If you missed those blogs, you can read Part I here and Part II here. Today we’ll dig into Lesson 3 which focuses on the economic truth behind the decision to go with a corrugated vs. a permanent POP display.
Lesson # 3: The Real Economics of Corrugated vs. Permanent POP Displays
Corrugated shippers have their place among POP displays in the merchandising world, particularly when it comes to in-and-out programs. However, a lot of companies make the decision to go with a corrugated display instead of a permanent POP display in order to save money. In many cases, their decision is based on misunderstood economics.
Let’s say you are not too concerned about the perceived value of your product at retail or making a strong brand statement. However, what you are concerned about is the overall cost of the POP displays you need for your first big national rollout. You have a corrugated display designed and get it quoted at $15 per display for a quantity of 2500 units. You calculate that it will cost you $37,500 for the displays. You also have a permanent display designed- one with a metal tube frame, wire shelves, and a nice PVC header. You like the look of the permanent display better, but at $75 per unit you just can’t justify spending the extra $60 per unit compared to your corrugated option. After all, you would have to fork over an extra $150,00 more for the permanent display option.
A lot of customer stop right there and decide to go the corrugated route based on the compelling cost savings. However, more information is necessary to make a good economic decision. Let’s say the corrugated display and the permanent display each hold 24 units of product. Let’s further assume that the displays are equally effective and generate sales of 3 units per week per store. Finally, let’s assume that you have secured a one-year commitment from the retailer as long as sales are living up to expectations.
So, let’s do the math. With the permanent display option, you have a one-time cash outlay of $187,500 to pay for a $75 display in each of 2500 stores. With the corrugated option, your initial cash outlay is $37,500, but at your projected sales per week, you will need to replace the corrugated display every 2 months since it will be tossed by the retailer once the product sells through. What that means is you will have to buy a total of 6 corrugated displays per store over the course of the year or 15,000 displays per year. At $15 per display, your investment in corrugated displays will be $225,000 or 20% higher than the $187,500 you would have spent on permanent displays.
Your own numbers may vary from those used in this illustration, but our point is it is important to run the numbers and ensure you are considering the entire picture before choosing a POP display option.
Jim Hollen is the owner and President of RICH LTD. (www.richltd.com), a 35+ year-old California-based point-of-purchase display, retail store fixture, and merchandising solutions firm which has been named among the Top 50 U.S. POP display companies for 9 consecutive years. A former management consultant with McKinsey & Co. and graduate of Stanford Business School, Jim Hollen has served more than 3000 brands and retailers over more than 20 years and has authored nearly 500 blogs and e-Books on a wide range of topics related to POP displays, store fixtures, and retail merchandising.
Jim has been to China more than 50 times and has worked directly with more than 30 factories in Asia across a broad range of material categories, including metal, wood, acrylic, injection molded and vacuum formed plastic, corrugated, glass, LED lighting, digital media player, and more. Jim Hollen also oversees RICH LTD.’s domestic manufacturing operation and has experience manufacturing, sourcing, and importing from numerous Asian countries as well as Vietnam and Mexico.
His experience working with brands and retailers spans more than 25 industries such as food and beverage, apparel, consumer electronics, cosmetics/beauty, sporting goods, automotive, pet, gifts and souvenirs, toys, wine and spirits, home improvement, jewelry, eyewear, footwear, consumer products, mass market retail, specialty retail, convenience stores, and numerous other product/retailer categories.