Like all brands that have opted to sell in supermarkets, you need to analyze the performance of your listing policy. Two indicators can help you do this: the numerical distribution rate (ND), and the value distribution rate (VD).
Sidely takes a closer look at this crucial subject. We'll start by looking at the definitions, then see how you can interpret and use them to improve your distribution strategy!
Numerical distribution is a crucial performance indicator in supermarkets, as it measures the effectiveness of your product listing policy.
The numerical distribution rate (ND) measures the presence of a specific product on the shelves of outlets in a studied sample. This sample generally corresponds to outlets selling the product category concerned.
It provides visibility on the availability and distribution of products on the market, and thus enables you to better assess a brand's ability to reach potential customers. Knowing your numerical distribution rate therefore enables you to increase the visibility of your products and ensure that they are well distributed and available where potential customers are likely to shop.
To determine the numerical distribution of a product, we divide the number of outlets in which the product is available by the total number of outlets offering this product category. The formula is as follows:
Numerical Distribution (%) = [(Number of outlets selling the product) / (Number of outlets in the chain)] x 100
The store sample studied can meet various criteria:
Depending on the granularity of your results, you can of course cross-reference these criteria.
Example:
Let's assume that a product is available in 75 out of a total of 100 stores in chain A. In this case, the numerical distribution of this product would be 75%, meaning that it is present in 75% of chain A's outlets. In this case, the numerical distribution of this product would be 75%, meaning that it is present in 75% of chain A's outlets.
Value distribution provides a more comprehensive assessment of your market coverage performance. While numerical distribution focuses on the number of sales outlets, value distribution concentrates on the market share of your sales outlets.
To determine your distribution rate by value, divide the sales of the stores in which your product is present by the total sales of all stores carrying the product category. Here's the formula:
Distribution by value (%) = [(Sales in stores where the product is distributed) / (Total sales in stores carrying the product category)] x 100
ND and VD are two complementary market share calculation methods. Knowing how to use them is fundamental to determining your competitive position and improving your marketing strategy. In particular, their analysis will enable you to optimize resource allocation, as well as to compare strategy objectives with indicators based on real-life observation.
Note: if your area managers take full line surveys on their rounds, you can also calculate competitors' ND and VD!
Comparing VD and ND rates provides valuable insights.
Let's imagine, for example, a ND rate of 15% and a VD rate of 60%. This means that your product is only available in 15% of the stores that could stock it. However, your points of sale capture 60% of the sales generated by the product category concerned. We can conclude that you have succeeded in positioning your products in the best points of sale. This is all the more strategic as, by concentrating on certain stores, you optimize your logistics and marketing costs.
This is why many companies cross-reference these two indicators to derive a VD/ND ratio, often in absolute terms. If this ratio is greater than 1, you can deduce that your products are distributed in high-potential outlets. If not, your listing policy may need to be redirected towards stores with higher sales. This is often the case for brands that have found their place in supermarket assortments, but not in those of hypermarkets.
This very schematic table shows that ND is not the only variable to be taken into account.
Increasing your numerical distribution means increasing the number of points of sale where your customers can buy your products, without expanding your catchment area. In fact, extending your geographical reach would also increase the sample you use as a basis for calculation. The positive evolution of your numerical distribution should therefore also be seen as an increase in your penetration rate.
Value distribution is a more qualitative approach: it allows you to evaluate your choice of partner outlets. If you achieve higher sales without increasing the number of distributors, your profitability increases.
Of course, maximizing sales means maximizing ND and VD rates. In other words, the higher a store's VD, the more important it is to be listed and present there. This is known as the 20/80 rule: in general, 20% of outlets generate 80% of sales. So it's more worthwhile to work on the 20% of stores that are the most profitable for you, than to tire yourself out on the other 80. All you need to do is calculate your VD.
Having high ND and VD rates also means that you'll be able to increase the return on investment of your advertising campaigns, as the breadth of your market coverage means that your target customers will be able to find you when they shop.
Successfully determining these indicators can also help you project market share and determine your sales targets. In fact, by calculating your product's sales at a ND rate of 100%, you can obtain the maximum sales you can expect.
Of course, increasing your ND or VD rates sometimes means forming distribution agreements with new retailers. At least, when your existing distribution contracts allow it...
Finally, be careful to include the competition in your analysis: distributing in high-potential stores can also dilute you in a wider offer, and force you to charge more aggressive prices to exist, at the risk of seeing your margin rate drop.
To be able to determine these rates accurately, you need to have an exhaustive, up-to-date and qualified database of sales outlets that could distribute your products.
By using Sidely CRM, you benefit from a complete database of supermarket outlets, including store codes. In addition to facilitating the calculation of ND and VD indicators, it enables your sales staff to optimize their sales rounds, and above all to improve another rate, which we haven't yet discussed here: the product holding rate. This indicator measures the number of references your distributors place on their shelves.
Yes, another way to increase your sales is to boost your presence in your existing points of sale. Want to find out more? Ask us for an online demo!
