If you sell your products in supermarkets, you need to regularly analyze the performance of your listing policy. Two performance indicators can help you do this: numerical distribution rate (DN) and value distribution rate (DV).
Sidely takes a closer look at this crucial subject. In this article, we'll explain what they are, how to interpret them and, above all, how to use them to improve your distribution strategy and maximize your impact in supermarkets.
Digital distribution, or digital availability, is a crucial performance indicator in the retail sector. It enables us to assess the effective presence of a product (or brand) in the points of sale of a given network.
In concrete terms, thenumerical distribution rate measures the percentage of stores selling a product in relation to all stores selling its category. It enables us to understand the extent to which a product is established in the market, to identify potential growth opportunities, and thus to measure the effectiveness of your product listing policy.
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.
A high DN rate means that your product is widely referenced in a retailer's stores. Conversely, a low DN indicates that your product is present in a limited number of points of sale, which can hamper its commercial performance.
The numerical availability and assortments of a brand are closely linked, as the assortment defines the basis of the DN.
A brand's assortment strategy aims to select the products it chooses to market in a given distribution network. The numerical distribution rate is then a concrete measure of the implementation of this assortment in the field. It shows whether products are actually listed in the planned number of stores. A high DN validates the correct implementation of the assortment policy.
Value distribution, also known as value availability, provides a more comprehensive assessment of your market coverage performance. While digital distribution focuses on the number of points of sale,weighted distribution concentrates on the market share of your points of sale. In other words, it evaluates the presence of a product by taking into account not only the number of stores where it is listed, but also the economic weight of these stores in the category concerned. It weights digital distribution according to store sales in the product category studied. This gives a more realistic view of your brand's competitive position.
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
Note: if your area managers take full line surveys on their rounds, you can also calculate competitors' DN and DV!
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.
A good balance between DN and DV enables brands to optimize their supermarket distribution strategy and ensure an effective presence in the stores that matter most to their category. And that's what we're about to find out!
Comparing VD and ND rates provides valuable insights.
A high DV (> DN) means that your product is listed in stores with high sales activity for its category. This is a good thing, as these stores generate more sales.
Une DV faible (< DN) suggère que votre produit est référencé dans beaucoup de magasins, mais plutôt des points de vente à faible volume de ventes dans la catégorie. Cela peut indiquer un potentiel de croissance si vous ciblez mieux vos référencements.
Let's take an example. You sell two products (A and B), each with a DN of 50%. This means that your products are only available in 15% of the stores that could stock them. However, product A has a DV of 60%. This means that your points of sale capture 60% of the sales generated by the product category concerned. Conversely, product B has a DV of 40%. This means that it is mainly present in smaller or slow-moving stores (which generate 40% of the category's sales).
In our example, product A benefits from better sales positioning, while product B may need to adjust its distribution strategy. We can conclude that you have succeeded in positioning product A 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 DV/DN 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.
It's not enough for a product to be present on the shelf (DN) for it to work. It must also be listed in the stores that generate the most sales (DV). The gap between these two indicators provides valuable information on the consistency between distribution strategy and expected sales performance, and therefore, your assortment.
In other words, DN enables brands toadjust their assortment to maximize their impact in-store, in particular by :
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 DN and DV indicators, it enables your sales reps to optimize their sales round plans, 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!
