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Measuring Shelf Space

By Steven Miyao

As a follow up to my last post on shelf space, opportunities do not simply just happen. Shelf space allocations are dynamic and reflect changing marketplace needs.

Shelf space value should be calculated using a formula that weighs the size of the shelf space market share opportunity, stickiness of assets, number of competitors, recent product sales, and revenue potential. Shelf space is optimized when a firm has fully leveraged the value inherent in the space to maximize revenue generation, profitability, and the strategic value of the relationship.

But to move up, you must first know where you are. Unfortunately, many firms have no formal process in place for measuring shelf space beyond a listing of the products they make available to the distributor. A more active program would seek at a minimum to capture shelf space data with an eye to anticipating product turnover and new opportunities. By understanding how cost and performance impact a distributor's decision making, the asset manager is positioned to develop and offer new products to meet these changing needs in a timely way.

Interestingly, the value of shelf space within an organization is not always equated with high volume sales. In one instance we examined, a firm focused on selling a short-term bond fund that was gathering substantial assets. The product won a significant amount of shelf space in a national wirehouse channel. However, following an evaluation of the shelf space, the managers realized that the turf they occupied was not very valuable after all. Redemption rates were high and profitability was low. As a result, they changed strategies, moving their shelf space to a more profitable large cap product with better stickiness.