Slotting fees or listing fees, slotting allowances, pay-to-stay
These are all names for the fact that the supermarket or other retail outlet wants to optimise its shelf space. The specific metrics may vary, but the principe remains the same: its a way to share the risk/opportunity of a failure/success of a listing between the manufacturer and the retailer.
So while slotting fees can help CPG companies gain access to new markets, increase visibility, and gain a competitive advantage, they also come with a few challenges that require careful consideration.
Want to get ahead of the competition and increase your market share? Paying a slotting fee can help you secure valuable shelf space in retailers with a large customer base, loyal following, or strategic location. By negotiating better product placement and merchandising strategies with retailers, you can also differentiate your brand on the shelf and increase your chances of being noticed.
According to NielsenIQ, slotting fees can also help you increase your brand awareness, customer acquisition, and market share. Another benefit of slotting fees is that you can secure limited or scarce shelf space for your product category, reducing the competition and clutter on the shelf, which can increase your sales potential and put you in a better position to negotiate favorable terms with retailers.
Paying slotting fees can be expensive and unpredictable, making it hard to budget and plan for them. Additionally, they expose you to the risk of product failure because retailers usually require payment upfront before your product has a chance to prove itself in the market. If your product doesn't sell well or meet the retailer's expectations, you may not be able to recover your investment. Retailers may also delist or discontinue your product if it fails to meet certain sales thresholds or turnover rates.
Moreover, slotting fees can limit your bargaining power with retailers because they may impose additional terms and conditions, such as promotional support, exclusivity deals, or price concessions, which can reduce your profit margins and flexibility, and may even have a negative impact on your brand reputation. Therefore, it's crucial to carefully consider the terms and conditions of the agreement and negotiate a fair deal that works for both parties.
To sum up, paying slotting fees can be a valuable investment that can take your CPG business to new heights. However, it's important to keep in mind the challenges that come with paying slotting fees and ensure that you have a solid plan in place to mitigate any risks. By weighing the costs against the potential benefits and negotiating a fair deal, you can make the most out of slotting fees and achieve your business goals.
Negotiating lower slotting fees can be a daunting task for CPG companies, but it's an essential one for those looking to gain valuable shelf space in retail stores without breaking the bank. Here are some tips to help you reduce slotting fees and increase your chances of getting on retail shelves:
Getting your products on retail shelves can be costly due to slotting fees. But you can optimize your product placement and shelf space with Vispera, a visual intelligence company that offers AI-based image recognition and analytics solutions for retail. Vispera helps you:
Vispera is your visual intelligence partner that helps you drive perfect stores with its innovative image recognition solutions. By using Vispera’s visual intelligence solutions, you can not only reduce your slotting fees but also increase your sales growth, market share and customer loyalty.
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Definition of a listing
A listing is the introduction of a product/product line in the retail offer of a retail/foodservice company in a specific retail channel (offline or online), territory, store/s decided by a retail representative (Category Manager, Retail Manager, Store Manager, Buyer) after having received all information and deeply assessed the profit and sales potentiality.
What is a slotting fee (or listing fee)?
A slotting fee is the amount of money/fee required by the retailer, once she/he found potentiality for your product, to cover some direct costs (e.g. opening a supplier code, checking quality standards, list in the IT system,etc.) but mainly to cover the costs of space that is the most scarce/valuable resource for a retailer (both online and offline).
Getting supermarkets, convenience stores and drugstores as you distributor
We all want our products in full sight at the shelves of any supermarket, convenience store, drugstore or department store. This will boost your sales and give your product the status it deserves. However, in order to get there, you will have to pay for it, and the better the position, the higher the fee.
Slotting fees or listing fees, slotting allowances, pay-to-stay
These are all names for the fact that the supermarket or other retail outlet wants to optimise its shelf space. The specific metrics may vary, but the principe remains the same: its a way to share the risk/opportunity of a failure/success of a listing between the manufacturer and the retailer.
To list a product means delisting another one
The space in a retail shop is limited. And it is already fully optimised. This means that if you want your product on the shelves, the category manager has to remove another one to make space. So he has to disappoint another manufacturer who has already paid a listing fee, but whose products do not sell enough.
What is a slotting fee (or listing fee)?
A slotting fee is the amount of money/fee required by the retailer, once she/he found potentiality for your product, to cover some direct costs (e.g. opening a supplier code, checking quality standards, list in the IT system,etc.) but mainly to cover the costs of space that is the most scarce/valuable resource for a retailer (both online and offline).
Getting supermarkets, convenience stores and drugstores as you distributor
We all want our products in full sight at the shelves of any supermarket, convenience store, drugstore or department store. This will boost your sales and give your product the status it deserves. However, in order to get there, you will have to pay for it, and the better the position, the higher the fee.
A listing is the introduction of a product/product line in the retail offer of a retail/foodservice company in a specific retail channel (offline or online), territory, store/s decided by a retail representative (Category Manager, Retail Manager, Store Manager, Buyer) after having received all information and deeply assessed the profit and sales potentiality.
How to ensure slotting fees are free and mutually beneficial
Before you begin to consider playing a slotting fee to get your product into a store, you need to have a plan. That much should be obvious. And yet, that doesn’t mean that this mistake doesn’t happen.
In a rush to get your product into a store, you might not even worry about this. But that’s a mistake that you’ll end up regretting.
So what does such a plan entail?
For one, you must be prepared to expect a slotting fee so that it doesn’t come as a surprise if the topic is brought up.
Then, you must know how much you are willing to spend. How high are you able to go without ruining your business? Once you have a figure that fits your budget, stick to it. Remember, this isn’t a one-way negotiation. If a large retailer is asking too much, don’t agree to meet them just because they can offer you a slot in their store.
Regardless of how much shelf space you’re promised, it doesn’t guarantee sales.
As much as securing shelf space places you at an advantage as it puts you in front of shoppers, you can’t expect to sit back and wait for sales.
Instead, you need to use various sales and marketing tactics available to you. Typical examples here would be to run promotions in-store or host a demonstration.
If you’re looking to improve your promotional planning efforts, there are four steps you need to take: One, decide on your objectives. Two, align yourself with the retailer. Three, implement the promotion in-store. Four, measure the outcomes and adjust where necessary.
We dive into the above steps in more detail in this piece. Considering the statistics we quoted around the failure of new products, promotions and the like are crucial. Also, as noted above, by promoting one product, you can improve your reputation amongst shoppers enough for them to show interest in other products that you offer.
If the product you put on promotion exceeds their expectations, they could also purchase it once it’s returned to its regular price.
As much as you can pay a slotting fee to secure your product's space on the shelf, there is another way to guarantee space. And that is to look at and understand your retail data.
You can use your retail data to prove to retailers that it’s worth giving your products space on the shelf. This is regardless of if you already have products in a retail store and you’re currently renegotiating for more space. Or, you’re in the process of negotiating an initial listing.
Let’s say, for example, that you’ve noticed a trend in the market, which indicates a current or future demand for a product. And you happen to supply that product. You can approach the retailer fully confident in your product and what you can offer.
What’s more, having this information places you in a far stronger position when it comes to negotiating a slotting fee. Instead of taking what a retailer gives you, you can arrange a price that suits your pocket.
The last step, which you could argue is the most crucial, is to measure your progress. You could even include it in with the above point around consulting your retail data.
That’s because you should measure how your product performs throughout the month. It can’t be an afterthought.
After all, this is about presenting yourself and your product in the best possible light. As much as you can pay to get space on a shelf, you also need to prove why a retailer should take a chance on stocking your product.
Also, it’s worth pointing out that as you measure, and you find your products selling better than expected, you can renegotiate your space. And, if you’ve proved yourself with one product, when the time comes for you to begin negotiations around stocking a new line, it could be easier to persuade the retailer to give you a slot, however small.
Of course, that doesn’t guarantee that you’ll get space for a different line. But, at least, you’ll have built up a solid enough working relationship and reputation.
DotActiv Lite, Pro, and Enterprise are all different versions of our category management software that allows you to drive category performance. You can visit our online store here or book a custom exploratory consultation here.
In the competitive world of retail, getting your product onto store shelves is only half the battle. Then you have to pay up for valuable shelf space. This practice, known as slotting fees, has been a staple of the retail industry since the 1980s, particularly in supermarkets and grocery stores. But are these fees worth it?
What Are Slotting Fees?
Slotting fees are payments manufacturers make to retailers to secure shelf space for their products. These fees help retailers offset the costs and risks associated with introducing new products to their inventory.
The Retailer's Perspective
Grocery stores face several risks when adding new products:
Given that the failure rate for new grocery store products is staggeringly high—approximately 70 to 80 percent—retailers use slotting fees as a safeguard against these risks.
The Brand’s Perspective
For CPG brands, slotting fees can be a significant investment. According to Nielsen, initial slotting fees typically range from $250 to $1,000 per item per store. However, these fees can offer several benefits:
The most coveted grocery items are often placed in the "strike zone"—the area just below eye level—which typically guarantees the highest sales. Securing this prime real estate can significantly boost a product's visibility and sales potential.
Are Slotting Fees Worth It?
The answer depends on various factors, but the most important one is knowing your margin. Do the math and calculate exactly what you need to sell to break even and what you need to sell to make a profit. Then consider the following:
While slotting fees represent a significant upfront cost, they can be a worthwhile investment for brands looking to gain a foothold in competitive retail environments. By securing prime shelf space and increasing visibility, these fees can pave the way for long-term success. It’s always important to carefully weigh the costs against the potential benefits and align this strategy with your overall business goals.
It's essential to understand slotting fees and how to minimize them, especially in the CPG market, which is brimming with new products – an average of 30,000 new products launch each year. Slotting fees, also known as fixed trade spending, represent the charges retailers impose for the shelf space your products occupy. These fees can fluctuate based on various factors and may impact your bottom line.
However, slotting fees can offer advantages such as reaching new customers, enhancing your brand, and outperforming competitors. How can you maximize these benefits? How can you leverage visual intelligence solutions to optimize your shelf space? We'll explore these questions in this blog post.
Simply put, a slotting fee is a fee paid by suppliers to retailers in exchange for the placement of their products on store shelves and in warehouses. The fee covers the cost of entering product data in the retailer's inventory system and programming its computers to recognize the product's unique barcode.
It's important to note that slotting fees are different from other fees that suppliers may incur, such as pay-to-stay, promotional, stocking, and failure fees. But why the controversy around slotting fees? Well, retailers need a buffer to account for the fact that new product introductions may fail, with up to 90% of new products failing, according to the FTC. However, the high costs associated with slotting fees can make it difficult for small businesses to introduce new products, with fees ranging from tens of thousands to millions of dollars per product.
So, how can you navigate slotting fees and make the most of your promotional planning efforts? By understanding the value proposition, market potential, and differentiation of your product and using data-driven decision-making to support your pitch. You can also leverage existing relationships or brokers to get referrals or discounts from retailers and offer incentives or trade-offs to make it easier for retailers to say yes to your proposal. By following these tips, you can negotiate lower slotting fees and secure valuable shelf space in retail stores without sacrificing your profits.
Slotting fees, or shelving fees if you may, can vary greatly based on a few factors such as the type of product, manufacturer, relationship with the retailer, market conditions, number of stores and more.
