Slotting Fees Adalah

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.

Profitability for a retailer is rotation x margin

Retailers make money by selling your goods at a margin. The quantity of goods sold in a certain period is the rotation, and as a manufacturer you have to make credible that the rotation of your product will be high. The other aspect is margin: but mostly retailers set a fixed margin per product category, which may range from 20 to 50% for fast moving consumer goods.

The same applies for online sales: although there you list as many products as you want, online retailers won’t do that. If the online customer has too much choice, he or she will find the website messy and perhaps even won’t buy.

The point of view of a category manager

A category manager of a Retail Chain has:

And a category manager knows that only 1% of new products launched in the market survive more than 1 year…

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.

Getting supermarkets, convenience stores and drugstores as you distributor

By: Daniel Duffy, Principal Analyst

You asked if any state considered legislation on slotting fees charged by grocery stores.

The term “slotting fee” describes a variety of fees retailers charge their suppliers. Generally, suppliers pay these fees under an agreement that guarantees the supplier shelf space for a particular period of time. Some fees are charged for the introduction of new products, some to maintain existing shelf space, and some to exclude a rival's products. The term is associated with fees paid to grocery stores, but slotting fees may charged by other types of retailers as well.

We identified a bill considered by California in 2005 and another currently pending in Massachusetts.

California's Senate Office of Research prepared a slotting fee background paper in January 2005. It describes how the fees are imposed, summarizes some Federal Trade Commission (FTC) work on the issue, and reviews the positions taken by supporters and critics of the fees.

California considered, but did not adopt, a bill on slotting fees in 2005 (SB 582). The bill was significantly revised before it died.

In its first version, the bill prohibited any retailer from imposing a slotting allowance or a pay-to-stay fee on a supplier without disclosing, clearly and unequivocally, the amount of the charge the retailer imposes on other suppliers for the placement of similar products (SB 582). It defined “slotting allowance” as a lump-sum payment for the placement of a product on a shelf and “pay-to-stay fee” as a fee for continued placement on a shelf.

In its second version, the bill required retailers, on request from a qualified supplier, to disclose (1) placement fees or arrangements charged for the placement of similar products and (2) all trade information for the placement of a similar product if (a) information about a specified product has been shared by the retailer with a manufacturer or supplier that neither supplies nor manufactures the product or (b) information about a product has been shared with the retailer by a supplier that neither supplies nor manufactures the product.

The bill defines (1) “placement fees or arrangements” as a promise of shelf space, specific shelf placement, guaranteed advertising, payment to keep a product on a shelf, slotting fees, or any other benefit; (2) “qualified supplier” as one who can supply the retailer with a product similar in character; (3) “shelf” as a specific location in a retail store where the product is offered for sale for more than five days; (4) “slotting fee” as a lump-sum fee for product placement on a shelf; and (5) “trade information” as all retail pricing, sales volume, and promotional information for all similar products within specific stores or a grouping of stores.

The 2007 Massachusetts bill, in the form of a proposed bill, prohibits slotting allowances from being charged by grocery stores (AB 324). It defines “slotting allowance” as an exchange of anything of substantial value in return for desirable shelf space. It received a public hearing in June.

CALIFORNIA BACKGROUND PAPER

The California Senate Office of Research prepared a background paper in 2005. It states that “there is no standard definition of the term “slotting fee,” but that it has been used to describe lump-sum fees paid for a new product introduction. It relies on certain FTC reports to state that it is difficult to determine the amount of or frequency with which slotting charges are imposed. The FTC surveyed seven retailers in 2003 and only one reported that it kept historical electronic records of slotting fees. The FTC concluded that even with retailers' cooperation, it is difficult to obtain historical data. As a result, the FTC states that “the frequency and overall amounts of slotting dollars reported by the retailers in this study may be lower than the actual incidence of slotting.”

Relying on a report issued by the Food Marketing Institute, the California report states that slotting fees are charged to (1) cover the costs of introducing a new product, (2) remove the item that previously occupied the shelf, and (3) recover the retailer's investment if the product fails.

Relying on another FTC report, the report states that slotting fees have been criticized for (1) increasing the cost of introducing new products, (2) adversely affecting smaller suppliers more than larger ones because larger suppliers are more likely to be able to afford paying them, (3) adversely affecting smaller retailers in favor of larger ones because smaller retailers cannot extract slotting fees from suppliers, and (4) reducing competition by stifling innovation and product variety.

A Practice Note discussing the key features of slotting fees, sometimes called slotting allowances, which grocery retailers impose on manufacturers, distributors, and other suppliers of grocery products, in exchange for the placement of new product items on store shelves. Together with free fills and introductory allowances and discounts, slotting fees help retailers to recoup the cost of and reduce potential losses arising from new product introductions.

The point of view of a retail category manager

A category manager of a Retail Chain has:

And a category manager knows that only 1% of new products launched in the market survive more than 1 year…

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).

What is the business case for your product?

Of course you can try to negotiate with purchasing managers of retail chains. There are alternative ways of payment, like advertising in the supermarket’s magazine or doing sampling in the supermarket. This will also help your sales. There are many parameters, and eventually you will have to keep in mind you business case: will you still be making money on your product?

Retail marketing has experience in presenting your product with supermarkets and with negotiations. Please contact your nearest representative or our matter experts.