Dive Brief:
- As retailers continue to expand and diversify their portfolio of SKUs across major legacy brands and startups, they often face critical choices to determine which brands get coveted shelf space in their stores, according to Marketplace.
- The challenge includes balancing brands that employ direct store delivery — with delivery drivers restocking shelves themselves — and brands that require retailers to stock the products.
- Consumer demand still informs shelf space decisions to an extent, but often other behind-the-scenes factors come into play, such as stocking fees to make some products more visible and accessible — and can also drive consumer demand by default.
Dive Insight:
Smaller brands and startups often can't afford direct store delivery reps. Major companies, on the other hand, often prefer to distribute their own products, which tends to be more profitable. This can be a disadvantage for smaller brands struggling to break into new and larger retail outlets, and it leaves final shelf space decisions up to retailers, who consider what is best for the company as a whole and for individual locations.
Those decisions can be littered with politics in terms of balancing the needs of long-time manufacturing customers and newcomers to the industry. That's especially true for major manufacturers that can afford to stock more products on a regular basis. Retailers need to safeguard those relationships to keep brand loyal customers coming back for those products.
At the same time, retailers have to balance offering the innovation and diversity coming from startups to appeal to other consumers, particularly millennials and those who are health-conscious. This could mean more labor involved for retailers. But offering the range of products consumers want could ultimately pay off by attracting a wider range of demographics.