Slotting fees and listing fees in supermarkets
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. This article outlines the principle and gives some indication for the fees.
Definition of a listing
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.
What is a slotting 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).
Slotting fees, listing fees, slotting allowances, pay-to-stay
These are all names for the fact that the supermarket or other retail outlet wants to optimise its shelf space. The specific metrics may vary, but the principe remains the same: its a way to share the risk/opportunity of a failure/success of a listing between the manufacturer and the retailer.
Use our expertise in convincing distributors and retailers
No one better than international marketing and partnership specialist Alfred Griffioen can help you draft a pitch to convince any distribution partners.
The point of view from a catagory manager
A category manager of a Retail Chain has:
- A potential opportunity to select products for the categories assigned among about 500.000 SKUs
- She/he needs to select products for a store that can keep only 1.000/3.000 SKUs on the shelves for her/his assigned categories (4.000 small smkt – 10.000 medium – 40.000 large)
- A shopper buys an average of 400 SKUs per year.
- A basket in a single shopping trip is composed by 30 – 60 SKUs.
And a category manager knows that only 1% of new products launched in the market survive more than 1 year…
To list one product is delisting another
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.
Examples of slotting fee heights
There are hardly any public number available on slotting fees, but these can be found on the internet:
Slotting fees are on average € 1500 per SKU per store. source
In general, the initial slotting fee for a new product is around $250-$1,000 per item per store. source
For those products with slotting allowances, the average amount of slotting allowances (per item, per retailer, per metropolitan area) for all five categories combined ranged from $2,313 to $21,768, depending on the particular retailer and metropolitan area. source
One Retailer’s Documents set forth various prices ranging from a low of $500 for DSD items to a high of $10,000 for other categories, with slotting fees of approximately $6,500 for frozen and refrigerated items. source
This retailer’s slotting fees ranged from a low of $50 for some fresh bakery products to $10,000 per item for a particular division’s grocery department. source
Case: Would you pay 10.000 Euro to have your product on the shelves in 50 supermarkets abroad for the next half year?
This is the reality for Fast Moving Consumer Goods. Why? Let’s follow the calculation of a supermarket purchasing manager.
He looks at his worst selling product in the category. This product sells 3 times a day in a store with a margin of 40 cents.
Let’s calculate:
- 3 times
- 40 cents
- times 50 supermarkets
- times 180 days
= 10.800 Euro (that this product brings in)
This is the risk the purchasing manager takes if your product does not sell at all. Apart from the hassle of introducing your product and disappointing somebody else. From this point of view the € 10.000 that you have to pay, only € 200 per supermarket, is rather realistic.
So what can you do as a brand owner?
1.Do market research
Know who else is in the market and what their price and positioning is. What competitor will you replace?
2.Present your data
The most convincing is to show the sales of your products in other countries.
3.Get to the right people
Use as much as possible existing contacts who know the right purchasing managers.
4.Close the right deal
Negotiate on advertising or sampling and other creative solutions that strengthen you brand in stead of just listing fees.
Read more of our articles
Frequently asked questions
A listing fee is an amount of money that a brand owner or distributor has to pay to a supermarket or other retail chain to get their products on the shelf. This fee comes on top of the margin that the retailer makes and is not dependent on the volume. Mostly you pay a listing fee per SKU (product variation) and per store
A slotting fee is an amount of money that a brand owner or distributor has to pay to a supermarket or other retail chain to get their products on the shelf. This fee comes on top of the margin that the retailer makes and is not dependent on the volume. Mostly you pay a slotting fee per SKU (product variation) and per store
