Market View: Shelf warmers

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At a recent meeting with a grocery chain, an analyst noted over 30 percent of all the items in the store sold less than one unit every 30 days. I expected to hear a gasp at such poor performance. Instead, the managers said they were not surprised and went on to give a number of explanations (excuses) as to why the situation is occurring.

           
The main reason for keeping "shelf warmers" in the stores is grocers are paid handsomely for the space. One store manager remarked, "We make money whether the product sells or not. In fact we like it better when it doesn't sell because we don't have to restock the shelf or use a lot of storage space for inventory."


In today's world it makes no sense for a retailer to have "shelf warmers." Stores should be doing everything possible to better serve the customer, and having space tied up with non-sellers is bad business whether the store gets paid or not. It's even worse for the food processor. This has to be as bad as it gets. 


There are a number of reasons why shelf warmers are counterproductive for food marketers. First, it makes the food processor look like a bank the retailer can go to anytime to make a withdrawal. It's like a food industry form of welfare. No need to work, just let us food processors give you money.


The logic some food executives use is that this practice hurts the retailer more than it does the processor. But one of the outcomes of the decline of the independent grocers and smaller chains is that a consolidated retail industry leads to more retailer negotiating power. If you think it's tough to negotiate with Wal-Mart now, imagine what it will be like when there are only four chains to deal with.

           
Allowing shelf warmers to exist is bad because they take up space that could be used for more productive products , especially new products, products that are good sellers or hot, faddish products that are here today and gone tomorrow. The last type needs as much space as possible, as they have such a short life cycle that their time in front of consumers must be maximized.


The shelf warmer tells the retailer your company is not really interested in selling. In fact, it even implies you don't care much about the consumer; otherwise, you'd be trying to find products that consumers want. It sends the same messages to your own sales force and other field employees, that your business is not about consumers and not about selling. While your top sales executives are making long-winded speeches about getting sales up and the importance of the consumer, every salesperson knows the company is paying to keep some products on the shelf without sustaining sales. In the long run, this takes its toll on morale and the spirit to sell.


Finally and most importantly it is obvious to consumers. They see the same products on the shelf, they talk to friends and they figure out what's going on. Some marketing executives I talk to think of consumers the way physicians think of patients: that they have no idea what is going on. They do! They know progressive and exciting companies. There is a reason why some food companies are always listed in the top brands. Why do you think for the first time in years Campbell Soup Co. wasn't listed in the top mentioned consumer brands?


A smaller food company might argue the only way it can get into supermarkets is to pay, and it has to get the brand established before sales will take off. The shelf warmer for them is like the bench warmer for the football team. They are just waiting for the big play to get going. But this is bad business. A company that tries to get started by buying into the shelf is either very rich or very unimaginative.


There are better ways of getting started. While the lure of the "big order" from the supermarket gets every small food executive excited, it is not the best way to get consumer attention. In many cases, the money could be better used on consumer advertising, promotions and merchandising.


To paraphrase the joke, "How do you get to Carnegie Hall? Practice, practice, practice!" How do you get to the supermarket? By selling, selling, selling, not buying your way in.

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