Archive for Retail Metrics

Who Moved My Cheese….Literally?

Who Moved My Cheese? Literally.

Thinking back to the classic business book written by Dr. Spencer Johnson back in 1998, I find both the premise and the title to be very thematic to the challenges bricks and mortar retailers now face with their category placement strategies.

First and foremost, Who Moved My Cheese addressed the difficulties in handling change in a dynamic business world. I think we could all agree that we are indeed in that mode as retailers in 2017. Secondly, and of equal relevance, when retailers literally do move their cheese, (and other categories and items) within the store they most often do so without understanding the implications of their decisions in terms of shopper dissatisfaction and accordingly lost sales.

In my thirty plus years as a supermarket retailer, I had the opportunity to sit in on many fixture and merchandising plan meetings involving new and remodeled stores. Where we placed departments and categories within the store was always about retailer logistics and space availability. There was little or no discussion about shopper convenience or shopping efficiency. Essentially, this remains the approach of most retailers today.

Let me make the case for why this practice must change.

  1.  Changing Shopper Expectations: Shoppers are being ‘spoiled’ by the ease in which they can no find and order items on-line. Many of these items are formerly items that they were required to hunt and find in a large footprint retail store, requiring their time, effort and often angst.
    2. Waning Loyalty to One Store: Even without the intrusion of e-commerce retailers, shoppers have more bricks and mortar options than ever before to more conveniently and affordably offer items and categories that formerly were purchased at one store, albeit often inconveniently.
    3. Shoppers are Time Pressed: No matter how hard we try to create a warm, friendly in-store experience, most shoppers have better things do than to spend extra time shopping in any one store, given their hectic and demanding lifestyles. Shopping Trip length is short and getting shorter.

What to Do?

If I have convinced you that I might be on to something, let me suggest a few things retailers can do short of ripping down walls and upending your merchandising practices that will yield quick, incremental gains.

It simply requires retailers to re-think where they place departments and categories in a more holistic, shopper centric manner. I have seen this effectively happening in three steps.

1. First, recognizing that some categories are more important to your business than others and they should be readily accessible to the majority of your shoppers, without your shoppers having to work t
o find them. Contrary to common practice, purposely placing the shoppers most important categories in the far reaches of large stores to manipulate the shopper’s trip is becoming increasingly risky in this new environment of retail channel options.

2. Which leads to the second step, which is recognizing that there are areas in every retail store that are more sales productive than others. There are also distinct, existing traffic patterns in every store, which are much easier to leverage than to attempt to change. Most of us have seen heat maps and traffic pattern maps that depict “hot and cold” spots in the store.
Just know that some areas of your store are more void of shoppers than you would like. It is also important to realize that shoppers spend faster and more efficiency early in their trip and their trip time is inherently short and not easily stretched by “good merchandising” and using placement of “destination categories” as magnet to attract shoppers into parts of the store they are not otherwise interested in going.

3. Finally, many departments, categories and items have strong affinities with other items on the basis of how the shoppers view and use these categories and items. When possible use data to measure basket level affinity. I would encourage retailers to do this both quantitatively (basket analysis) and qualitatively (shopper questionnaires and shop-a-long research) to better understand the strength of these relationships and the importance of position these categories and items near to the other.

Enabling shoppers to quickly and efficiently find what they are looking for in today’s bricks and mortar stores are emerging as a key competitive advantage. As with most things retailer, there will always be an element of “art” in any empirical category placement plan. However, we are no longer operating in a consumer environment where our stores and merchandising plans accommodate our merchants first and expect the shoppers to adapt.

If you move your cheese now without first thinking about the cheese shopper, you will likely be selling less cheese in the future.

Aligning Inventory Investment To Consumer Demand

From the Teradata Conference, September 13, 2016

Atlanta, Georgia

 

 

Presented by Victor-Luis Gualdi , IT Manager at La Anonima in Argentina

And Carlos Machain, Carrefour

 

It is always interesting to hear retailers outside the U.S. present their versions of many of the issues that effect retailers in the U.S.   Such was the case in a recent session at the Teradata Partners Conference in Atlanta, Georgia, where representatives for La Anonima, a Carrefour Supermarket Banner in Argentina presented their case for the investment in inventory and demand alignment. La Anonima is part of a 577 store country wide distribution channel and representing $1.7 billion in sales.

The presenters painted a fairly bleak picture of the logistics of their business back in 2005, prior to implementing automated ordering. Their company wide out of stock rate was over 25%, they were incredibly out of compliance in terms of theirs shelf sets, and the practice manual replenishment.

On the warehouse side of things, the distribution center carried 35 days of supply in house, much too much, given the amount of out-of-stocks that prevailed at retail. Their journey was not dissimilar to many retailers who have come to grips with the financial wreck and ruin they encounter when consumer purchases are not driving the ordering process.

In the current environment it is difficult image any retailer of scale attempting to compete without a shopper demand model generating store orders and warehouse purchases from suppliers. Inventory ‘awareness’ is absolutely essential in executing an omni-channel sells platform. Throughout the retail industry, thanks to more agile and affordable data, much progress has been made, but as the two presenters continually pointed out, there is significant ‘heavy lifting’ in getting to the point where a blend of automation and store level accountability work in tandem to maintain optimal amounts of inventory, while drastically reducing out-of –stocks.

After more than a decade of work, La Anonima now boasts an out of stock rate of less than 5%, while reducing days of supply at the warehouse by over 40%.

Demand planning and aligning is no longer an option, but a requisite for competing in the omni-channel marketplace.

For those just beginning the journey today, they do not have the luxury of building such a platform over ten years, or even half of that of that time, given the progress others, like La Anonima have already made. It will take investment, a very strong commitment, a plan created by experienced experts and the ability to understand the importance of combining the power and scale of an automated system with the flexibility of occasional ad hoc decisions as market conditions continually change.

 

Five Important Questions Most Retailers Cannot Answer

Managing the retail business in 2016 has never been anything but challenging, but with the mountain of business intelligence data available today it has becoming equally challenging to determine which metrics are the most effective tools in that process.

question markWhen the retail business is growing, the important, ‘bankable’ metrics such as sales, profits, cash flow, labor and transportation efficiencies are reassuring numeric markers of success. Despite retailers continued reliance on these numbers, none of these stalwart metrics are sufficiently deep reaching to accurately provide a true diagnostic of the health of the business in today’s complex environment.

As a veteran of many “Monday Morning Retail Meetings”, I know personally that when sales are tracking the wrong way, it is usually theories and conjecture that serve as explanations, not empirical measurement. Also, many times a downward trend comes as a surprise, when in fact if the right diagnostic measurements were being monitored, pre-emptive steps could have been already in motion.

Encouragingly enough there are an entire new genre of metrics that have emerged over the past decade that can serve as ‘intelligent indicators’ of the health and vitality of the business. Use of these metrics begins with the retailer “asking the right questions” about their business these questions are of particular relevance to the bricks and mortar retailers, who have made significant investments in stores, inventory, and logistical support.

1. Are My Departments and Categories Getting Sufficient Exposure to Shoppers?
Whenever retailers look at shopper tracking studies in their stores, the number of key departments and categories that see only a scant few of the in-store shoppers typically astounds them. This is particularly true in larger stores (over 50,000 square feet). Simply put, you cannot sell something that no one sees. In fact, many of the highest margin categories in the store are typically visited by fewer than 10% of the shopper base. There are a variety of remedies for increasing shopper exposure, but it begins with understanding the lost opportunities of low traffic areas in the store.

If category sales are lower than is acceptable, before you make adjustments to pricing, promotions, and presentation in the store, measure the categories shopper exposure rate. If fewer than 20% of shoppers are exposed to the category, the fastest way to sales increases is to either move the category or more likely create secondary placements of the category in higher traffic areas.

2. To Optimize Exposure, Are My Categories and Products Positioned Optimally in My Stores?
Ask any retailer why they position various departments and categories where they do and you will hear anything from “that’s where they have always been placed’ to ‘perishable departments are more efficiently operated if they are on the perimeter of the store near back room work areas’, to that’s where they need to be for theft and security monitoring. While all of these reasons are viable, none speak to optimize the sales and profit of the department. None speak to the sequential order that makes the most sense to the shopper, which will enable the shopper to more quickly find the items they want and move on to the next purchase.

As a group, shoppers develop a cadence and flow in your stores that can be leveraged with the creation of selling events along the ‘dominant path’ that carries the majority of traffic in most all stores. If there are 10 product categories that are driving a disproportionate amount of business, insure they are position to be intercepted by shoppers on or near the ‘dominant path’ of the store.

3. Are We Selling the Right Mix of Items in Our Stores?
There are essential questions that should be asked continually in order to understand the efficacy of a retailer’s product offerings.

i) Of the top selling 20% of items in my stores, which items are growing in sales, flat, or shrinking?
ii) Of the bottom selling 20% of Items in my stores, which items are relevant and valuable to the overall mix and which should be discontinued?

The rationale for carrying items in larger, inventory intensive stores often falls to moneys or deals that are offered by manufacturers as incentives for shelf placement. As shoppers become more accustom to on-line purchasing, where filters and past purchases help shoppers make choices, slow moving items that clutter the shelves and make the shopper’s purchase decision more difficult are a luxury of the past.

Understand the ‘contribution of sales’ of each sku that is slotted on the shelf and determine a survival threshold for each product, one that dictates a certain level of relevance to your shoppers if it is to remain in the mix.

4. Are Shoppers Able to Efficiently Navigate Our Stores?

Most retailers have no clue as to how long the average shopping trip in their stores last or how fast the shopper buys during that trip. Both are important metrics and both will likely surprise the retailer upon their discovery. Length of trip is vitally important in that shoppers have a finite amount of time to spend in stores. Efforts by retailers to entice shoppers to linger or move into areas of the store that are not relevant to their current mission, typically do more to frustrate the shopper, than to place additional items in their basket.

Within the short, finite amount of time, the faster the shopper is finding their needs and making purchases, the bigger their basket size will ultimately be. The notion of helping shoppers ‘expedite’ their shopping trip is not only counterintuitive to most retailers, but flies in the face of the long accepted belief that the longer shoppers linger in the store, the more they will buy.

Measure, benchmark and strive to improve shopper ‘buying rates’ in stores. Shopping trip length, while it will vary upon the physical size of the store, is a clear indicator of how efficient your stores are for you shoppers. Do not be alarmed if shopper centric merchandising practices reduce the shopper’s time in the store. As long as they are buying faster and building basket size in less time, shorter trip lengths are a positive indication that you are connecting with your shoppers on their terms, which is how it should be. The faster the shopper buys, the more they will buy on any given trip. If shoppers are spending at slower rate, lower basket sizes will result. Set benchmarks on shopper time and spending rates and work to steadily improve through smarter, shopper-centric merchandising.

5. Are We Relying Too Much on Discounts and Promotions?

As a new store manager, a wise man once said to me, “Mark, anyone can give it away, but only a good merchant knows how to sell at a good profit”. Certainly deals and promotions can be very powerful tools, especially for retailers that are positioned as a ‘high-low’ merchant. However, too much of the business being sold on promotion can be a harbinger for bigger problems to come. First and foremost, too many or too frequent promotions serve to dilute the impact of any single event. Further and more critical to the life of the business, it could be an indication that the everyday pricing is out of sync with the shopper’s expectations and the competitive environment.

It is difficult for anyone to make grandiose generalizations about pricing and promotion to specific retailers, as their effectiveness is driven in large part to localized variables such as demographics, shopper income levels, and competitive environments. However, on the whole, retailers discount too much and rely too heavily on promotions to drive their business.

To my knowledge, know one in the retail industry has developed a sure fire method of measuring the amount of wasted ‘markdown’ a retailer investment in a merchandising program. Most retailers would tell you that they intuitively know that what the retailer can measure is how much of their business is sold on promotion/discount versus full margin. If I were a CEO or CMO I would asked this question every week with the knowledge that good merchandising, good operations and good service can work in tandem to reduce the reliance on deals to drive more profitable sales.

It’s About Time ….Making the Case for Shopper Time Management

Most would agree that we have entered in a period of radical change in shopping behavior. Almost nothing is the same as it was a mere five years ago. New on-line competitors, technology aided shopping apps provide shoppers new options and retailers new ways to compete for shoppers. Through all of this progress, there is one thing that hasn’t changed. There are still only twenty-four hours in any given day.

To that very point, while shoppers are interested in new tools to help them save money, early returns indicate that shopping apps and new in-store technologies that save the shopper time are the ones rising to the top of the pile.

Traditionally, retailers almost totally ignore the “time investment” shoppers make to buy from them. Ask any retailer what their shopper’s average trip length is or how fast shoppers buy once they are in one of their stores, and you will likely get blank stares.

Aside from some attention to expedite the checkout process, retailers continue to assume that their shoppers relish looking for new ways to invest more of their time exploring aisles, alcoves, reading labels and scrolling directories. In 2015, this is nothing more than a retailer’s fantasy. To demonstrate this misguided mentality, store footprints have continuously grown over the years and along with it the corresponding decline in shopping efficiency.

closingspeed

 

The More Options Shoppers Have, The Less Time They Have for any One Retailer!

To put a finer point on it, food retailing study after study tells us that as much as 85% of the shopper’s time is wasted in-store navigating massive stores with extraordinary amounts of products, searching, seeking, but NOT BUYING. Aside from the most ardent “price shopper”, “time” is the shopper’s most prized possession.

Retailers, whether they be bricks or e-commerce, that invest in new ways to give some of the precious commodity of time back to the shoppers will rule over their respective marketplaces.

The Payoff and Rationale of Shopper Time Management
What we steadfastly know is that the faster shoppers buy, the more the buy. Conversely, the long it takes for a shopper to make a buying decision, the less likely they will make one at all.

In fact, shopper time management is the first logical step in a shopper centric merchandising. Dr. Herb Sorensen, noted expert on retail shopping behavior and author of the top selling book, “Inside the Mind of the Shopper”, lays out a new road map for retailers. He refers to this map as the Five Vital Tenets of Shopping Behavior.

5 vital

Use the link for more detail on the Five Vital Tenets http://acceleratedmerchandising.net/?page_id=90

Following this guideline represents both a new and necessary methodology of in-store merchandising. Every step of this process is focused as to how the shopper shops, not how retailers would like them to shop. The Five Vital Tenets of Shopping Behavior is predicating on understanding the importance of element of time in the success of connecting products with shoppers in an efficient manner.

As retailers begin to measure and react to shoppers’ “habitual” tendencies when they engage bricks and mortar retailing, connecting shopping efficiency with basket size and shopper visitation increases will provide the empirical justification for changing the mindset of how physical stores are designed and merchandised.

The data is compelling. The relationship between a shopper’s ability to buy faster and every retailer’s goal of increasing sales is irrefutable.

What’s Next?
Seldom does any thing in retailing happen quickly. Adaption speed of Shopper Time Management will be no exception. Retailers are deliberate beasts and venture in a step-wise fashion into new business paradigms, as they are heavily invested in the current retailer-brand monetary ecosystem.

The good news is this. In high volume retailing, even step-wise, incremental gains in shopper efficiency can produce significant impact to the bottom line. It’s time to incorporate the element of the shopper’s time in the mix of merchandising metrics. Those retailers that do so will find their time-starved shoppers thanking them with more of their dollars and enduring loyalty.

Playing “Small Ball”…..the New Game in Retailing

“Small” is the latest “big thing” in contemporary retailing in 2015.less is more     Ironically, the impetus for the reduction in size of store footprints is in significant part due to a recent trend of building huge stores over the past two decades. During that period, Walmart, SuperTarget, Costco and even the likes of Kroger found nirvana in retail formats well over 150,000 square feet. Others followed. “Size Matters” was the battle cry.

The size of traditional supermarkets doubled in many instances. Categories and variety were expanded and even the most traditional retail supermarkets made ample space to “sell everything but the kitchen sink”. It should be noted that Midwestern DIY retailer, Mennards actually does sell groceries and the kitchen sink.

Fast forward to present day. That quest for size is largely responsible for saturated and sub-optimally productive retail markets.  As a consequence, many retailers who opted for big boxes find their revenue per square foot in constant decline. Additionally, Amazon and other e-retailers have taken a sizable chunk of sales and productivity advantage away from these larger box operators by not having to operate thousands of labor-filled stores and burgeoning on-hand inventory.  Now….. even the retailers that invented “big” are nervous.

Walmart believes part of the answer is building smaller Neighborhood Markets and even smaller “Express” stores. Other retailers across the Food, Drug, and Mass channels are experimenting with limited variety “express” formats. Target, Whole Foods, Stop and Shop, and regional independent, Martin’s are chains that have made recent headlines with their experimentation into the world of smaller “express or urban” formats.

Simply said, lots of smart people from very successful retail chains are diving in head first into smaller footprints. But reducing store size has its inherent risks and consequences. The following are areas of four shopper dynamics retailers should consider in when designing a more concise footprint;

  1. Shopper’s Variety Comfort Zone: Smaller footprints necessitate dramatic reductions in both breadth and depth of categories. Without extensive research into the reasons shoppers frequent a retailer’s physical stores, eliminating variety can create the risk of sending the wrong message to shoppers who find comfort in knowing a retailer has what they want, when the want it. Balancing the benefits of less space with the loss of variety is a delicate, but very important process.
  1. Before Shrinking Store Size, Have a Viable Companion On-line Shopping Alternative: Before a retailer leaps  into smaller footprints, it would do well to first develop a consumer centric approach for shoppers to have access to less frequently purchased items. This could be accomplished  via an in-store kiosk where items can be ordered and dropped at the store for pick-up or delivered to the home, as just one example.
  1. Operational and Merchandising Limitations: With reduced space comes with it the opportunity for faster moving items to be more readily out of stock. With all the current issues even the best retailers are having with out of stocks, reducing inventory capacity in smaller footprints may only exacerbate this problem. Also for those retailers who still rely heavily upon brand dollars for slotting allowances, end caps reservations and other in-store placements, there will be much less room for such things in an “express” store. Technology, planning and customer data can mitigate these issues if included in the design plan.
  1. Inefficient Layouts: Multiple studies have concluded that a significant portion of the inefficiency with larger formats is not simply connected to the actual amount of square footage retailers must merchandise, or shoppers must navigate, rather much of the problem lies with inefficient store layout. During the design phase of a smaller footprint, it is an excellent time to lever research to better understand the dynamics of the current formats. Shopper traffic flow, hot and cold spots, dwell time, optimal departmental placements and are critical in enhancing the Customer Experience (CX). Once armed with the knowledge of how shoppers are engaging existing formats, large format stores can be improved and new smaller prototypes, can be made more efficient out of the gate.

Market conditions are conducive for smaller formats to continue to populate urban areas and saturated markets. Reducing store size brings with it the opportunity for more efficiency, productive sales areas and a more efficient customer experience. Conversely, with less space to sell into, merchandising the stores and engaging the shopper will require thoughtful planning based upon measureable in-store shopper behaviors. Let the discovery begin!

 

mark heckman

 

 

 

From The MorningNewsBeat: No Plan Survives Contact With The Enemy

Wednesday Morning Eye-Opener:

By Kevin Coupe

Businesses of all kinds got some great advice from a sage military strategist this week, as retired Gen. Stanley McChrystal appeared on “The Daily Show with Jon Stewart” the other evening. He was there to plug his new book, “Team of Teams: New Rules of Engagement in a Complex World,” and Stewart began the interview by showing a chart from the book that focuses on the current military-political structure in the Middle East.

The subject, at the moment, was the Middle East. But the discussion could have been about any competitive business situation.While we think of many of the forces in the Middle East to be medieval in their orientation, ISIS, McChrystal said, “is a 21st-century organization that uses some frightening tactics, really quickly, and then they leverage Digital Communications to essentially tie their enemies in knots.”In fighting such organizations and creating a future strategy, he went on, “it is fundamentally impossible to predict.

So what we really have to do is go at things with an awful lot of humility that says what we’re going to to is approach things with the reality that we’re going to have to adapt constantly and iterate. You’re not going to come up with a 100 year plan, or a 50 or even a five year plan. You’re going to come up with general directions and frameworks, and you’d better learn every day, because that’s the world we’re in now.”And then McChrystal delivered the business lesson.”In the military, there is a saying that no plan survives contact with the enemy…I think that’s what we’re finding in business now, too.

You’ve got competition from competitors, garage start-ups, new technology, all of these things, and organizations that get very happy with being efficient, with very, very wired processes that have worked for their grandfathers, fathers and brothers, now don’t work.”One can’t assume that the enemy – or the competition – is wired the way we’d like them to be wired, that they are thinking in traditional terms or planning traditional strategies. Rather, one has to assume the opposite – that the competition is going to see the marketplace through a different prism, see opportunities for both effectiveness and efficiency where we’ve missed them, and use strategies and tactics that we haven’t considered.“No plan survives contact with the enemy”.

Eye-Opening words to live by.

Source: MorningNewsBeat

From the MorningNewsBeat: Study Points To $1.75 Trillion In Retail Inefficiencies

There’s a new study out suggesting that “retailers worldwide lose a staggering $1.75 trillion annually due to the cost of overstocks, out-of-stocks and needless returns” – three components of what the study is a kind of “Ghost Economy” haunting retail.

“These inefficiencies, the study says, result in “monies left on the table and the loss of sales that otherwise would be available.” And it says that a retailer “addressing the inefficiencies and data disconnects throughout their organization could mean the equivalent of adding $117 Million in revenue for every $1 Billion in retail sales — or an additional $2.9 Billion in revenue for a $25 Billion retailer.”FYI … the annual inefficiencies break down to $642.6 billion in preventable returns, $634.1 billion in out-of-stocks, and $471.9 Billion each year in overstocks.

Kevin Coupe’s Comments:  The research was performed by retail analyst firm IHL Group, and commissioned by OrderDynamics.KC’s View:

As Senator Everett Dirksen is reputed to have said, “A billion here, a billion there, pretty soon, you’re talking real money.” Though these numbers might’ve staggered him.  Obviously, if retailers are looking at these kinds of inefficiencies, they need to address them.  My only caveat is that while they’re working to be more efficient, they need to spend as much money, time and energy trying to be more effective.  Because efficiency and effectiveness are not the same thing.

Source: MorningNewsBeat

Can Loyalty Marketing Finally Fulfill Its Promise?

It has been well over twenty years since the first “electronic” card based loyalty programs entered the retail scene. Supermarkets led the way, given their propensity to offer coupons and deals, coupled with seeing their customers more once a week. Loyalty programs seemed to be a good fit for their business model. Furthermore, most supermarket retailers understood that about 20% of their shoppers were delivering about 80% of their sales. For many, it made good economic sense to focus on building further rapport with the most valuable shoppers and promote less often or differently to those outside that group.

From the early fanfare of these programs, it wasn’t long before the reality set in. Retailers discovered that creating a separate marketing strategy with offer banks full of meaningful, special deals for targeted shoppers was problematic. With the limited technology of the day, it was often too expensive to target shoppers. CPG brands, while appreciating the concept of targeting, were of little help with content given they often held different targeting objectives than their retail customers.

 

firehose1For those and other reasons most card-marketing retailers, quickly gave up on building relationships with their top shoppers despite having mounds of customer data to smartly do so. Frustrated and mired in the day-to-day struggle for “comp sales” and gross margin growth, they simply reverted to using the card as a new prerequisite for shoppers to get the deals they were already getting before the program launched.

Shoppers for the most part played along. However, over time these programs became very milquetoast and provided little or no point of advantage for retailers. With rare exceptions, the early promise of loyalty marketing went unfulfilled. Consequently, a number of good retailers have abandoned their programs, while other successful retailers felt vindicated by staying away from electronic card marketing.

Fast forward to present day.

Shopping technology is exploding. Shopping Apps are abundant. Some would even argue apps are too abundant and present so many options and functions that shoppers are overwhelmed with choice. Apps with “geo-fencing” capabilities like Shop Kick (www.shopkick) and Ping4 (www.ping4.com) alert shoppers when they are in geographic proximity of the store. Still other Apps, like Aisle 411 (www.aisle411.com) use iBeacon® or similar technology to sense the shopper is in a particular area or standing in front of a certain display in the store. Still, others are focusing on the collection of deals across many stores. Couple that with every major retailer having their own proprietary app, each with their own version of loyalty points or rewards.

New technology adaptation is also changing the shopper and their expectations. Upwards of seventy percent of shoppers now carry a smart phone with them while they shop. Some are even using it to help them find items, download coupons and explore nutritional content. On an increasing basis, shoppers are deciding where they shop based upon the presence of shopping technology. Said another way, retailers must innovate and adapt popular technologies or risk losing market share and shopper relevance.

Techno-Loyalty is here to stay.

Pad-signal copyIn my view, loyalty programs must be communicated and executed through technology to remain relevant. Shoppers want automation, simplicity and consolidation of the many offers and rewards from each retailer, both on-line and in the physical store. Consequently, while loyalty cards live on, they are gradually giving way to shopping apps, wireless chips and other technologies that identify the shopper both on-line and in the store.

Further, options are emerging for shoppers to manage their own loyalty. Shopping sites such as Retail-Me-Not, (www.retailmenot.com) , All You, (www.allyou.com) , Savings.com (www.savings.com) and a host of others have aggregated offers from multiple retailers for the shopper to access in one consolidated place. While these sites are growing in popularity they often lack full retailer participation, meaning they work independently from the retailer’s own website or shopping app. This separation often requires the savvy shopper to visit both websites to insure they have the complete offering from each retailer.

In an effort to create the ultimate level of consolidation, solutions like LOC Loc Card(www.locenterprisesllc.com) enlists the retailers to participate both in-store and on-line to extend the reach of their current loyalty program, by creating a consolidated on-line “shopping mall” where shoppers can access the full compliment of their favorite retailer’s offers and rewards, on one website. In-store, the LOC card or app either replaces or augments the retailer’s own mechanism of shopper identification.   Shoppers naturally love the idea, while retailers, who are deeply vested in their own websites apps, appear to be gradually understanding shoppers will ultimate dictate the manner and place in which they interface with the retailer.

Looking Forward, the Retailer Must Take a Holistic View of the Shopper

The future is now defined as “next week or next month”, not “next year or the next five years”. The rapid development of shopping technology has accelerated the shopper’s expectations and has put the onus directly on retailers to elevate their loyalty game. The first step in that process is to first acknowledgement that each retailer, no matter how big, is just one piece of the shopper’s loyalty environment, not the alpha and the omega of the shopper’s needs as many have viewed it in the past.

Concurrently, technology companies understand that working with (not around) the retailer is optimal, as it provides the most holistic shopper solution. On the other hand, if retailers remain guarded and over protective of their programs ignoring the increasingly loud voices of their customers to become more holistic in their approach to building relationships, even their best efforts of offering stand-alone loyalty will miss the mark with the shopper.

After two decades of struggle, technology has finally arrived to deliver on the promised returns of loyalty marketing. It is now up to the retailer to either embrace a new model of holistic, technology-based loyalty or run the risk of being rendered irrelevant, even to their most loyal shoppers.

 

Chasing the Ghosts of Shoppers of the Past.

The deliberate, time rich shopper of the past, to whom we market our stores, no longer exists. Quite the contrary, In general shoppers are time starved, distracted, and in some cases just flat out annoyed when they enter our stores. This new shopper increasingly finds ways to short-circuit the store plan, finding their items and moving on as quickly as possible, despite the retailer’s best efforts to induce the shopper into a long and deliberate visit.

Shoppers are trying to tell us something!

To amplify my point, there exists quantitative research in abundance supporting the notion that bricks and mortar stores are rapidly alienating themselves from the evolving shopper. Among several notable KPI’s (Key Performance Indicators), such as Dollars per Square Foot, Same Store Sales and Customer Counts are trending in the wrong direction for all except the very few that have strategically embraced the new shopping paradigm.

Dr. Herb Sorensen1, who I consider the very best source of empirical knowledge on consumer shopping behavior, stated in one of his recent publications that the relatively short time the shopper spends in a retail store is mostly devoted to moving from point “A” to point “B” and not engaged with actual shopping at all. This is particularly true in larger foot print stores of 50,000 square feet and more. In fact, only twenty percent of the entire shopping trip involves the shopper facing the shelf and engaging in the purchasing process.

 

The implications of this information are profound. Retailers and their marketing partners spend annually $275 billion2 in the U.S. on advertising, marketing, and promotion initiatives. These monies generally are regarded as less than efficiently spent, due to a variety of reasons, but chief among them is that those funds are not reaching the shopper effectively at the shelf, when and where the majority of purchased decisions are made.

 

According to website designers in Scotland and the UK, new advancements in web technology are around the corner and with it, retailers and brands alike now have access to new research techniques and resulting data that can help them re-think how they lay out their stores and categories. Ultimately, each retailer should have a Visual Strategy for its bricks and mortar stores. Much the same way a web designer uses Google Analytics to build and fine tune an efficient website, physical stores must be approached in the same way.

 

Training and Retaining Associates is Key for “Bricks and Mortar” Retailers

As consumers become increasingly more comfortable with ordering everything from soup to nuts on-line, the onus on bricks and mortar retailers to create a “value-added” in-store environment correspondingly increases.

cashierAs intuitive as that sounds, many retailers still regard training and employee retention as a luxury they cannot afford, as labor costs remain the “easiest” target for cost cutting.   Those that continue to view labor first and foremost as an expense, the future is bleak. Converesly, retailers who have structure and priority for training and retaining associates,  your path is paved with satisfied, loyal shoppers.

It’s all about metrics. If retailers make a point to measure training and labor in a ROI model, instead of purely looking at it as an expense, they have at least put themselves in position to accurately track the fruits of their training efforts.

“Sales per labor hour invested”, or “sales per labor dollars invested” are two measurements that can begin the process of considering store associates as “assets”, rather than expense items. Further, most HR departments can measure, at least directionally, the cost of employee turnover. Without this number in the equation, retailers are just fooling themselves when they believe that cuts to benefits, hours, and full time status save expense without have any consequence on both the top and bottom line.

In my view, the HR and Finance departments should team to own this process. Together they have the tools and the structure to affect training, compensate performance, and provide the financial impact to the P&L for training and retaining a productive team. Done correctly with sustainable commitment to associate training, bricks and mortar retailers will not only sell more soup and more nuts, they will attract the best people in the market to help them do it.

We Can’t We All Just Get Along?

Despite vehement denials to the contrary, retailers often unwittingly create silos within the corporate structure that at times foster more of a competitive rather than a cooperative environment between departments and business units. For those of us that have spent time behind the desk at a retailer, we can likely come up with a few our own examples of structural or even compensation-related situations that prevented internal cooperation. More often than not, each department has their own goals and objectives and very rarely do any of these involve partnering or sharing the limelight with another department.

corporate fighting

In my experience, Marketing and Merchandising are two internal disciplines that often find themselves in adversarial positions. It is not as if this situation has gone unnoticed. As one remedy, some retailers of sufficient size and demeanor have positioned a Chief Marketing Officer (CMO) in the C-Suite that governs both.  Quelling these inter-departmental skirmishes should be one of the key initiatives in a CMO’s annual business plan.  But more than peacemaking, coordinating the efforts of these two vital arms of the retailer is becoming a necessity to remain competitive.

Merchandising has traditionally driven the content of the weekly circular, the products and placement of products on the shelf and the all-important relationships with the CPG brands. Most merchandising departments are organized by defining the business in clusters of departments and with further granularity in categories. Within the management of these categories, the brand relationships are particularly coveted as brands still come calling each year with a pocket full of money to promote and discount their products within the retailer’s merchandising calendar.

Marketing, on the other hand, typically is charged with public relations, advertising, and shopper marketing and loyalty promotions.  Promotions typically involve accessing customer data, targeting and managing a loyalty program if one exists. Often, marketing has their own promotional budget, but is menial compared to the dollars that flow from the brands to their brethren in merchandising.   It is this area of promotions and shopper marketing that is often a major disconnect, not just for the retailer, but for the consumer as well.

The adage, “one hand does not know what the other is doing”, is hardly an overstatement when it comes to the bifurcated approach to the business that merchandising and marketing departments often practice.  The result often leads to ad hoc promotions from the marketing department that have little or nothing to do with the priority category imperatives of the merchandising department.  Merchants often dictate pricing and promotion strategies with no regard for the targeted programs and loyalty rewards that originate from the Marketing team.

CPG brands complicate the matter even further.  They are looking for customer data and post hoc analytics from the retailer, which is typically not found in the merchandising department where their trade dollars flow, but rather marketing.  If there is little or no cooperation and synergies between those the merchants and the marketers, brands can become frustrated and often take their “incremental” funds to a retailer that has figured out the process.

For those that remain mired in the traditional un-integrated approach, I offer a few suggestions as to how to begin to establish the important link between these two areas.

1. Marketing should be knowledgeable of merchandising goals and category level priorities.  Certainly understanding the “margin mix” process and the roles of categories is a first big step in aligning promotions with the priorities of the merchants.

2. Merchants should be asking for shopper level data or shopper segment information (if it exists), pertaining to their departments and categories.  Driving category level pricing and promotions in a smart targeted approach is a fabulous way to involve the marketing team as well as becoming more appealing to brand funds, that require post hoc analytics.

3. Both Merchandising and Marketing should agree to measure success with common metrics.  That implies that merchants should be knowledgeable of the shopper marketing metrics such as household spend, shopping frequency, and share of requirements.  The marketing team in turn should become fluent in understanding department and category sales and margin objectives, pricing strategies, and the role of store brands in the merchandising mix.

4. Communicate with each other via weekly schedule meetings that focus on plans, promotions, and optimizing brand funds.

5. Having a common analytic team to insure that all parties are getting the same version of the data can further develop integration between Marketing and Merchandising.  Surprisingly, this is often not the case among retailers with multiple databases.

As with any discussion topic, there are retailers that excel in integrating their merchandising and marketing efforts, however there are others that are still structured to promote unintended internal competition.  Fixing silos within the organization will pay big dividends for the retailer, their shoppers and their brand partners.  

 

 

 

JCP–Back to the Future??

In the life cycle of any retail brand there are watershed events that provide a venue for re-invention.  In the case of JC Penney’s, the venerable retailer is in the midst of one such opportunity.  Having recently fired CEO, Ron Johnson after the unsuccessful re-branding and merchandising campaign, JCP has predictably launched a “recovery campaign”, complete with an opening mea culpa and a plea for their shoppers to return.

We can debate the merits of such a strategy but on the surface it would seem to make sense to admit the sins of the past and ask for forgiveness, at least as an initial message.   The first salvo of messages in this recovery campaign has done just that.  But that’s the easy part of the process.  Now on to the task of winning back old shoppers and bringing in new ones.  But unless I have missed my guess on this one, JCP, new CEO, (which just happens to be the CEO that was fired in favor of Ron Johnson), will be tempted to immediately get back to being the Penney’s of old.

If that is true, all bets on a successful and sustainable recovery are off.

backtofuture-16an3nd

Clearly, the merchandising schema of days-gone-by of heaving “”percentage off” discounts, one day sales and day part sales should be considered in the mix of marketing elements that Penney’s uses to re-engage shoppers.  But if returning to the ways of the old is both the alpha and the omega of their strategy, they will be missing out on important opportunities.

  • First, re-invention of the retail brand creates an opportunity to embrace new merchandising elements whether they be new on-line services and policies,  new store-with-a store offerings, new co-branding relationships with famous brands.  “Something New”  not only can lure some of the old guard back through the door, but can serve to attract, new younger shoppers, who were not seemingly enthralled with the Penney’s of the past.   In short, big changes and big announcements, done thoughtfully,  provide real reasons for shoppers to return.
  • Secondly, and equally as important, this is an opportunity to re-invent the culture of the company, from the sales associates on the floor up through the corporate ranks. Becoming truly shopper-driven remains a marketing position opportunity that Penney’s cans cease, albeit not an easily achieved and sustained.  Solicit and listen to shoppers every step of the way.  Make investments into products and services that shoppers want and competitors are not providing.

Putting a finer point on the matter, Penney’s can either chose a path to recovery, or a path to re-invention.  If recovery is their goal, they will likely find themselves only slightly better off than today despite spending big bucks on media and message.  If true re-invention is the goal, innovation and shopper centricity will guide their decisions and the odds on not only surviving, but actually thriving ……increase substantially.

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.

 

 

 

 

Brand-Retailer Relationships: “Partnering” or “Biting the Hand that Funds You”

When the Food Marketing Institute met this year for its annual warm-weather retreat, aka, The FMI Midwinter cooperationsConference,  one of the topics that is being touted was “partnering”, specifically between the Food Marketing Institute and the Grocery Manufacturers Association, (GMA). A perfect partnership opportunity for the two major food industry organizations to combine forces, share expenses and develop notable synergies.  Stay tuned, but I see no reason that this new marriage should be a long a prosperous one.

But as for the members of these two fine organizations, the individual brands and retailers, “partnering” has produced mixed results.  Over the last twenty years several industry movements have served as catalysts for partnering.  Category Management (CM), Efficient Consumer Response (ECR), and more recently Shopper Marketing-Path to Purchase (PTP) have led to co-authored and co-funded studies that lead to books and presentations.   But lasting partnerships among brands and retailers, not so much.

Reasons for less than optimal results abound. The truth is that on key cultural and process issues, brands and retailers are wired very differently. Retailers live in the moment.  Brands often live in the future.  Retailers adjust the components of their business hourly, while brands deliberate and strategize over months and years.  Brands move managers and executives relatively quickly through their organization, while retailers tend to keep their team members in positions longer.  Both feel they “own” the customer and are keenly anxious to extend that advantage.  For these reasons and others, many retailers continue to “bite the hand” that funds them.  In turn, brands continue to believe they represent a significant portion of the retailer’s life to form a direct to shopper relationship.  Both practices are unwise and bode poorly for the future.

Technology and a sagging economy have nurtured a new variable, namely an empowered shopper.  This shopper has ceased control of the conversation and is quickly demanding better information, more relevant deals, and more efficient shopping alternatives that only the brand and the retailer together, can deliver.

Loosely translated, retailers with data and new shopper touch points need shopper insights and content from brand to attempt to satisfy the insatiable appetite of the new empowered shopper.  Sure, brands and retailers can try to go it alone, but given the short window of opportunity, new competitors pouring through that window each day, and the impatience of the shopper, it is hard for me to image anything but the power of a well formed partnership providing the best solutions for the new millennium.

As with all things that yield positive and timely results, there are requisites for success.  Here are some.

  1. Lasting partnerships are formed typically at the top of each organization.  The commitment must be clear and consistent.
  2. A good partnership has an accountable contact person on each side of the relationship, who must answer the bell when things get bogged down or do not flow as expected.
  3. Outcomes must be clearly communicated with success metrics known to all.
  4. There must be equal or near-equal benefit from the relationship.
  5. The partnership must grow and evolve, rather than stagnate and become mundane.

Perhaps the conversations at FMI Mid-Winter will serve as a harbinger for further brand-retailer alliances.  The shopper is waiting….waiting…waiting…

 

mh

 

 

 

 

 

 

How Much are Your Customers Really Worth?

Much as been written about the monetary value of each customer.  What are they worth and how much should I invest in each one to retain them and grow their share of requirements are logical follow up questions to be answered.  Theories and white papers have chronicled some very compelling reasons to understand “customer value”.   But despite these revelations,  many retailers simply do not measure their business by individual shopper metrics, but rather the more traditional sales, customer count and aggregate profitability.   So when you ask one of these retailers how much their customers, and more specifically, their best customers are worth to their business, you get a blank stare.

I agree that ultimately customer value metrics must be linked to the more traditional metrics of accountants rely on to measure the business.  Wall Street is not going to change their yardsticks of success overnight.  But it is also no accident that retailer leaders like Dave Dillon of Kroger and Steven Burd of Safeway are quick to credit their customer relationship initiatives as the single most important driver of their financial success.  One must assume that leaders with their level of business acumen are not just guessing about the nexus between traditional metrics and customer-specific metrics.  What do they know that others do not?

  • First, they likely know what the value of each of the key shopper segments represents to their business.  With their massive databases loaded with customer shopping history, they know precisely what each key shopper segment brings to their enterprise and how important the retention of these shoppers is to a vibrate business.  There are a number of techniques to calculate the value of the shopper, but at its most rudimentary level, annualizing the amount of spending and resulting profit each shopper segment represents is a great start.
  • Secondly, because of their ability to understand the value of the shopper, it is not difficult to extrapolate this “monetization” to the capital assets necessary to deliver the necessary targeting and content needed to maintain or improve upon shopper value.  With this approach, capital investments can be made in the context of cogent ROI models, putting smiles on the faces of both marketers and accountants.
  • And finally, armed with shopper value data, these retailers can and have made intelligent decisions on the best and most efficient way to spend limited marketing dollars.  As retailers advance their shopper evaluation process we are beginning to see fewer dollars spent on mass communications such as weekly circulars, television and radio, and more dollars being focused on targeted media such as SMS texting, email programs, and periodic direct mail.
While there is nothing new or truly exciting about any of the aforementioned steps, other than it all begins with understanding the value of each customer that comes through the retailer’s door or logs on to the retailer’s website.  Despite good progress, still, far too few retailers are unable to answer the question, “How much are my customers worth?”