.1 Disadvantages of convenience sampling ......................................................................... 36
  9. 9. Page 10 3.6.2 Advantages of convenience sampling ............................................................................... 37 3.6.3 Why we used conveniencesampling.................................................................................. 37 3.7 Reliability .................................................................................................................................37 3.8 Validity......................................................................................................................................37 3.9 Data Analysis………………………………………........................................................................ 38 3.10 Limitations………………………………....................................................................................38 Empirical observationand analysis............................................................................................ 39 4.1 No ofvisitsin a month………………………………..................................................................40 4.2 Familyincomelevel……………………………… ......................................................................40 4.3 Spendingina month……………………………….....................................................................41 4.4 Shoppinglist………………………………...................................................................................42 4.5 ComparativeAnalysis……………………………… ...................................................................42 4.5.1 Tea Whitener .................................................................................................................................43 4.5.2 Toothpaste .....................................................................................................................................44 4.5.3 Drinks ...............................................................................................................................................45 4.5.4 Laundry Detergent .....................................................................................................................46 4.5.5 Tissue papers ................................................................................................................................47 4.5.6 Chips .................................................................................................................................................48 4.5.7 Biscuits .............................................................................................................................................49 4.5.8 Bread ................................................................................................................................................50 4.6 Crosstabs.................................................................................................................................51 4.6.1 Number of visits to any grocery store vs importance of shelf space................... 51 4.6.2 Importance of shelf space VS monthly spending......................................................... 52 4.6.3 Importance of shelf space VS shopping list ................................................................... 53 Discussionand Conclusion....................................................................................................... 54 5.1 Importance oflocationandsizeofstore......................................................................55 5.2 ShelfSpaceManagement...................................................................................................56 5.3 ProfitMaximization............................................................................................................56 5.4 Whichproductcategoryneedsthe premiershelfspace?......................................57 5.5 Conclusion..............................................................................................................................59 5.5.1 Retailer’s point of view........................................................................................................... 60 5.5.2 Manufacturer point of view.................................................................................................. 60 5.6 Implications...........................................................................................................................61 5.7 Limitation...............................................................................................................................61 Reference….................................................................................................................................... 62 Appendix......................................................................................................................................... 64 CrossTabs...................................................................................................................................... 64 Questionnaire............................................................................................................................. 76
  10. 10. Page 11 Introduction Shelf Space refers to the space available in a store or place to display particular goods for sale. Some decades ago, marketing techniques and strategies were only limited to outside the store and display centers, for example marketing activities, advertisement, promotions etc. But after 1970, internal marketing began to get attention when researchers found that many internal store cues help in increasing the sales and profits of both manufacturer and retailers. These internal cues include light, sound, color, isle management, product categories etc. All these cues work as mediator and communicate the benefits of the products to the consumers and help in increasing the sales. Out of all, shelf spacing appeared as the most important in- store cue to affects and attract the customers. Since past few years, competition between the products has been tensed, companies are using every possible strategy to win the race of competition and cater more customers than its rival have. They are spending most of its expenses on the promotional activities and improving their products as per customer’s desires. Everyday more products are coming in the market due to which display places at the stores has been decreased. On the basis of modern concept “Jo Dikhta Hai Wo Bikta Hai” the competition to grab the best place in the shelves at retail stores has geared up. Companies are today willing to give money to the retailer as incentives for providing them with the premium shelf places. 20% of total marketing expenses are today spent on buying the shelves in retail stores to boost up their sales and gaining more shares in the profit. Duty of the retail manager is very critical in all this process. Because retailers at the same time want to earn more profit by managing their shelves as he think is the best for the sales of his store but at the same time satisfying the suppliers who want premium shelves for their new or old products and paying the retailer with incentives for that. They are supposed to worry whether a particular product should be stocked or not and what the promotional strategies should be. The proficiency with which these decisions are made eventually regulate the success or failure of the retailers. Grocery business retailers left with two options. A small Pan Shop in a town is often paid 20 to 50 thousand rupees by Pepsi or Coke for not dealing in their rival’s products and selling only their brands.
  11. 11. Page 12 With the passage of time, concern of placing products in shelves at big stores is becoming essential and at the same time critical for manufacturers and retailers, because of increased competition between national and international brands. Big retailers sell International as well as national brand. But retailers want to give premium shelves to International brands and products; because they provide more incentives for shelf spacing. But if retailer does not give the appropriate shelf space to national products then it does not give the good image of retailer to consumers. The reason is that, customers are more aware of national products. Due to the competition, today shelf spaces are sold to the highest bidders. It is same as media buying. Retailers are paid different kind of incentives along with shelf space incentives like pay to stay fees, listing fees, placing the brands near the national brands and displaying the brands on attractive place in the isles. These are sometimes known as slotting fees. From a retailer’s perspective, managing shelf space is often helpful as it helps them in avoiding overstocking and under stocking which in turn satisfy the customers because they always find their desired products and decreases the inventory cost. The problem under concern here is that, management of the limited shelf pace is very critical to the suppliers as well as retailers. Suppliers pay millions of rupees to buy the shelf spaces every month. The objective of this research is to find out the customers buying behavior, how they purchase from different product categories, what influence do store characteristics have on purchases and finding that which product categories are shelf space dependent. Be answering these questions, manufacturers can improve their planograms and can save some costs by not spending on the products which are not need shelf space dependent and are choose on other variables like taste, price and familiarity of the products. Retailers can also take help from this research by improving their shelf space management.
  12. 12. Page 13 1.1. Statement of the problem: Today, companies are spending billions of Rupees on different marketing strategies to cater and retain more customers. 20% of these spending are made on buying of the shelf space. The most important thing for organizations is to understand what consumer wants are and how they choose their products from different product categories while purchasing from the shelves in a store o they can make their own product better than others to get preference over other products. Being aware that customers are performing a major role in marketing, finding out what are the factors that are essentially affecting the purchasing intentions are important. Analyzing the process of shopping activities, how consumers decide and what they buy in a store need to be identified by organizations. Customer behaviors are influenced by different factors and so they show different customer behaviors. There has been limited number of studies on this subject. In this paper, research has been made on consumer’s buying behavior towards products on shelves and which product categories are shelf spaces dependent. Findings of the research are also discussed in the last. 1.2. Product categories: Stores contain different kind of items. These items can be classified into different number of categories. A small study was lead to collect the data. Through which I figured 8 product categories. 1. Tea whitener 2. Toothpaste 3. Drinks 4. Chips 5. Cookies 6. Laundry Detergent 7. Bread 8. Toilet paper People use different tactics and parameters when purchasing these products these tactics can be always buy, satisfaction, price, recommendation, brand name, shelf space because people have different mind sets. We used this research to study the reality that how consumers are making the selection among the different product categories. Our objective is to study the 8 product categories to know the importance of the shelf space for them.
  13. 13. Page 14 1.3. Research Questions: To fulfill the aim and the purpose of the study, the research questions have been formulated by relying on the problem statement. The research will be addressing the following problems and questions: 1. Which product categories are shelf space dependent and for which products manufacturers should buy shelf spaces? 2. How are consumers making the selection in different product categories when they shop from stores? 3. What influence do characteristics of stores has on consumer buying behavior? Consumers use different purchasing tactics for different product categories. It is not possible for retailer to provide the premium shelf space to all the product categories. This research question will help us to know the different purchasing tactics about to the different product categories. It assumed that shelf space is not effective for all the different product categories. This research questions will help us in differentiating those products whose sales are dependent on the shelf space position. 1.4. Purpose of the research: Purpose of this research is to recognize those product categories which are shelf space dependent and important to be placed on shelve from a consumer’s perspective. By classifying the products into different categories, manufacturers and retailers can develop the most effective shelf management plan so they have to spend less on buying shelves and save money through not spending on the products which are not shelf space dependent. The sub purpose of this research is to provide the recommendation to the manufacturers so they can make a more effective planogram that can help them in increasing the sale and profit.
  14. 14. Page 15 1.5. Hypothesis: Based on forgoing literature review the following hypotheses were made for this study. H1: The greater the amount of shelf space devoted to a product category, the more likely consumers will employ buying behavior. Large aisle displays by design draw attention to the various brand offerings in a category. They may, in turn, encourage inter brand comparisons and active in- store behavior. Research indicates that sales of almost any item will increase if given additional shelf space. H2: Lower involvement products are more likely to be sold if placed on premium shelf spaces. Low involvement products in which customers does not think much or conduct any special prior to sales research or gather information, are more likely that if placed on high shelves or at premium shelves, they are more likely to be sold easily or can be sold by impulse buying behavior. H3: Characteristics of stores (size etc.) can greatly influence the purchasing behavior of consumers. In sale of any product, store or location of the store places an important role or significance. It’s because, what type of store will be, characteristics of the consumers will be accordingly. For example, store in an elite town will be visited by mostly elite people and their buying behavior will be different from the customers of small store in small town as they would be less conscious of the price of the products and will be more involved in other characteristics of the products like quality, packaging and availability.
  15. 15. Page 16 Literature review 2.1. What is Shelf space? Shelf space is the place allocated to the products on the retail shelves. Shelf space is very limited to the retailers, due to which retailers are very selective to stock the items and allocating them a proper shelf space is a big issue to them. But for the individual stock keeping units SKUs, shelf space is an important factor in the revenue, cost and eventual profit of the product category. Besides providing the shelf space biggest challenge is to provide the proper location to them. Proper shelf allocation is significant in product sale. Usually those items which are on the lower shelf usually get the less consumer attention than those items which are on the upper part of the shelves. So the items which are at the lower shelves will return with the lower sale and there is a chance they will get less benefits from the promotions, Nierop, Franses (2006). Grocery product retailer’s job is not easy especially when looking for profit maximization shelf arrangement and at the same time meeting the manufacturer’s requirement. Through the shelf optimization measurement they can predict the effect of the shelf layout on the sale of different product categories and marketing effectiveness. A well-defined shelf layout model could make the life of grocery product retailer easy (Nierop, Franses, 2006). Shelf space management refers to the point that products get proper place on the shelf so that maximum profit can be achieved and can avoid the situation of stock out. There is no doubt that shelf space is a valuable real estate. Shelf space costs heavily to the manufactures. Manufactures use considerable resources to secure this real estate because an improper location or under- allocation of space could kill the future of the product. Retailers work is also very hard at the same time because they do not want to waste the space by placing too many products on the shelf and at the same time they do not want to lose the sale by being out of stock, Dreze et.al (1994). Shelf space is very limited to the retailers, due to which retailers are very selective to stock the items and allocating them a proper shelf space is a big issue to them. But for the individual stock keeping units SKUs, shelf space is an important factor in the revenue, cost and eventual profit of the product category. Besides providing the shelf space biggest challenge is to provide the proper location to them. Proper shelf allocation is significant in product sale. Usually those items which are on the lower shelf usually get the less consumer
  16. 16. Page 17 attention than those items which are on the upper part of the shelves. So the items which are at the lower shelves will return with the lower sale and there is a chance they will get fewer benefits from the promotions proposed, Nierop and Franses (2006). Grocery product retailer’s job is not easy especially when looking for profit maximization shelf arrangement and at the same time meeting the manufacturer’s requirement. Through the shelf optimization measurement they can predict the effect of the shelf layout on the sale of different product categories and marketing effectiveness. A well-defined shelf layout model could make the life of grocery product retailer easy, Nierop and Franses (2006). Shelf space management refers to the point that products get proper place on the shelf so that maximum profit can be achieved and can avoid the situation of stock out. Shelf space is a scarce and critical resource which must be allocated so as to optimize the profitability level of the assortment, and retail chains need methods for validating the pertinence of the shelf space allocation made by store managers presented, Desmet and Renaudin, (1998). Management of the limited shelf space is most sensitive subject for all grocery retailers presented, Reyes and Frazier (2005). New products development have already made shelf space management too complex, because now there are so many types of product available in the grocery stores and its quite difficult for the grocery retailers to decide which product needs how much of shelf space and similarly new product development has enriched the consumers with so many choices. Decision about the shelf space allocation and its management is critical to effective grocery retail operational management, Reyes and Frazier (2005). A well-managed shelf space not only improves customer service by reducing out-of- stock occurrences; it can also improve the return on inventory investment by increasing sales and profit margins, Yang (2001), Yang and Chen (1999). Ideally, the decision rules regarding shelf space allocation should consider the profit contribution of each product in the category against the opportunity costs for carrying the inventory, Cox (1964, 1970). The context of self-service grocery retail stores is that the demand for a product is influenced by the quantity of display exposure, and it has been speculated that this structure of promotion is capable of shifting brand choices among consumers, Anderson (1979), Urban (2002). If we talk in another context then it is not true in our opinion. For example, if we talk about electronic retail store then it is not valid that the products which are displayed in large quantity make influence on the demand of the product.
  17. 17. Page 18 Consumers use the different purchasing tactics for different product categories. It is not possible for retailer to provide the premium shelf space to all the product categories. This research question will help us to know the different purchasing tactics about to the different product categories. It assumed that shelf space is not effective for all the different product categories. This research question will help us in differentiating those products whose sales are dependent on the shelf space position. Major six types of tactics are presented, Hoyer and Walgren (1988).  Price oriented tactics: Buy the cheapest products, Buy the brand on Sale, and Buy  the brand due to the discount coupon.  Performance tactics: Buy the brands which works best  Affect-related tactics: Buy the most familiar brand; buy the brand on liking base.  Normative tactics: Buy what my parent bought, buy what my friend advice.  In-store related tactics: Buy the first brand i see, buy the most prominently displayed. 2.2. Importance of Shelf space for manufacturers: Product spread has not only increased the complexity of manufacturing, management and distribution, but it has also created new issues in shelf space allocation. To cope with fiercer competition, manufacturers provide retailers with financial incentives to secure shelf space for their products to attract more consumers towards their brands. Consumer goods manufacturers have indeed been reported to spend 15% of their revenue to pay stores to stock their products. Better shelf space management provides a source of competitive advantage in retail industry. The competition among a large number of brands to get display space at retail store makes the management of shelf space very complex. It is a limited resource in a retailing outlet which in many cases is expensive as well. There is broad appreciation that better shelf space management has positive impact on an outlet’s performance proposed, Desmet and Renaudin (1998). Organizations develop various ways to optimize shelf space utilization to maximize sales and the outlet’s profit. For example, quantitative optimization models have been developed in order to help managers make optimal shelf space allocation decisions under store specific constraints. Similarly, softer factors such as a brand’s strategic importance, demographic suitability, and seasonal demand behavior also play important roles in specifying shelf space to a brand presented, Amrouche and Zaccour (2007), Hübner (2011).
  18. 18. Page 19 The practice of these transfer payments remains nevertheless obscure, and its competitive nature and value to the end-consumer are highly debated. For instance, Hewlett-Packard Co. has recently been criticized for offering chain stores incentives to stop selling store-brand inkjet printer cartridges, in order to increase HP’s cartridge’s market share by reducing consumer choice, Hamm (2007). Retailers consider five factors for the allocation of shelf space which increase the financial performance of the store. These factors include the location of fixture, location of product category, location of items in a category, off shelf display and point of sales materials, F.Buttle (1984). Sales productivity method and build up methods are commonly used techniques for the shelf space allocation presented by F.Buttle (1984). Space elasticity is another method to allocate shelf space to different brands. Space elasticity = relative change in unit sales relative change in shelf space, Curhan (1973). There is no doubt that shelf space is a valuable real estate. Shelf space costs heavily to the manufactures. Manufactures use considerable resources to secure this real estate because an improper location or under-allocation of space could kill the future of the product. Retailers work is also very hard at the same time because they do not want to waste the space by placing too many products on the shelf and at the same time they do not want to lose the sale by being out of stock, Dreze et al. (1994). Most of the manufactures are ready to pay the significant premiums to get the premium place in the store. Manufacturers usually spend 40 to 50% of their advertising budget on trade promotion. Manufacturer and retailer have the different prospective about the shelf space. The goal of the manufacturer is to increase the profit and sale of their products, so that is why they are always looking for the premium place. Whereas the retailer’s perspective is quite different, they want to increase the category sales and profits, Dreze et al. (1994). Retailers especially those who are dealing with grocery products face a very large and highly complex set of marketing decisions. Averagely they keep 45,000 separate products and making the decision for these much of products are not an easy job. They, retailers, are supposed to think all the way from whether a given item should be stocked and what the promotional strategy should be for an item. The competition among the grocery retailing stores is very tight and the proficiency with which these decisions are made ultimately determine the success or failure of the retailers, Chiang and Wilcox (1997).
  19. 19. Page 20 Large firms will win the shelf-space bidding wars not necessarily because they make better products, but because they are willing to pay more to protect their monopoly rents than small firms are willing to pay to be competitive, Shaffer (2005). In a related view, the large firm may have easier access to capital markets or face lower interest rates, giving it a tangible advantage over smaller rivals. In either case, it is argued that products that may be more socially beneficial are being excluded. The opposing view is that slotting allowances can be thought of as the market price of a scarce asset (shelf space) that, according to traditional price theory, has optimal allocated properties, Sullivan (1997). According to this view, the firms that offer retailers the best deals will be the ones whose products generate the largest private and social bene.t, and thus only the manufacturers of the best products will obtain shelf space. As much as shelf is allocated to brands, it raises market share equally, “share of shelf = share of market” by Norm Borin. Due to the introduction of PL, manufacturer is dependent on retailer for shelf space, Natalia Rubio (2008). Inverse relationship has found between PL market share and its profitability. The reason is that, manufacturer has limited resources in which he has to establish the terms of trade with the retailer. If manufacturer is unable to fulfill the requirements and demands of the retailer then retailer allocates less space to NB. This results in giving more prominent proportion to the PL, and will get huge market share from the NB presented, Wilcox (1998). Space elasticity is greater for PL as compared to national brands. Negative relationship has been found between market share and space elasticity, Curhan (1972). Manufacturers suppose that retailers support unequal competition by giving more space to the PL as compared to NB. PLs are sited at more profitable place than NBs. PLs occupy more space disproportioned to their market share. PLs imitate the features and appearance of NBs, in this way PLs look like the NBs and customers are motivated to buy PLs. When retailer introduces the PL, then it removes the NBs from the shelves and gives maximum possible space to its own brands, Fernandez Nogales et al. (2005). Manufacturers invest huge amount in packaging of NBs to communicate its benefits. To further increase the performance of shelf, they usually boost brand’s image through marketing and advertisements. Hence the packaging of PL should be, or at least match with NB’s packaging. Sales of a particular product and range of assortment identify the amount of shelf space allocated to that brand. Perishable goods receive less shelf space in comparison to storable goods. Sales and variety are positively related to each other. But if the retailer has
  20. 20. Page 21 certain successful shelf space management strategy, he can get high sales through less product variety presented, Chiang and Wilcox (1997). Price promotion, featuring and shelf displays increase the sales of a brand within a store. Among these three activities, price promotion has more positive effect on the store sales, then featuring and displays respectively, Kumar and Leone (1988). Consumers buy PL due to in- store promotion and national brand due to out-store promotion, Ailawadi et al. (2001). Shelf space not only impacts the retailer’s profit but also affects the manufacturer’s profit. So a manufacturer fights for scarce shelf space, Wang and Zhao, n.d.. Demand is a function of inventory displayed and placement of brand in a shelf. Retailers can boost up sales by reducing cost through appropriate management of products in shelves. Hwang, Choi et al. (2005). National brand is more dominant than the PL. National brands are rich in brand equity comparative to PL, Kristof De Wulf (2005). Shelf space allocated to PLs mainly depends upon its quality. And quality of PL is measured in terms of price positioning, brand substitution and brand equity proposed, Nawel Amrouche (2007). With the introduction of PL, the power of retailer increases. The reason for increase in power is that, number of brands and trade promotions are increasing day by day but shelf space remains same, Monoca Gomez (2007). Grocery retailers left with two concerns. On one hand, they are looking for differentiation to avoid price competition. Through differentiation they can get the long term competitive advantage in consumer’s mind. On the other hand, they are seeking productivity gains by cost reductions or economies of scale and integration of decisions to share experience, Yang and Chen (1999). Retailers are supposed to take some critical decisions improve the sale of the different product categories and retain the customers. Grocery product retailers can do it in multiple ways. They can increase the sale by offering the price discounts or by increasing the in-store advertisement and by the improvement of the shelf space. The research mainly focuses on one of major merchandising decision: the allocation of space among different product categories in retail grocery store, Yang and Chen (1999). A well-managed shelf space can not only decrease the inventory level but can also build the strong relationship with vendor and the higher customer satisfaction as well. Because if the retailers know exactly which product is high in demand and which one is low in demand then they can avoid over stocking of the product which is low in demand and it will eventually
  21. 21. Page 22 reduce their inventory level. And the product which is high in demand will never be stock- out. So in this way customers will be satisfied because they always find their desired product and retailers also reduced their inventory cost by managing the inventory efficiently, Yang and Chen (1999). With all the hype around efficient consumer response (ECR) and the brave new world of technologies, one would believe that retail out‐of‐stocks have gone down over the last ten years. That is wrong. Retailers have been struggling with considerable out‐of‐stocks for decades – with little evidence of improvement. A similar wrong belief is that shoppers are also still unwilling to accept low service levels. In fact, increasingly, consumers switch brands when they do not find the brand they wanted. But retailers must be wary, because the results of the re- search show that increasingly shoppers switch stores quickly and may never come back. So, who is to blame? The supply chain and where to tackle it? On the shop floor. Over the past two years, worldwide study has been conducted of the extent, causes, and consumer responses to out‐of‐stocks in the fast‐moving consumer goods industry, Daniel Corsten and Thomas Gruen, (2003). Among these widespread retail practices, we first consider pay-to-stay fees, which are a “rent” charged by retailers to suppliers in exchange for retailing space. We show that this mechanism improves supply chain efficiency, while reducing the suppliers’ profits, refining a proposal, madeby Cairns (1962). Another notable type of slotting fee, which we do not consider in this paper, is the slotting allowance. Slotting allowances are lump-sum, up-front payment from a manufacturer to a retailer to have a new SKU carried on the retailer’s shelves. Lariviere and Padmanabhan (1997) interpreted the slotting allowances as a signaling instrument about the potential sales of a new product. In contrast, pay-to-stay fees are charged for existing products to ensure continued presence on the shelf, and are therefore used more to cope with increased competition (through product proliferation, see Sullivan 1997) than to reduce demand uncertainty through signaling.
  22. 22. Page 23 2.3. Product Categories: The grocery stores contain different kind of products. These products can be divided into different categories. Hoyer & Walgren divided these products in 12 categories. These categories are Breakfast cereals, Toothpaste, Beer, Butter, Cake Mix, Chips, Cookies, Facial Tissues, Laundry Detergent, Loaf Bread, Toilet paper, Coffee. According to his finding these products are selected according to the different parameters. These parameters are price, always buy, satisfaction, recommendation, brand name, shelf space. According to his findings satisfaction parameter is over all dominating parameter in all categories but there are some other parameters are also there which has effect on particular product category. Like toilet tissues, facial tissues and butter is selected on the basis of price. Recommendation parameter is limited to beer, breakfast cereals and cookies. Always buy parameter is very much use in tooth pastes, Hoyer and Walgren (1988). There are five aspects of shelf space allocation through which grocery retailers can improve the performance of the store. These aspects are fixture location, product category location, item location within product categories, shelf space and Point of sale promotions. There are two commonly used techniques, which are used in commercial systems for allocating shelf space are the sales productivity method and the buildup method. The sales productivity method is used to allocate the shelf space to products according to the sales, while build up method is used to allocate the space to the products regardless to the sales. There is another approach known as space elasticity, this approach has been already used in many experimental studies. Space elasticity is defined as the ratio of relative change in unit sales to the relative change in shelf space by Yang and Chen (1997). Shelf elasticity is not equal for the all the different product categories. Now it is very important to know that which product categories have highest shelf space elasticity so retailer can provide the space accordingly. Shelf space is a limited, valuable and expensive source for both retailers and suppliers as a large number of brands compete for it in a retailing store. Brands compete with each other to obtain maximum shelf space to get exposure to the customer. Objective of the retailer is to allocate shelf space to each brand in such a combination that maximizes profit of the retail store. The question of shelf space allocation has attracted research attention from marketing areas.
  23. 23. Page 24 Various quantitative techniques including non-linear modeling and integer programming techniques are used to solve shelf space allocation problem. Corstjens and Doyle (1981) present a non-linear model incorporating both demand and cost for determining optimal shelf space allocation. However, since their model does not take into account integer nature of the shelf space the solution may become sub-optimal. Further their model is too complex mathematically to be used by practitioners in a real sense. Further, Corstjens and Doyle (1983) present a more comprehensive strategic space allocation model which incorporates factors other than those included in their previous work. They emphasize that profitable retail space allocation depends on changing customers’ preferences, product life cycles of competing brands, and varying growth rates. Further, the work of Mason and Mayer (1990) seeks to propose more easy to use methods. They argue there are two methods which can be used in industry for managing shelf space in retailing stores: “sales productivity method,” and “build-up method”. Sales productivity method emphasizes to increase sales and tends to give more display to the brand which contributes more towards sales, whereas “build-up method” does not give credit to a brand’s contribution towards sale. Similarly, Yang and Chen (1999) present a shelf space allocation model with an alternate form applicable in the retail practice. The model considers space elasticity, cross space brand elasticity, profit margin, and demand of individual brands for determining optimal solution of shelf space allocation for each brand. They also show that the retailers who adopted some strategy for shelf space allocation their performance is significantly different from the retailers who do not implement any strategy for shelf space management. They argue that shelf space management strategy affects performance through shelf space allocation operations. While shopping, customer choices are highly influenced by in-store factors, in particular during frequent unplanned purchases and when the products they are searching for are not available. This is in part motivated by the low level of involvement that consumers have with in-store decisions, often made quickly and with only a minimal search. More than just displaying the merchandising, a clever product arrangement on the shelves assumes a crucial importance as a tool to increase visibility, consumer awareness and demand for the products, ultimately leading to better performance. Therefore, retailers work on getting the right goods to the right places at the right time, Chandon et al. (2009).
  24. 24. Page 25 Every year, suppliers propose thousands of new grocery products, each competing for retail grocery store shelf space. New products development have already made shelf space management too complex, because now it’s quite difficult for the grocery retailers to decide which product needs how much of shelf space and similarly new product development has enriched the consumers with so many choices. Decision about the shelf space allocation and its management is critical to effective grocery retail operational management. A well- managed shelf space not only improves customer service by reducing out-of-stock occurrences; it can also improve the return on inventory investment by increasing sales and profit margins. They, retailers, are supposed to think all the way from whether a given item should be stocked and what the promotional strategy should be for an item. The competition among the grocery retailing stores is very tight and the proficiency with which these decisions are made ultimately determine the success or failure of the retailers, Chiang and Wilcox (1997). Retailers are supposed to take some critical decisions improve the sale of the different product categories and retain the customers. Grocery product retailers can do it in multiple ways. They can increase the sale by offering the price discounts or by increasing the in-store advertisement and by the improvement of the shelf space. The research mainly focuses on one of major merchandising decision: the allocation of space among different product categories in retail grocery store, Yang and Chen (1999). A well-managed shelf space can not only decrease the inventory level but can also build the strong relationship with vendor and the higher customer satisfaction as well. Because if the retailers know exactly which product is high in demand and which one is low in demand then they can avoid over stocking of the product which is low in demand and it will eventually reduce their inventory level. And the product which is high in demand will never be stock- out. So in this way customers will be satisfied because they always find their desired product and retailers also reduced their inventory cost by managing the inventory efficiently, Yang and Chen (1999).
  25. 25. Page 26 2.4. Term Definitions: 2.4.1. GroceryStore: A store which is primarily established for retailing of daily use products. You can find the different product categories in it. For example, food, stationary, Sweets, Chocolates etc. 2.4.2. ProductCategories: The term product categories define the number of the product categories available in the grocery store. Examples of product categories are Dairy Products, Meat, Kitchen Item, Cigarettes, and Vegetables and so on. 2.4.3. Manufacturer: Manufacturer term is used to represent the owner of the brand. Owner, who manufacture that brand and now want to sell it through grocery store, 2.4.4. Retailers: Retailer is the owner of grocery store. Who has the different product categories from different manufacturer? And he is selling these manufacturers through his grocery store. 2.4.5. Consumers: Consumers are representing those people, who physically visit the supermarkets or grocery store to purchase the grocery items. 2.4.6. Planogram: Planogram is basically a diagram of products, which show the most effective layout of these retail products.
  26. 26. Page 27 2.5. Conceptual Framework: It has been proved from different researches in the past that consumers use different tactics to while purchasing different products from the store. These cues could be prices, promotions, regular buys and shelves. Usually these cues are formed through experience and passage of time. Purpose of this research is to study those cues, which are frequently used by consumers for different product categories. For this research we defined the conceptual framework from the studies of Desmet, Renaudin (1998) and Hoyer (1988). They used the model to explain the shelf space elasticity in a grocery store at product category level. The finding of this study was that the space elasticity increase with the impulse buying rate of product category and it does not depend on the type of store. We will study that what influence different cues have on the purchasing behavior of the consumers. Given figure explains this conceptual framework. Price oriented tactics Store Characteristics:  Location  Competitive Environment  Specific Store performance tactics Product Attributes In-store related tactics This framework explains the cues that affect the sales and consumer behavior while shopping different products. They employ different tactics including price tactics, product attributes, performance tactics and in-store related tactics. Sale
  27. 27. Page 28 2.5.1. Price orientedtactics: Price oriented tactics are important for those who purchase on the bass of competitive pricing. People from middle and lower class buy on the basis of prices and make their purchases according to available product’s prices. On the other hand, people from high cass does not bother about the prices and they are more likely to base their purchases on the taste and familiarity. 2.5.2. Performancetactics: Performance tactics are used to attract the customers on the basis of the product’s quality. Companies try to make their products superior in quality and adding more features so it will get more consumers’ preference. So in return, loyal customers always buy these product no matter what the fluctuation in the price is. 2.5.3. Productattributes: Product attributes place a great deal of emphasize on the sale of any product. These attributes could be packaging, features and its prices. Suppliers think of every possible characteristic that would make their product stand out in the products war. Consumers normally prefer the product which offers high performance, more number of features and fewer prices. 2.5.4. In-store relatedtactics: This tactic is also known as hybrid tactics. Consumers make their purchases on the basis of different in-store characteristics like shelf spacing, product display, store layout etc. These tactics are used to attract the consumers who do not make their shopping lists and try new things. These are also important to attract consumers who engage in impulse buying behavior. 2.5.5 Store Characteristics: Characteristics of the stores play an important role in sale of the products. Taking the example of this research, while conducting the survey, we have seen that people in Al-Fatah and Hyperstar have different buying behavior and different attitude towards shelf spacing. In Hyperstar, people prefer the products which are placed on the shelves it is because of the attractive shelf displays in the Hyperstar Mall, while people in the Al-Fatah store are not much attracted towards the shelf displays because of congested places.
  28. 28. Page 29 Research Methodology 3.1. Methodological Assumption: It is important to describe methodological assumption of any research for clarification. This portion of the research discusses that what the truth is and how this research studies the certainty. Methodological assumption deals multiple tasks such as the collection of data, analysis etc. Normally there are two approaches, quantitative approach and qualitative approach which are used to collect the data. Quantitative approach is the scientific approach to study the objective. It uses the mathematics calculations to find the results. On the other hand, qualitative approach uses the observation technique and interviews to study the object. For this research we’ve used the quantitative approach on the basis of deductive approach. We started the research with finding out those product categories which are shelf space dependent. A small research was lead, through mean value we defined the priority set for these 8 product categories. 3.2. Research Strategy: 3.2.1. Choice of Industry: Importance of shelf space in any industry for example in clothes industry cannot be ignored. Reason to select the grocery store is that, in the grocery store retailer deal with the thousands of different products in their stores. Taking the decision for these SKUs or products is not an easy job to handle. A lot research has been done on this subject who has been discussed in the literature review. Providing an effective Planogram to the manufacturers and retailers is the most important issue nowadays for the improvement of the retail grocery stores. Selection of this industry (grocery store) is also very much interested for me because I want to know that how shelf space can help the suppliers a competitive edge on their competitors and retailer to manage the different products categories to increase their business.
  29. 29. Page 30 Sometime we can’t answer about our own purchase decision, that why I’ve selected this topic over the others. In our literature review we discussed that shelf space could be more effective even when consumers have unplanned shopping trip to grocery store. It has been discussed in the research that retailers and suppliers can improve their profits through the proper planning of the shelf space in between the different product categories because an effective shelf space plan can encourage the consumers to put more things in their shopping list. We selected two stores “Hyper star” and “Al-Fatah” grocery store for this research to collect the feedback of customers for research analysis. Hyper star mall is situated in Cantt, mall road, Lahore. And Al-Fatah is situated in center of Lahore in gulberg, Lahore. 3.2.2. Why we selected more than one store: Effect of shelf space in grocery store for different product categories also depends upon the location of the grocery store where it is situated and we cannot ignore the size of the grocery store as well. Because the grocery store which has the larger area can provide the more space to the shelves. There are so many reasons, competitive environment and store characteristics, target market, due which we selected two stores Al-Fatah and Hyper Star.
  30. 30. Page 31 3.2.3. Description of stores: Al-Fatah stores: Al-Fatah store is situated in center of the Lahore, Pakistan. You can find the different product categories of grocery from this store for example they have the varieties of bread, fish, dairy products, cheese and many other things in their store. In Al-Fatah, it’s more like a shopping mall and different places or shops are allocated to different brands. It has a large grocery store as well where most kind of national and international products are available. It’s very less likely that you would see any sale on the products (from the store, not from the suppliers). Prices of products are high here. They are also selling the Al-Fatah branded products in their stores. You can say, it’s a large size store with lot of shelves in their store. Al-Fatah has their own planogram through which they divide the shelf space in different product categories. You can find the different product section in this store. Mainly, the target market or consumers of Al-Fatah is elite and high class. Due to its location in Gulberg, it is mostly visited by high and medium class people. It is because this town is known for its upscale business centers, urban shopping centers, modern restaurants and a major sports complex. It is also known as the hub of the contemporary fashion and cuisine industry in Pakistan. Gulberg is considered to be one of the most exclusive residential areas in Lahore. Important questions for our research: 1. Target class of the store: Elite and high class 2. Structure of the store: Big mall, shops for different brands 3. Products display and discounts: Less product display and rare to offer any product discounts
  31. 31. Page 32 Hyper star shopping Mall: Hyper star the only mega superstore in Lahore with wonderful shopping characteristics running throughout the year for consumer and giving them lasting experience. Promotion, Staffing of serviced departments, Advertised special promotions, Efficient & accurate operations, Easy access to car park, Convenient location, Product availability, Cleanliness ,High quality fresh food with stable low prices are some of the important characteristics which I noticed there. There is an ongoing sale and promotions throughout the year on many products whether its grocery items, electronics or cloths. In Hyperstar, there is open place where different companies places their product in discount sales and only for display purpose near the entrance of the store, that attracts the attention of the consumers due to which consumers purchase these items except they decided about some other product when leaving for the store. On the other hand in Al-Fatah, display is not much concentrated on. Shelf space in Al-Fatah store is congested as compared to the Hyperstar. Hyperstar also offer incentives and discounts to its customers through different promotion deals. In depth detail is as follows: Promotion &Specials: 1. Bi-weekly promotion (10%): In store after every 15 days the promotion gondola changes on various products these days the promotion is put with minimum 10 % discount on more than 2000 grocery products. 2. Special gift cards: It runs for whole year you can buy that gift card for worth 1000rupees and you can give to your loved ones very few people are familiar with this opportunity you can easily find it on cash counters. Important questions for our research: 1. Target class of the store: Medium class 2. Structure of the store: Open place for different brands 3. Products display and discounts: More product display and discount offers on products
  32. 32. Page 33 3.2.4. Choice of Product: Averagely grocery store has thousands of separate items. So it was not possible for us to cover all these product categories for this research. Due to the time limit, we are selecting the already tested product categories for this research. Hoyer and Walgren, (1988) have already tested these products by asking the questions from 61 shoppers at supermarkets. Through this survey, researchers revealed that these 8 product categories are varied in importance of selection among brands. On the behalf of these findings we can say that some of these product categories are selected on the base of brand and some these product categories are selected on the base of price and some on the bases of shelves display. So these 8 product categories varied in number of ways from each other. The names of these product categories are Toothpaste, Laundry Detergent, Bread, Coffee, Chips, tissue papers, Butter, and Cookies. 3.3. Research Approach: Research approach refers to procedure that has been adopted to conduct the survey. It can be qualitative research approach and quantitative research approach. Quantitative research approach was used in this research and questionnaires were used to collect the data from the consumers. This approach was used because we wanted to know the strategies which consumers use when making the purchases selection in between the different product categories. There were many reasons due to which we selected this approach. Firstly, the quantitative research was more economical. Suppose if we just talk about the qualitative research, a lot of time and effort is required to conduct the interviews and similarly for the observations. Quantitative research allowed us to conduct the data through questionnaire. Main purpose of this study was to know the importance of shelf space for different product categories from the consumer’s perspective. Quantitative research helped us to find to the answer of this question. This approach helped us to know the relative importance of shelf space for these 8 product categories. 3.3.1. Instrument to collect the data In this research we used questionnaire to collect the data. Main advantage of using the questionnaire is, they save time and are cheap to administer. Whereas questionnaire also has some disadvantages, there is a possibility that participant or respondents might misinterpret it. The aim of these questionnaires is to know the how people select the product from the
  33. 33. Page 34 product category and which product category is more shelf space dependent? And how consumers choose from different products on a shelf? A Simple questionnaire is developed for the people and simple answers would be required. I designed the same questions for all the different 8 product categories because I want to measure these 8 product categories on a same scale, otherwise it could create the conflict in the result. All the questions in the questionnaire are close ended. 3.4. Structure of the questionnaire: In the opening statement of the questionnaire we clearly mentioned that “we are the student of NCBA&E and just want to know the shopping experience in stores of yours”, purpose of this statement was to ensure the people that this survey is purely for the educational purpose, so people can quote the honest answers. And in the second part of the statement it is clearly mentioned that we don’t want to know the name of product, we just want to know how they select the product. In the opening statement of these 8 product categories, we start it from the imaginations. May be people don’t purchase all of these product categories, so that’s why we ask them to imagine if they are supposed to purchase all of these 8 product categories from Al-Fatah store or Hyperstar then how they will select the product from the product category. First five questions were the general questions; reason to ask these questions was to know the consumer’s frequency of visits to any grocery store, their monthly spending for the grocery products, family income level and we want to know that how many consumers, from our sample, make the shopping list before they leave for the grocery shopping. Reason to ask these questions was to develop some understanding about the consumers. These demographics questions helped us to know the importance of shelf space for them. These questions helped us to find out the importance of shelf space for those people who define the shopping list and who do not defined the shopping list. They also helped us to find out the relationship between the importance of the shelf space and the monthly spending. To analyze these 8 different product categories, we asked the 8 simple questions against each product categories. We measured the answer of these seven questions through Likert scale (1 to 5). Reason to use the Likert scale was to know the importance of shelf space for these 8 product categories. We asked the following questions against each product category.
  34. 34. Page 35 Researchquestions: 3.4.1. Price of this product is: It was our first question against 8 different products. Reason to ask this question was to know that how much price is important for them for selecting the product. This question helped us in knowing the importance of price for these products. 3.4.2. I buy the most familiar product among this product categories: Motive to ask this question was to make an idea that how much the consumers are open to try new brands. This question is helpful to know that which product category is selling on the bases of familiarity. 3.4.3. I mostly buy the product, which stands out on the shelf: Motive to ask this question from the people was to know the importance of shelf space. This question is helpful in knowing which product category is selling on the base of shelf space. 3.4.4. I buy the product, which I always buy Motive to ask this question was to know how much consumer is willing to try new products, among these 8 different product categories, to experience new brand of the product category. 3.4.5. I buy the product, which is on sale Motive to ask this question was to know the importance of the sale incentives and promotions. Can retailer increase their profit by introducing the different sale incentives?
  35. 35. Page 36 3.5. Sampling: According to Nadra Statistics, Total population of Lahore is more than 7 million (2011). We conducted this research in fortress and Gulberg area because our targeted stores “Al-Fatah” and “Hyper Star” exists in these areas. We choose 100 number of respondents 50 in Gulberg and 50 in Fortress. Confidence level is a percentage which reflects the degree of certainty in the research. We preferred those building where we had the reference and distribute the questionnaires. All of these questionnaires were distributed on 12th May 2016 and 13th May 2016. At the time of receiving the questionnaire back, we made sure that each questionnaire was filled properly. This research is based upon the non-probability sampling. We used the convenient sampling because it was not possible for us to connect and compile the data of all those consumers who participate in this survey. Another reason for not using the random sampling was that; it is expensive and time consuming. 3.5.1.Non-Probability Sampling: In this type of method, all the units in population have not equal probability of being chosen. For this research we used the non-probability sampling simply known as convenience sampling. There are so many reasons for not using the probability sampling. Firstly, it was not possible for us to get the access to all the people who are living near these stores. Contacting a randomly selected people is not an easy job. Secondly, in case of random sampling we were supposed to spend more money and it required a lot of time to contact with a randomly selected people. 3.6. Convenience Sampling: A convenience sampling allows you to meet any person when walking in a street. Convenience sampling allows the researcher to find out the sample which is easily available to him. There is not any randomness in it.
  36. 36. Page 37 3.6.1.Disadvantages of convenience sampling: As there are lots of people living near both of the stores, one of the problem is that we are conducting research on only 100 people, 50 in Fortress area and 50 in Gulberg area, this population does not represents 7 million people in Lahore. So through this sampling technique we cannot generalize the results for the whole population. 3.6.2.Advantages of convenience sampling: This sampling technique was very helpful for us to contact with the 100 people in a shorter time. Convenience sampling helped us in saving the time and resources to get the questionnaires filled. 3.6.3.Why we used convenience sampling: It was the most convenient for me to use this technique because I wanted to save time and my efforts. I with my friend went in both of the stores with my friends and asked people to fill the questionnaire; on the average we collected all questionnaires back in less than 2 hours. 3.7. Reliability: Questionnaires technique was used to collect the data from the different people who are living near both the stores. We consider the sample size as the main limitation of this study because the sample size cannot represent the whole population. However, having the right target people which are doing the shopping from these stores, It can be said that this sample size can represent the trend and behavior that how consumers make the decision among these 8 different product categories in stores. To increase the reliability, we ensured it by asking a simple question from the respondent either they have shopping experience from these both stores or not. 3.8. Validity: The validity refers the issue that either these scales are measuring that concepts that they are supposed to measure. Either these scales or questions are valid and measuring the same concept which is actually expected. To assure the validity of the questionnaire and the validity of our research work, we extract the products and the questions from the other research work (Hoyer and Walgren, 1988). These questions and products are already tested.
  37. 37. Page 38 On the behalf of these research works we can say that we have the valid questions and products for our research work. 3.9. Data analysis All the data collected from the questionnaires were administered and analyzed through the MS Office Excel sheets. The MS Office Excel helped us to process the data in the form of probabilities, numbers and percentages. Overall, the MS Office Excel results differentiate those products, which are shelf space dependent. We did the analysis to find out the percentage and probability mean value of these factors against 8 product categories. 3.10. Limitation: 3.10.1. Consumers: This study is limited to the general public as a respondent, from which most are the consumers, to whom we interviewed through questionnaire; they all had different backgrounds and social class. Also this research is restricted to two stores, Al-Fatah store and Hyperstar Lahore, Pakistan. On the behalf of this we can’t generalize this research to the entire population of the Pakistan. 3.10.2. Choice of Products: There are too many products in a grocery store and we can’t conduct our research on every product so that’s why we are adopting only 8 products categories. These items are different in their behavior e.g price, brand, advertisement etc. Another reason to choose them is that these products are available in many brands in every grocery store. 3.10.3. Choice of Store: This research is limited to two stores, Al-Fatah Store and Hyperstar shopping mall and all of our findings are based on these stores. According to some article, consumer behavior also varies with the location, type and size of the store. So, to control these variables we restricted our research only to two stores. These findings are only applicable to those, which are very much similar to both these stores.
  38. 38. Page 39 Empirical observation and analysis The purpose of this chapter is to present the findings of our questionnaire. This chapter deals with the findings, which we have got during the survey. As a part of data collection, 100 copies of questionnaire were distributed in Al-Fatah store and Hyper Star shopping Mall. By the end of 13th May, we were able to collect all copies of completely filled questionnaires. Convenient sampling was used to get these questionnaire filled, we used our references and tried to distribute the questionnaires to those area where we had the references. Through first five question we tried to know how often consumer visit the grocery store, how often consumer make the shopping list before leaving for the grocery store, family income level, gender and how much consumer like to spend for grocery shopping. 4.1. Gender: During our survey, we filled our questionnaires from 37 men and 13 women in Al-Fatah store. Whereas in Hyper star, men and women from whom we collected our questionnaire were in ratio of 35 and 15 which makes 70 and 30 percent of total. Al-Fatah Store Hyper star Mall Frequency Percentage Frequency Percentage Male Female 37 13 74 26 35 15 70 30 Total 50 100 50 100
  39. 39. Page 40 4.1. Number of visit in a month: Al-Fatah: On the behalf of our result we can say that 64% of our targeted people visit the grocery store once in a month. 20% people visit the grocery store twice a month and 16% people visit more than two times in a week. Hyper star: On the behalf of our result we can say that 50% of our targeted people visit the grocery store once in a month. 30% people visit the grocery store twice a month and 20% people visit more than two times in a week. On the behalf of these findings we can say that majority of the people visit both these stores once a month. 4.2. Family Income Level: Al-Fatah Store Hyper star Mall Frequency Percentage Frequency Percentage Once a month Twice a month More than two times 32 10 8 64 20 16 25 15 10 50 30 20 Total 50 100 50 100 Al-Fatah Store Hyper star Mall Frequency Percentage Frequency Percentage Less than or equal to 20,000 20,000 to less than 40,000 40,000 to less than 80,000 80,000 or more than 1 5 20 24 2 10 40 48 1 5 13 30 2 10 26 60 Total 50 100 50 100
  40. 40. Page 41 Al-Fatah: On the behalf of our result we can say that 2% of our targeted people’s family income level is less than 20,000. 10% of our targeted people’s family income level is more than 20,000, 40% of our targeted people’s family income level is less than 40,000 and 48% of our targeted people’s family income level is less than 80,000. Hyper star: On the behalf of our result we can say that 2% of our targeted people’s family income level is less than 20,000. 10% of our targeted people’s family income level is more than 20,000, 26% of our targeted people’s family income level is less than 40,000 and 60% of our targeted people’s family income level is less than 80,000. 4.3. Spending in a month: Al-Fatah: On the behalf of our result we can say that 10% of our targeted people’s family spending in a month are less than 8,000 and 90% of our targeted people’s family spending in a month are more than 8,000. Hyper star: On the behalf of our result we can say that 20% of our targeted people’s family spending in a month are less than 8,000 and 80% of our targeted people’s family spending in a month are more than 8,000. Al-Fatah Store Hyper star Mall Frequency Percentage Frequency Percentage less than 4000 4001 to 6000 6001 to 8000 more than 8000 0 0 5 45 0 0 10 90 0 0 10 40 0 0 20 80 Total 50 100 50 100
  41. 41. Page 42 4.4. Shopping list: Al-Fatah: On the behalf of our result we can say that 26% people always make the shopping list before leaving for the grocery shopping. 44% people said, most of the time they make the shopping list but not for every time where as 30% people never make the shopping list before leaving for the grocery shopping. Hyper star: On the behalf of our result we can say that 30% people always make the shopping list before leaving for the grocery shopping. 44% people said, most of the time they make the shopping list but not for every time where as 26% people never make the shopping list before leaving for the grocery shopping. 4.5. Comparative analysis: Eight questions were asked from the respondents, against these 8 different product categories, to know the importance of different factors in their purchase decision. Respondent were asked to imagine that they are purchasing these products from Al-Fatah or Hyperstar Store. A Likert scale was used to measure the importance of these factors. After compiling the data in SPSS we got the following results for these product categories. Al-Fatah Store Hyper star Mall Frequency Percentage Frequency Percentage Every time Most of time Never 13 22 15 26 44 30 15 22 13 30 44 26 Total 50 100 50 100
  42. 42. Page 43 4.5.1. Tea Whitener: This graph is representing the importance of different factors for the purchase of Tea whitener in two stores. Through the questionnaire results we can say that consumers always give the priority to those brands, which they always buy. On the behalf of our respondent we can see that regular purchase brand has the maximum share in both stores because it has the highest mean value, 3.27 and 3.95 in Al-Fatah and Hyperstar, and combined probability of 3.54 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Probability Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.43 3.13 2.77 3.27 2.67 2.50 3.20 3.05 3.95 2.80 2.46 3.16 2.88 3.54 2.72 17% 22% 19% 23% 19% Combined Probability Price Familiar Shelf space Regular buy Sale16% 21% 20% 25% 18% Hyperstar 17% 22% 19% 23% 19% Al-Fatah store
  43. 43. Page 44 4.5.2. Toothpaste: This graph is representing the importance of different factors for the purchase of Tooth Paste in two stores. Through the questionnaire results we can say that consumers always give the priority to those brands, which they always buy. On the behalf of our respondent we can see that regular purchase brand has the maximum share in both stores because it has the highest mean value, 3.43 and 3.90 in Al-Fatah and Hyperstar, and combined probability of 3.62 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Probability Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.53 3.03 2.93 3.43 2.73 2.65 3.30 3.30 3.90 2.65 2.58 3.14 3.08 3.62 2.70 17% 21% 20% 24% 18% Combined Probability Price Familiar Shelf space Regular buy Sale17% 21% 21% 24% 17% Hyperstar 17% 21% 20% 23% 19% Al-Fatah store
  44. 44. Page 45 4.5.3. Drinks: This graph is representing the importance of different factors for the purchase of Drinks in two stores. Through the questionnaire results we can say that consumers always give the priority to those brands, which they always buy. On the behalf of our respondent we can see that regular purchase brand has the maximum share in both stores because it has the highest mean value, 3.40 and 3.40 in Al-Fatah and Hyperstar, and combined probability of 3.40 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.03 2.93 2.73 3.40 2.63 2.80 3.15 3.30 3.40 2.80 2.34 3.02 2.96 3.4 2.7 16% 21% 20% 24% 19% Combined Probability Price Familiar Shelf space Regular buy Sale18% 21% 21% 22% 18% Hyperstar 15% 21% 20% 25% 19% Al-Fatah store
  45. 45. Page 46 4.5.4. Laundry Detergents: This graph is representing the importance of different factors for the purchase of Laundry detergents in two stores. Through the questionnaire results we can say that consumers in both stores always give the priority to those brands, which they always buy. On the behalf of our respondent we can see that regular purchase brand has the maximum share in both stores because it has the highest mean value, 3.17 and 3.55 in Al-Fatah and Hyperstar, and combined probability of 3.32 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.40 3.07 2.90 3.17 2.90 2.75 3.0 3.10 3.55 2.90 2.54 3.04 2.98 3.32 2.9 17% 21% 20% 22% 20% Combined Probability Price Familiar Shelf space Regular buy Sale18% 20% 20% 23% 19% Hyperstar 17% 22% 20% 22% 19% Al-Fatah store
  46. 46. Page 47 4.5.5. Tissue/Toilet Papers: This graph is representing the importance of different factors for the purchase of Toilet papers in two stores. Through the questionnaire results we can say that consumers always give the priority to those brands, which are on shelves. On the behalf of our respondent we can see that shelf placed brands have the maximum share in both stores because it has the highest mean value, 3.83 and 3.55 in Al-Fatah and Hyperstar, and combined probability of 3.12 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.77 2.77 2.83 2.80 2.06 2.15 3.40 3.55 3.55 2.85 2.52 3.10 3.12 3.1 2.7 17% 21% 21% 21% 20% Combined Probability Price Familiar Shelf space Regular buy Sale14% 22% 23% 23% 18% Hyperstar 19% 21% 20% 19% 21% Al-Fatah store
  47. 47. Page 48 4.5.6. Snacks: This graph is representing the importance of different factors for the purchase of snacks in two stores. Through the questionnaire results we can say that consumers in Al-Fatah store give preference to familiar brands and consumers in Hyperstar give preference to what are their regular buys. Familiar brand has highest mean value in Al-Fatah store of 3.03 and regular buy has highest mean value of 3.50. In combined probability, regular brands stands highest on the scale with probability of 3.25 among other factors, on the behalf of our results important factors for Tea Whitener, it will look like Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.43 3.03 2.83 2.90 2.77 2.65 3.25 3.40 3.50 3.05 2.52 3.12 3.06 3.25 2.88 17% 21% 21% 22% 19% Combined Probability Price Familiar Shelf space Regular buy Sale17% 21% 21% 22% 19% Hyperstar 17% 22% 20% 21% 20% Al-Fatah store
  48. 48. Page 49 4.5.7. Biscuits: This graph is representing the importance of different factors for the purchase of biscuits in two stores. Through the questionnaire results we can say that consumers in Al-Fatah store give preference to familiar brands and consumers in Hyperstar give preference to what are their regular buys. Familiar brand has highest mean value in Al-Fatah store of 3.13 and regular buy has highest mean value of 3.80. In combined probability, regular brands stands highest on the scale with probability of 3.34 among other factors, on the behalf of our results important factors for Tea Whitener, it will look like Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.27 3.13 2.90 3.03 2.47 2.60 3.45 3.35 3.80 2.80 2.4 3.26 3.08 3.34 2.6 16% 22% 21% 23% 18% Combined Probability Price Familiar Shelf space Regular buy Sale16% 22% 21% 24% 17% Hyperstar 16% 23% 21% 22% 18% Al-Fatah store
  49. 49. Page 50 4.5.8. Bread: This graph is representing the importance of different factors for the purchase of bread in two stores. Through the questionnaire results we can say that consumers in both stores always give the priority to those brands, which they always buy. On the behalf of our respondent we can see that regular purchase brand has the maximum share in both stores because it has the highest mean value, 3.40 and 3.65 in Al-Fatah and Hyperstar, and combined probability of 3.50 among other factors, on the behalf our results important factors for Tea Whitener, it will look like this Variable Frequency Al-Fatah Hyper star Mall Combined Price Familiar Shelf space Regular buy Sale 2.23 3.20 2.50 3.40 2.77 2.85 3.15 3.50 3.65 2.65 2.48 3.18 2.9 3.5 2.72 17% 21% 20% 24% 18% Combined Probability Price Familiar Shelf space Regular buy Sale18% 20% 22% 23% 17% Hyperstar 16% 23% 18% 24% 19% Al-Fatah store
  50. 50. Page 51 4.6. Crosstabs: 4.6.1. Number of visits to any grocerystore vs. importance of shelf space: In order to find out the relationship between the importance of shelf space with the number a visits to any grocery store I ran the crosstabs. On the behalf of findings I have the following result about these 8 product categories. As the shelf space arrangement and area in both stores are different so I’m representing the findings for both stores separately. Al-Fatah Store: There are 32 people who visit the grocery store once in a month. These people are almost neutral for tea whitener, laundry detergent, chips and biscuits because these categories have almost equal number of people in agree, disagree and neutral category. Whereas people are almost disagreeing for bread and drinks with regards to the importance of the shelf space. But they are showing the importance of shelf space for tooth paste and tissues. There are 10 people who visit any grocery store for twice in a month. They are neutral and agree with the importance of shelf space for the all product categories except for the drinks, laundry detergents. Most of the people are disagree with the importance of shelf space for drinks. There are 8 people who visit any grocery store for more than two times in a month. These people are neutral and disagree for the toothpaste, biscuits and bread with regards to the importance of the shelf space. Whereas majority of the people are agree and neutral for rest of the 5 product categories with regards to the importance of the shelf space. Hyper star Mall: There are 25 people who visit the grocery store once in a month. These people are almost neutral for tea whitener and biscuits because these categories have almost equal number of people in agree, disagree and neutral category. Whereas no people are almost disagreeing for
  51. 51. Page 52 any product with regards to the importance of the shelf space. But they are showing the importance of shelf space for tooth paste, drinks, bread, drinks, chips and laundry detergent. There are 10 people who visit any grocery store for twice in a month. They are neutral and agree with the importance of shelf space for the all product categories except for the drinks and bread. There are 15 people who visit any grocery store for more than two times in a month. These people in majority are neutral and agree for all product categories with regards to the importance of the shelf space. 4.6.2. Importance of shelf space VS monthly spending: Al-Fatah: There are 12 people who spend less than 4000 rupees, for grocery shopping, in a week. These people are collectively neutral and agree, on the importance of shelf space, for toothpaste and laundry detergent. There are 38 people who spend more than 4000 rupees and these people are almost agreed and neutral for all the 8 product categories with regards to the importance of the shelf space. Hyperstar Mall: There are 7 people who spend less than 4000 rupees, for grocery shopping, in a week. These people are collectively neutral and agree, on the importance of shelf space, for toothpaste and laundry detergent. There are 43 people who spend more than 4000 rupees and these people are almost agreed and strongly agreed for all the 8 product categories with regards to the importance of the shelf space.
  52. 52. Page 53 4.6.3. Importance of shelf space VS shopping list Al-Fatah: There are 13 people who, every time, prepare the shopping list before leaving for any grocery store. And according to the findings these people are almost neutral and agree for all the product categories expect bread. There are 22 people who, most of the time, define the shopping list before leaving for grocery store and majority of them are agree and neutral on the importance of shelf space for all the product categories except tea whitener, laundry detergent, chips and bread. There are 15 people who, never, define the shopping list before leaving for the grocery shopping and according to finding they are neutral and agree on the importance of shelf space. Hyperstar Mall: There are 15 people who, every time prepare the shopping list before leaving for any grocery store. And according to the findings these people are almost neutral and strongly agree for all the product categories expect tea whitener, drinks and toothpaste. There are 22 people who, most of the time, define the shopping list before leaving for grocery store and majority of them are agree and neutral on the importance of shelf space for all the product categories. There are 13 people who, never, define the shopping list before leaving for the grocery shopping and according to finding they are neutral and agree on the importance of shelf space.
  53. 53. Page 54 Discussion and Conclusion Discussion and conclusion about our findings is presented in this chapter. Readers can know the implication of these findings and what were the limitations in this research. In this part of the study, we discuss about the different aspects of shelf space, consumer behavior and the marketing importance of shelf space allocation management. The motive of this research was to know the importance of shelf space for 8 product categories. On the behalf of our findings and results we can say that consumer use different tactics for the different product categories in different stores. Some of their decisions are based on the shelf space; taste and some of their decisions are based on price. So consumer adopts the different ways to make the selection among the different product categories in different stores. So retailers should have to consider the other factors before defining the Planogram. Only shelf space cannot increase the sale of the product categories. These finding are effective for the manufacturer as well. They can also brush up their marketing strategies according to these results. Suppose if there is a taste war between the product categories, then good taste could be more effective than the shelf space. Similarly if the price is the most important factor for any product category then definitely manufacturer should have to concentrate competitive pricing strategies of the product, there is a very little chance that people will purchase those products are not good in price.
  54. 54. Page 55 5.1. Importance of locationand size of store: On the behalf of our findings we can say that consumers rate the importance of shelf space differently against the different product categories. And from these findings we also came to know that consumer rates many other factors before rating the shelf space in different stores. Shelf space is only effective if the product has competitive price, delicious taste and high performance. Type and location of store places a great deal of emphasize on selection of any product in shopping. We have already discussed the characteristics of both the stores on which we are conducting research on. According to which Al-Fatah store is small in size than Hyperstar Mall. And also the shelf space in Hyperstar Mall is much vast than the Al-Fatah store. In Hyperstar, there is open place where different companies places their product in discount sales and only for display purpose near the entrance of the store, that attracts the attention of the consumers due to which consumers purchase these items even they decided about some other products when leaving for the store. On the other hand in Al-Fatah, display is not much concentrated on. Shelf space in Al-Fatah store is congested as compared to the Hyperstar. Products in Al-Fatah are displayed on isles within the category along with other product categories. No special treatment is given to any product except the shelf position. On behalf of our findings we can say that characteristics of the store have great influence on buying behavior of the consumers. We have seen from the result that respondents in Hyperstar mall have more positive response towards the shelf spaces as compared to the respondents from the Al-Fatah store. It’s because of the shelf spacing area and displays in the Hyperstar and also the ongoing discount offers and promotion. In Hyperstar, people rated importance of shelf spacing form 3.05 to 3.55 as compared to rated importance of shelf spacing in Al-Fatah which was from 2.50 to 2.93 which is far less if compared to Hyperstar. Hypothesis result: On behalf of our findings we can say that cheap and less involvement products are choose when placed on premium shelf places or at attractive shelf display which happens in Hyperstar Mall. And secondly we have also seen from the result that size and characteristics of the store also plays important role in people’s behavior towards shopping so we can say that our hypothesis HI and H3 are true and accepted.
  55. 55. Page 56 5.2. Shelf space management: For different product categories, there are different ways of selection from the consumer’s perspective and there are different strategies used to allocate them on the shelves from the retailer’s perspective. For example, the products which are purchased on the basis of the prices, retailers use special strategies for them like they place the expensive products on low shelves and cheap products on premium shelves so the cheap products get sold easily rather than no sale. But not all products are sold on the basis of prices; there are many other tactics used by the consumers. For example there are products which are sold on the basis of the brand name rather than anything else. So consumers place these products on premium shelves so they get easily sold. Because in case that consumer doesn’t find the desired product, then they switch the store and it will cost retailer fortune if happens again and again with many customers. 5.3. Profit Maximization: The objective of any business like grocery retailer is the profit maximization. There are many ways with which retailers can increase their profits, with the effective sales operation and retaining the customers and their buying shares of months. But there are also other ways by which retailers can increase their sales, for example by managing their shelves. Product categories which are important for impulse buying are critical for profit maximization. Because impulse buying is an additional sale which any grocery retailer can achieve by managing efficiently its shelf space. According to our finding 72% (sometimes + most of the time) of respondents make the shopping lists and remaining 28% never make a shopping list so these 28% are the prospective customers who can increase profits of the retailers by engaging in impulse buying behavior.
  56. 56. Page 57 5.4. Which product category needs the premier shelf space? Shelf space is a very limited reserve for any retail business. In this research I’ve tried to find out those grocery product categories which need the premier shelf space. This research was limited to the 8 different product categories. Through the probabilities of the each product we prioritize these products according to the importance of the shelf space. 8 questions were asked from the respondents in two stores against each of these 8 product categories, to know the importance of shelf space for these products. On the behalf of our result, we will priorities these products in this way. Al-Fatah Store: Hyperstar Mall: Priority Product name Mean value at Hyperstar Mall 1 Tissue papers 3.55 2 Bread 3.50 3 Chips 3.40 4 Biscuits 3.35 5 Toothpaste 3.30 6 Drinks 3.30 7 Laundry Detergents 3.10 8 Tea Whitener 3.05 Combined probability mean: Priority Product name Mean value at Al-Fatah store 1 Toothpaste 2.93 2 Laundry Detergents 2.90 3 Tissue papers 2.90 4 Biscuits 2.83 5 Chips 2.83 6 Tea Whitener 2.77 7 Drinks 2.73 8 Bread 2.50 Priority Product name Mean value at Hyperstar Mall 1 Tissue papers 3.12 2 Tooth paste 3.08 3 Biscuits 3.08 4 Chips 3.06 5 Laundry detergent 2.98 6 Drinks 2.96 7 Bread 2.9 8 Tea Whitener 2.88
  57. 57. Page 58 Value of shelf space for different product categories in two stores It shows that tissue papers and toothpaste are among top product which need premium shelves and are shelf space dependent. This table could be helpful to the Al-Fatah and Hyperstar Mall management for defining the planogram about these 8 product categories. The product which is at the top priority of the shelf space is toilet paper and which is at the least priority of the shelf space is Tea Whitener. This part of the research answers first research question which was presented in the start. 2.80 2.90 3.00 3.10 3.20 3.30 3.40 3.50 3.60 Hyperstar 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 Tissues Toothpaste Biscuits Chips Laundry detergents Drinks Bread Tea Whitener Combined Probability Mean 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3 Al-Fatah

×