What are slotting fees? groceryaisle1.jpg

Slotting fees also called product placement fees are trade allowances charged by retailers to stock new products. Originally created to cover the expense of squeezing new products onto limited shelf space.

These fees are justified in four ways:

  1. Shelf space is hard to come by in retail stores. In order to add new brands others must be deleted all together or the size of their display changed. This costs the retailer time and money to make the shelf space available and the displays for each product.
  2. Around 80% of newly introduced products into the market fail. Slotting fees are believed to make producers and manufacturers make sure they are putting forward a good product introduction. The average slotting fee cost to introduce a product nationally is $1.5 to $3 million, depending on its location. This in turn creates more testing and assurance that the introduction will be a success.
  3. Slotting fees help add to the bottom line. With low margins this helps the retailer’s bottom line. It is estimated that 14 to 27 percent of this money goes straight to the retailer’s bottom line.
  4. Slotting fees discourage some products from entering into the retail market. Smaller firms cannot afford to pay the slotting fees and some larger firms already have large amounts of money tied up in their new product and slotting fees are just too high to chance so they decide against retailers.

Loblaw's Advantage
Slotting fees give the store brands an advantage, as they do not have to pay the fee. As the store brands are improving in quality they are gaining the trust and confidence of consumers. This is causing a serious threat to manufactures brands. This leads to the price gap between store brands and the competing brands. Some brands are finding the battle hard and in the future more and more could back out of large nation wide box stores.

Loblaw’s is a prime example, their chocolate chip cookie brand is one of the leading cookie brands in Canada, and their President’s Choice cola makes up for 50 percent of their canned cola sales. They now offer over 2500 items with the name President's Choice in their supermarkets.

Type of Fees Description

Presentation fees - Fees paid for the privilege of making a sales presentation.

Slotting fees -
Up-front payments of cash, promotional dollars, or merchandise to obtain shelf space for a product.

Display fees -
Fees paid for special merchandising and display of products.

Pay-to-stay fees -
Fees paid to continue stocking and displaying a product.

Failure fees
Fees paid when a product does not meet expected goals.

Clow, Kenneth E., & Baack, Donald. (2010). Integrated advertising, promotion, and marketing communication. Upper Saddle River: Pearson Education, Inc..

Kotler, Phillip. Armstrong, Gary. Cunningham, Peggy H. Principles of marketing 6th Edition.
Prentice Hall.

Paul N. Bloom. Slotting Allowances and Fees: Schools of Thought and the Views of Practicing Managers. American Marketing Association, Volume: 64