To best adapt their offer to the characteristics of different points of sale, supermarket chains use the principle of "gigognity", a set of rules for determining which products should be included in each store's assortment.
This principle, which is often poorly understood by brands, is nevertheless a strategic asset for retailers. That's why we're going to take a closer look at this practice, assessing its advantages and limitations for retailers, and asking how brands can benefit from it.
"Gigognity" refers to a series of objects that fit into one another or slide under one another, like Russian dolls. In retail marketing, this term is used to refer to the stratification of a retailer's offer. Indeed, there are different store formats, grouped into categories known as strata. These include proxi, discounters, hyper, etc.
These strata are defined according to criteria such as size, location, sales, customer profile and so on. This segmentation of sales outlets enables chains to create assortments adapted to the needs of each type of outlet. The "gigogne" assortment thus consists of a hierarchy of products for each category, with stores offering a deeper and deeper range according to the stratum to which they belong.
The "gigogne" assortment enables chains to centralize their approach to the marketing mix, and in particular to adapt supply to demand. But gigognity also responds to a branding and homogeneity challenge, in that it enables consumers to find certain products in the points of sale of a network, the available offer being one of the criteria that enable a chain to distinguish itself from its competitors.
Gigognity also helps to solve storage and shelf space problems: optimizing assortments should enable each sales outlet to offer a range that is adapted to its logistical and commercial structure, as well as to local demand. Last but not least, the "gigognité" concept makes it easier for retailers to negotiate purchases, as it guarantees the volume flow of strategic SKUs. It is therefore a real pillar of cost strategy.
At the time of writing (March 2024), inflation is driving consumers to give priority to private labels, leading retailers to reduce the number of national brand references on their shelves in favor of private labels. We have thus moved from a strategy of profusion to a new era of optimization and sizing. While "gigognity" is not a new tool in itself, it remains one of the levers used by retailers to optimize their supply chains and maximize the value per linear meter on their shelves.
The staggered assortment consists of a series of products classified by strategic importance score in the retailer's revenue or strategy, and by category. To define this tree structure, we need to assign scores or indices to the products, so as to rank them in order of importance. This is part of category management, and is carried out at head office or purchasing center level, the aim being to set up a network-wide system.
Let's start with a simple diagram:
Product A → Product B → Product C
In the above chain, product A is necessarily a common, top-selling product. In supermarkets, the 80/20 rule is generally applied, with 20% of products generating 80% of sales and vice versa. In our diagram, A corresponds to the product that all sales outlets must offer.
The rule to understand when it comes to gigognity is that a store that carries product B must also carry product A. And a store that carries product C must also carry products A and B, so gigognity is a bottom-up rule: whatever product is available on the shelf, all the products preceding it in the hierarchy must also be available on the shelves of that store. On the other hand, a store may offer only product A. In this case, the gigognity rule is always respected.
With this in mind, each store is assigned an assortment profile for each product category. This profile corresponds to the number of products to be included for each category:
Example
Let's take the case of a catman who teaches the "beer" sub-category. He has determined the following indexes:
The profiles could be organized as follows:
Despite the theoretical suitability of assortment profiles at point-of-sale, gigognity can come up against local barriers, particularly for cultural reasons. For example, the level of consumption of salted butter and olive oil corresponds to regional cooking habits. Conclusion: gigognity rules generally apply, but are often adapted based on the observation of purchasing behavior. Optional products can therefore be added to meet the specific needs of local demand.
Gigognity is therefore designed to rationalize the value proposition across a network of outlets operating in a variety of ecosystems (demographics, purchasing power, competition, etc.). It can be described as top-down, i.e. from the head office to the point of sale.
But, as we have just emphasized, this engineering layer does not allow us to imagine all possible consumer scenarios, nor to anticipate potential evolutions. This is why retailers also use bottom-up methods, to adapt their strategies in line with observed purchasing behavior.
To achieve this, retailers collect a maximum amount of customer data via loyalty cards. In fact, by associating sales with individuals, retailers are able to determine customer segments based on their purchasing path or the complementary nature of the products they buy.
Retailers are therefore adopting a two-pronged approach: one based on gigognity, to theorize a maximum value proposition for each stratum, and the other on field data analysis, to reveal winning tactics based on real-life consumer behavior. This complementary approach is fundamental. Indeed, while e-commerce makes full use of algorithms to identify the most appropriate offers, distribution in physical stores also has to contend with logistical constraints and costs.
On the other hand, a full bottom-up logic would mean that demand drives supply. However, the purpose of marketing and communication is precisely to influence purchasing behavior. In other words, retailers need to find a value proposition that impacts shoppers' consumption habits, and is not just a consequence of them.
This development is relatively complex for brands, as retailers' strategies are increasingly based on data that belongs to them and to which manufacturers do not have access. What's more, retailers often aim to offer private label products in order to lower their prices while preserving their margins. For example, if a retailer sees that the organic sector is slowing down due to prohibitive costs, despite rising demand, this means that there is an opportunity to position itself in private label by meeting an existing need at an "acceptable" price.
Brands must therefore observe certain best practices to defend their shelf positions.
This is a real strategic challenge for brands, who must try to understand the rules of retail chains' gigognity in order to reap the benefits, rather than paying the price by defining ranges that are ill-suited to the strata of their distributors.
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