Archive for February 28, 2013

Walmart Recognizes Out of Stocks as Self-Inflicted Wound

Walmart CEO, Bill Simon recent revealed in an internal memo that Walmart’s out-of-stock position was a problem and one that is getting worse, not better.  Kudos to Mr. Simon for being a leader and recognizing something that most of us in the retail industry are aware of, namely that despite flow casting, just in time, demand planning processes, there are still too many items missing in action when you walk down the aisles of your favorite store.

Out-of-stock3As with any retail issue, a piece of this problem is out of the control of the retailer.  Recall items, pack changes, and other manufacturing problems can be a source of the out.  But the majority of the out-of-stocks I see in stores are due to too few associates in the store, actually using the systems they have available to them, to replenish a sold out item in a timely fashion.

Past research on the topic of out of stocks has placed the average number of items missing from the shelf at about 7% at any time.  If you are a high volume retailer, such as Walmart, the 7% number is likely to be woefully conservative.  But even at 7%, and knowing that only about half of the shoppers will substitute another item for the one missing, you are talking about huge lost dollars sales.  As Mr. Simon puts it, out-of-stocks are inherently a  “self inflicted wound”.   Unlike many others, retailers can control and recover much of the damage inflicted by missing items.  In order to do so they must first recognize it as a problem and monetize the problem, as Mr. Simon has done.

Then and only then can you begin to allocate resources against this issue, knowing that there is a huge ROI waiting at the end of the process.  Being the opinionated guy that I am, here are a few suggestions as to how address out-of-stocks more effectively.

1.  First, do not solely rely on systems and reports to fix the problem.  Some person or persons needs to be accountable and have some addition human resources available to execute the fix.

2.  Audit the stores individually and identify chronic outs perhaps due to pack size of the product and allocation of adequate space to stay in business delivery to delivery.  Every store can be different in the sales pattern and space allocated to an specific item.

3. Systematically check your shelves twice a day, once in the morning, even after the stock crew has finished their work, and a second time in the mid evening, or in the middle point of whenever your business is peaking for that day. For sale items and other fast moving items, additional checks may be needed.

4.  Develop a working knowledge of why certain items are chronically out of stock and insure through addition back stock or an outside display that there is plenty in reserve if the shelf capacity is a limiting factor.

5.  Track your progress and sales on the items that are being monitored.  There is no proof of concept  like seeing sales growth among items that have been chronically inclined to be missing in action attributed to the new attention they are receiving.

Building upon Mr. Simon’s comments, I see out-of-stocks are a “shelf-inflicted wound.  Check your shelves daily, develop a system that works for you,  and don’t settle for average when it comes to something that you can control.





The Death of Big Paper…or Not?

Safeway’s CEO, Steve Burd touted just last week that their new and expanded CRM program “Just for U” is now reaching  55% of Safeway’s shopper base and doing extremely well.  So well, he claims that perhaps, just perhaps by the end of this year, Safeway could actually stop printing a weekly circular and rely solely on the reach of “Just for U” to communicate its marketing programs and offers.  It begs the question, “Are finally starting to see the “end days” of Big Paper”?

Weekly CircularsI refer to the weekly circular and the FSI as “Big Paper”  due to the fact paper and printing comprised almost half of my entire annual advertising budget as a retail marketing and advertising VP.  Image the savings or better yet, the re-purposing of these resources if we could eliminate the weekly circular?   But I’ve heard all of this before.  In fact pundits and prognosticators have long predicted the demise of the dreaded, inefficient weekly circular ad.

So what’s different this time.  True, Safeway and their key competitor, Kroger seem to be on track to transition much of their promotional marketing content away from mass and to targeted, digital media.  That’s significant and new.  What is not new is that the rest of the playing field is either invested in EDLP programs, without access to a customer database, or is just too small to command the necessary brand content away from their the broad reach of their mass programs to the much smaller reach of their fledgling digital properties.   In addition, Valassis and News America are in no hurry to stop their FSI presses.  FSI’s are proverbial cash cows and they will not go down without a fight.

Then there is the issue of targeting.  Aside from the costs savings of communicating digital versus paper, the most compelling reason to go digital is the ability to fluidly target and vary both content and pricing all the way down to the individual shopper.  But to be able to effectively accomplish targeting, retailers need to address some very formidable obstacles which include;

1.  Flexible targeting & modeling software capable of  working fluidly across retail channels and customer touch points to include, email, social, POS, SMS, and proprietary Applications.

2.  Intellectual property to effectively build targeting strategies that almost necessarily will involve CPG brands and their strategies.

3.  A huge offer bank of content as best of class targeting infers that not everyone will see all the offers, just those relevant to them.

4. Highly active and updated email, SMS, and Social Media customer lists.

5.  Connectivity between the targeted, digital communications and in-store messaging and signage.  The majority of purchase decisions are still made in-store and close to the shelf and brands still covet the brand equity afforded them by traditional paper media. Digital needs this support to be truly effective.

Kroger and Safeway proudly tout they have accomplished much of the aforementioned list. For them, the death of Big Paper may be on the horizon.  For many other retailers, much work is left to do before the Rain Forests are saved and the printing presses grind to a final stop.


Is Your Digital Strategy “Active” or “Passive”?

All the hype, pomp and circumstance aside, digital marketing is mere blip on the radar screen for most retailers…especially those in the grocery channel.  I say this with all due respect to grocery retailers as I understand their need to hitch their wagons to those media and programs that represent critical mass.  Accordingly, digital engagement in the grocery channel, defined as communicating digital content and offers,  is far from grabbing the headlines away from traditional venues and promotions.

My assessment of as to why digital programs still live in the periphery of the retailer marketing options centers around whether digital programs are passively or actively promoted.  Pour another cup of coffee and let me explain.

Passive digital programs are those that are launched relatively quietly, typically exclusively on digital touch points.  For example, in the case of a grocery retailer offering load to card or load to account digital coupons, there is often little or no mention of these programs in the mass media such as weekly circular television, radio, or even direct mail.  Further and even stronger evidence of the passivity of promoting digital content, there is rarely any mention or reinforcement of the program in-store.  Please don’t bother asking a cashier or associate about the program in-store, you will only get a blank look and a shoulder shrug.

Another key component of a passive approach to digital is content itself.  Retailers who expect hundreds of meaningful, widely WinnDixe1purchased brands to drive the content bank of these digital programs, often find that unless the shopper is in the market for an obscure meat seasoning, or a new herbal toothpaste, the digital offers available have little relevance to their shopper’s needs. But yet retailers who take a passive approach launch programs with these offers and then wonder why engagement is so disappointing.

Here’s the first take-away for retailers.  Digital is not going away.  Shoppers want it.  Shoppers are hooked on the concept and other channels of trade and on-line retailers are setting the early shopper expectations in both content and technology. As Winn-Dixie aptly “tags” their new digital program, “The Future of Savings is Here”.  They have it right.

The second important point for retailers is that passively engaging digital and waiting for the content to arrive, is depriving them of a golden opportunity to become a committed leader and thus gain share of wallet from their current shoppers and actually be in position to lure shoppers from their competitors. But this can happen only if the retailer takes an “active” approach to digital.

Here are a few recommendations I offer to become an active retail digital marketer.

1.  Shout about the program in-store. Point of sale signage, bag stuffers should tell the story.  Associates should be aware of the program and endorse it at every opportunity.

2.  Drive the digital content with retailer-sourced offers.  Make the commitment to have some of your “skin in the game”.  Measure results and then “invite” your brand partners to contribute based upon your early positive results.

3.  Tie digital into the mainstream of your marketing program.  If you offer paper coupons in your circular or paper direct mail, convert them to load to card or account.  Also, think about layering digital bonus savings on front page items, end cap features, perhaps have a “Store Managers Digital Offer of the Week”.  Get inventive.

4.  Measure the results and use the resulting customer data to become iteratively smarter about which offers and content drive the best results among your shoppers.

5.  Don’t forget to include store brand offers.  Nothing will get your brand partners interested in participating faster than if they see their share of category sales diminishing due to the impact of your store brand digital offers and campaigns.

Active digital engagement is an opportunity to lead, differentiate and embrace the future.  Staying passive will keep you comfortably operating in the past or at least until you fade from the scene.  It’s your choice.








Giant Eagle Ends Foodperks and Adds Gas Discount | Retail & Financial content from Supermarket News

Giant Eagle Ends Foodperks and Adds Gas Discount | Retail & Financial content from Supermarket News.

There is an important take-away for every retailer who engages in continuity and loyalty programs.  Even the best programs have a shelf-life.  Over time, even the most effective consumer offerings can lose their punch and appeal to the shopper.  Moreover, their existence over a period of time, becomes more of an entitlement than a benefit, thus producing increasing costs for the retailer without the benefit of the necessary incremental behavior needed to create a positive ROI.

Before starting any campaign or program, have an exit strategy that provides a smooth way of ending or changing the program without alienating the shoppers who have participated.