Why retail-space constraints matter
Brand owners, distribution channels and retail outlets form a complex regional and national network through which brands aggressively compete to reach consumers. Like all connected systems, supply and go-to-market networks experience a primary bottleneck, that constrains throughput and that determines the maximum rate of total product flow through the entire system.
For categories experiencing brand and pack proliferation, the primary bottleneck or constraint within the whole network is usually the physical and execution-oriented limitations on retail and merchandizing space.
Retailers, distributors and brand owners all need to maximize their own total margin that they generate through that limited space every day. But, maximizing profit for one stakeholder does not necessarily maximize profitability for others. Understanding the dynamics and economics of profitability at the constraint is critical for brand owners who want to scale and grow sustainably.
Smart portfolio choices, new business models and disciplined approaches to maximize margin velocity are needed.