Archive for Retail Operations

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.

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.

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

 

 

 

Fumbling at the Goal Line

Retailers often spend inordinate amounts of capital and expense in creating an inviting shopping environment.  Music, fixtures, terrazzo floors, digital signage and wall graphics are all meant to allure shoppers into the store and entice them into spending more.

shutterstock_120974128While all of this expense is well placed, its benefit can be negated in just a few minutes at the checkout line.  Calling upon a popular football analogy, it is tantamount to fumbling at the goal line after a productive long drive.  

Admittedly, checkout systems have improved.  Self checkout can be both a benefit for the shopper (especially one that does not crave interaction with an under trained, minimum wage associate) and the retailer’s labor expense.  However, shelf checkout, coupled with new, but slowly emerging mobile checkout technology, not withstanding, most checkout experiences are pretty much the same as they twenty years ago and they are often excruciatingly slow.

This is especially true in the food channel, where there are more tender options, frequent shopper codes, coupon types, pricing snafus, and numerous other situations that render being the “next one in line” an unforgettable adventure in frustration.

A recent VideoMining Study revealed that the average grocery shopping trip lasts only thirteen minutes, (without checkout time). While this is an average, and stock up trips last significantly longer,  the brevity of time spent on an average trip underscores the need to avoid the excessive time spent at the checkout.

Other studies show that time spent at the checkout ranges from market to market.  In very efficient markets, the checkout wait time can be as few as a minute or less.  In other markets, mostly in the Eastern region of the U.S., checkout wait times can be as long as eight minutes.

Key is keeping the in-store wait time as a very low percentage of the time spent in-store.  

Kroger is one of the leaders in the grocery channel addressing checkout wait times.  In most markets they offer a shopper monitoring system that tracks the number of shoppers that have entered the store and the time they entered.  Using average shopping times, they predict how many check lanes they will require at various times throughout the day.  This system announces this information on video monitor screens where both Kroger associates and shoppers can view the information.

Having a sufficient number of lanes open is indeed a key factor for keeping the checkout process from grinding to a halt.  Associate training is yet another.  Trained associates know the difference between an artichoke and a rutabaga. They understand the various tender types and do not need constant supervision assistance that freezes the line, as their training continues.

Without making the technical investment of a Kroger, retailers can “observe a lot by watching”.   Managing the front end of the store is a requisite for a smooth and shopper pleasing checkout experience. Waiting until lines are five and six deep in frustrated shoppers before opening new checkouts is not good front end management.  Retailers that have a management person with their sole responsibility centered on smooth checkout experience are winning this battle.

A shopper’s last impression of the shopping trip tends to set the tone for their overall experience.  Erring on the side of investing in excellent customer service on the front end will pay dividends in terms of customer satisfaction and their repeat business.

 

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.

Bi-lo and Winn-Dixie Replace Reid’s, Harvey’s and Sweetbay

From Morning News Beat….10-9-13

 

What’s in a name?  We will soon find out when Bi-lo Holdings changes the banner names of recently acquired chains Harvey’s, Reid’s, and Sweetbay.  Conventional wisdom tells us that managing many banners with various names and named programs is menacing, if not expensive.  

With overlapping stores in the many of the same markets, this decision is the correct one.  Now it is up to Bi-lo Holdings to use these conversions as an “excuse”  to create some excitement around these events.  Further and most importantly, it is also important for the Winn-Dixie and Bi-lo brands to begin to better define themselves vis-a-vis their formidable competition.  We wait for that to happen.

mh

 

Bi-Lo Holdings announced yesterday that when it closes on its acquisition of Sweetbay, Reids and Harveys stores from Delhaize, it intends to convert the Sweetbay stores to the Winn-Dixie banner and the Reids stores to the Bi-Lo name.The company said that it intends to keep the Harveys banner, though some of the stores using that banner could be changed to the Winn-Dixie or Bi-Lo name.According to the company, “The transitioning of Sweetbay and Reids stores to Winn-Dixie and BI-LO banners respectively is to reduce overlapping footprints. There is little overlap between BI-LO, Winn-Dixie and Harveys stores. Through this transaction, we will be able to provide our great products at a great value to a broader base of customers.”The transaction is expected to close in the first quarter of 2014. Bi-Lo said in May that it has a deal to acquire the three chains from Delhaize for $265 million.The Tampa Bay Times writes that “Sweetbay has had a prominent spot in the marketplace since 2004, when Tampas Kash n Karry changed its name to Sweetbay as part of plans to remodel stores, expand product selection and create a customer-friendly culture. The name comes from a type of magnolia tree.”But caught between customer service-oriented Publix and value-driven Walmart, Sweetbay still struggled to find its niche and gradually lost market share. In January, Sweetbay said it was closing 33 underperforming stores in Florida, including 22 in the Tampa Bay area.”

via MorningNewsBeat.

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.

Amazon Fresh…Changing the Rules of Engagement

MorningNewsBeat.

A news article posted by MorningNewsBeat speaks to RetailNetGroup’s recent analysis of the experiment in on-line grocery shopping that is Amazon Fresh.  I am always interested in those who are convinced that to-your-door groceries is coming into its own.  While Ahold’s Peapod, Fresh Express, MyWebGrocer, and others have carved out a sustainable yet small niche in the grocery industry, Amazon may just be the one to kick start the offering on its journey to a more pervasive service.

Unlike those other services, Amazon is seemingly prepared to expand this service without any sustainable profit in sight.  They likely mean it when they say Amazon Fresh is a strategic initiative, not a profitable tactical one.  Without the burdens of financial contribution, coupled with Amazon’s mastery of logistics, Amazon Fresh could conceivably be the service that finally breaks through to critical mass.mobile-shopping

If that is true, Walmart, and all leading traditional supermarkets will need to pick up the pace on refining and expanding the services.  It could also mean that delivery fees are lower, order size minimums are waived, and it certainly could mean that home delivery and in-store pick up will never pay out using traditional metrics and full allocated costs.  Amazon Fresh may dictate that all players in this space see it as strategic as Amazon purports.

Departments and offerings within the mix of the traditional supermarket that do not profitably stand on their on is not a new phenomena.  Just add on-line grocery shopping to the list and understand the indirect benefits of incremental shoppers and transaction size growth that these services can foster.  With Amazon moving in, and Walmart not about to be left out of the mix coupled with more time starved, tecno-savvy consumers, the stars are aligning for grocery e-commerce.  Let the games begin.

 

Supermarkets Doing Just Fine Says Kroger CFO | Retail & Financial content from Supermarket News

Supermarkets Doing Just Fine Says Kroger CFO | Retail & Financial content from Supermarket News.

Kroger’s CFO, Michael Schlotman reports that the traditional supermarket industry is “doing just fine” at yesterday’s investor conference in Orlando, FL.  I hope he is right.  Mr. Schlotman cites the viability of Wegmans, Hyvee, WinCo, HEB  and of course, Kroger as sterling examples of successful traditional supermarkets.  It is very difficult to argue with his logic or examples.

If we look deeper at his example retailers, they all share some very important business practices.  They are aggressive in capital investment, they have invested in human resources, they price competitively, they are deeply involved in local marketing, and consequently, they have all found a profitable niche in their respective marketplaces through innovation and differentiation.

One last comment about this elite group of retailers.  They all have taken the “long view” in terms of financial investments.  Not everything they do has to “ROI” immediately.  In fact, Kroger has taken “heat” from Wall Street for many of their investments in fuel programs and customer database marketing over the past few years.  Both of which are cited today as key elements of their on-going success.

I am still not convinced the traditional supermarkets as a group, are “doing just fine. Certainly those that take the long view and have a clear vision of what it takes to compete are positioned very well to continue to prosper.  However, dozens of other traditional chains continue to struggle, close stores, freeze wages, cut staff and continually retrench.  These chains would benefit from at least attempting to replicate the investments and practices of the successful few.  Easier said than done!

 

Grocery Stores Losing Fresh Market Share ..Not Good News for Traditional Supermarkets!

A recent study conducted by the Nielsen Perishables Group reveals that selling fresh product in supermarkets is, like many other aspects of the business, becoming increasingly more difficult.  While fresh categories are transitioning from reliance on commodity markets and seasonal strategies to more of a packaged goods approach, one of the supermarket’s long-standing advantages over its supercenter competition is fading away.bag salads

Bruce Axtman, president of the Nielsen Perishables Group states within the new report extracted from Supermarket News;

“Fresh as a commodity market is changing and can no longer just rely on strategies that are determined by supply and commodity prices,”  “Suppliers and retailers are slowly but surely transitioning to the consumer packaged goods style of category management based on the knowledge of both consumer and performance data to better understand how various consumer groups purchase fresh foods differently, at which stores, and at what price points.”

Bruce’s comments are significant. Previously sold as predominantly bulk products,  pre-packaged and sealed, meat, deli, and produce items are now taking on the personalities of their sister departments like grocery, general merchandise and health & beauty care.  That implies that fresh departments are now subject to category management principles, pricing models and even supply chain functions that resemble non-fresh departments, all of which can provide efficiencies for grocery retailers, both traditional and big box formats.

But with this trend, warehouse stores and supercenters are poised to gain more of the fresh business….. at the expense of traditional grocers.

Supercenters as a channel of trade, are gaining in their share of the “fresh market” at the direct expense of their traditional supermarket competitors.  This same Nielsen Study predicts that warehouse stores will gain 2% share of the fresh business and supercenters will gain 1% over last year, while traditional supermarkets will lose 2% of this profitable business.

One could argue that the fresh business would be trending away from traditional supermarkets even without the aforementioned  trend of  “the packaging” of fresh”, but clearly the consumer acceptance of pre-package meats, produce, deli, and even seafood product plays right into the hands of the volume-oriented big boxes, who lack the expertise and the business model to support more traditional open-market type fresh presentations.  Pre-packaged, case-ready product is just what the perishable doctor ordered for price formats whose business model appreciates the labor savings inherent with pre-packaged perishables.

So what does this mean for the business?  

Once again, traditional grocers will need to re-invent their fresh departments and services in order to defend this very critical and profitable part of their business…..a daunting task given the current consumer trends towards the acceptance of packaged fresh product and the resources of the big box stores to provide an ever-improving alternative to bulk produce and the service meat, deli, and seafood cases!

Editor’s Note:  In recent posts, I have talked to specifics that traditional retailers can employ to sustain their fresh business. More to come on this topic as it is critical for the continued wellbeing of supermarkets that they continue to dominate “fresh”.

 

 

Read More: http://supermarketnews.com/produce/grocery-stores-losing-fresh-market-share#ixzz2O1lamLQn

 

 

 

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.