It’s the age-old supply vs. demand issue- you want to have enough product in stock to meet consumers’ demand, but you don’t want to overstock in case you have leftover inventory. This issue often leads to an influx of the product on the shelves, the thought being that more products on the shelves will result in more sales.
However, as a luxury goods business owner, you want to avoid doing this. Consider the cosmetic displays in department stores or boutiques- they may not necessarily be large, but they avoid overcrowding with their use of fixtures, lighting, and most importantly, their lack of product density. This not only makes it more visually appealing to the customer, but also contributes to your brand image. For luxury goods, you want to create an air of prestige. By having fewer products on the shelf, you are conveying to the customer that your product is not common or mass-produced.
In addition to promoting your brand image, there is a financial incentive to avoid purchasing too much retail space.. Since it can be expensive, you need to consider whether or not the potential increase in sales will be worth the extra cost. Instead of purchasing extra space, seek the most optimal shelf space for your product, as shelf location is a large factor in sales.
All in all, it is important to collect data on various locations to discern where your product performs best, and to then determine the optimal position by weighing the cost of the space with the amount of sales. Booz&Co. did a study detailing how to measure SSP (Shelf-Space Profitability), which is a metric you can use as a tool to evaluate the relationship between sales profits and shelf real estate costs.
If you are finding that retail space is too expensive, instead of overcrowding the space with your product, try restocking small amounts of your product more often. After all, luxury products deserve their own space, and you’ll find that both your budget and your customers will readily agree.
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