June 16, 2017 Most of us would agree that over the past twenty years the lion’s share of the focus and creativity within the supermarket has occurred on the perimeter of store. This is true for a number of reasons. Retailers have deliberately placed their
In my view, the over-storing of America is perhaps the most immediate and imposing problem facing retailers, especially those who have invested heavily in expanding their physical footprint over recent years. The public investment community, industry pundits and retailers themselves have used the “plan
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
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
By Mark Heckman / August 2016 It is not news to anyone associated with retailing, that Amazon and other on-line retailers continue to carve out increasingly large portions of market share traditionally owned by bricks and mortar stores. This phenomenon is driven both by vastly
A recent Supermarket News article rightly touted the remarkable comparable store sales record of Kroger. Fifty consecutive quarters of positive same store sales comps (without fuel). The article went on to explain the simple but rare approach that Kroger leadership took to enable
When technology outpaces content and strategy, alerts and other automated consumer messages can become more of a negative distraction, than a positive disruption.
Think before you hit “send” is an acxiom from which we can all benefit!
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.
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.
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.
Digital signs, video screens, mobile applications, electronic shelf tags, coupon machines, banners, danglers, self tags, and floor graphics scream at shoppers each and every trip into today’s retailer supermarket. The business model of each one is predicated on gaining the attention of the thousands of shoppers that move through a large retailer store each week.
But what many of the proponents and pundits of in-store media fail to recognize is the mind set of their target audience, the in-store shopper. These mission-driven individuals are NOT in the store long enough (13 minute average trip length for average supermarket trip*), to absorb and interact with the plethora of messages, signs, shelf tags, kiosks, and sampling stations that frequently populate the aisles of many stores. In fact, only 18% of those thirteen minutes are spent in the supermarket’s center store. Shoppers are there to shop, period.
With that in mind, to have any chance of engaging a shopper, media must be intrusive, concise, and help the shopper make a purchase decision. Simply stated, the media and the content must be convey the name and benefits of the product, the price the shopper pays and the amount the shopper is saving, if discounted.
Key to implementing effective in-store media is having an in-store media plan in place. Layering programs on to other programs for the purpose of receiving revenue-sharing checks from third party media providers does not lend itself to success. Too many signs or messages dilute the impact of the entire effort.
It is also important to think as if you were a shopper. What is the most effective in-store media to help shoppers make quicker and better decisions. There is no benefit, none….of attempting to keep the shopper in the store longer than they want to be. Its all about “spending productivity, that is the pace of which they are making purchase decisions and placing items in their cart of hand basket.
If your in-store media is effective, it will not only produce incremental sales, but also make the shopper’s journey through the store more efficient. To a shopper that translates into getting everything they are looking for, and perhaps a few additional items in the shortest amount of time possible. To that point, retailers who are truly interested in optimizing the media that place in their stores should view it holistically by inviting shoppers to provide feedback as to their ability to find find what they want in an efficient way.
More to come on the topic…..
I love the “digital overlay” concept. It makes so much sense to me to drive digital coupon adaption by linking these new savings options with more traditional promotions. It is not a surprise to me that Kroger is leading the way, employing brands and promotions with these digital overlays. Details below;
“ConAgra has also effectively employed programs with digital overlays. For example, a January 2013 meal-solutions program sent an email blast to Kroger’s loyalty card shoppers with load-to-card coupons and incorporated a customized landing page at ReadySetEat.com. “Growing business with Kroger’s loyal shoppers is our priority too,” says Yurovski. “The programs that focus on loyal Kroger shoppers and our brand shoppers return higher ROI than those that target the competition’s [shoppers].”In each of these efforts, Kroger relied on its email database from global market research firm dunnhumby the retailer owns half of dunnhumby USA to identify and reward Kroger’s most loyal shoppers. The company’s ongoing partnership with Kroger has long set the industry standard for effective targeted marketing. “Over the past few years, dunnhumby has raised the bar with increased emphasis on post-program analysis, including following the shopper’s purchase behavior beyond a single mailer and introducing targeted digital communications,” says Catapult’s Cross.”
Experiencing too much of a good thing is a rare situation for most of us. But I believe that I have personally hit that point when it comes to shopping applications. As a necessary piece of my job as a retail “expert” I do my best to acquaint myself with those shopping apps that appear to be in vogue. It’s not an easy task as it seems that almost every week I run across a new application that is attempting to enter the fray. As a retail consultant, I am encouraged by the activity.
To support my point, CatapultRPM’s 4th annual Digital Shopper Marketing (DSM) study examined trends around the many tools that shoppers use along their path to purchase. The study covered perceptions and behaviors regarding over thirty (30) digital shopping tools. Among it’s findings was among the avid digitally-aided shopper, these consumers frequently use more than one shopping app to assist them in building shopping lists, loading coupons, finding items in the store, barcode scanning, and even comparing prices across retailers.
In addition to all of these new third partner applications, individual retailers are also offering their own specific applications for their shoppers each including as much utility as possible in hopes that the app itself becomes a reason for the consumer to spend a larger share of their requirements at that retailer.
Together, this activity has created a very crowded and often confusing marketplace. So much so, that I have often thought that if one application could combine the function and the offers of multiple retailers, (especially the ones I shop), I would load that one in a heartbeat and delete all others in the name of shopping sanity. For the lack of a better term for this solution, let’s call it a “Community Shopping App”.
One such solution is offered by Loc Enterprises. http://www.locenterprisesllc.com
The folks at Loc Enterprises have built a platform designed to coalesce multiple loyalty programs for consumer convenience. At the centerpiece of their program is the “Loc Card”, which will identify the cardholder at multiple retailers and activate and deliver all the rewards of programs of those participating retailers. It’s a “big idea” that makes so much sense for the consumer that Loc Enterprises is banking on consumer demand to lure the big retailers and their existing loyalty programs to eventually sign up.
Attracting Big Retailers….Job #1!
But this is a big “ask” from the “big” retailers, as they have always shown an aversion of participating in anything thing that requires an open transfer of data, whether it be offers or content to third parties that could potentially also be a platform for their chief competitors. I have yet to meet a retailer of any size or shape that relishes the thought of providing the consumer a quick and clear comparison of their offers against the best offers of their competition. In addition, most of these big retailers are still convinced that their individual programs and franchise with their shoppers is sufficient to stand on it’s own. Unfortunately, without the big retailers, like Walmart, Target, Kroger, Safeway, etc….the app will likely not gain sufficient consumer acceptance.
So now we wait and see who wins…. the consumer who covets convenience or the retailers demand exclusively ownership of the mobile application and it’s content.
Ultimately, consumers like me, that feel overwhelmed by the number of shopping apps that are currently available, will decide how this all shakes out. If we chose to NOT to shop at retailers that show reluctance to consumer-driven loyalty platforms, perhaps the big retailers will participate. But we must do so in meaningful numbers. We are a “few miles” away from that at the moment, so my frustration will continue for now, but keep your eye on these “Community Shopping Apps”. One or more will eventually break through. In the meantime, I will continue to load a new one each week and give it a spin.
Colleague and shopping pundit, Herb Sorensen (www.shopperscientist.com), will tell you without hesitation that there is much to be gained by enhancing store layouts, particularly those that impede fluid shopper mobility within the store. As just one example, we known from past studies on the topic that the more aisles and barriers a store has, the slower the pace of shopper spending. This is particularly important when coupled with the knowledge that shoppers do not have an infinite amount of time to navigate through a store.
In fact, after a few minutes into the trip, shoppers consistently speed up their pace, and accordingly decrease the rate in which they buy, speeding by aisles and categories that appear to be irrelevant to the shopper’s immediate needs or more commonly just represent too much time and energy to explore.
Most retailers are oblivious to these shopping tendencies. In fact they design and stock their stores with the mindset that more aisles and products mean more sales opportunities. It is just a matter of manipulating the shopper into spending more time in the store to take advantage of all of these great new products and departments. Nothing is further from the truth.
Retailers who have taken the time to track their shoppers through the store…whether it be by personal observation or by technical means, are often surprised by many of the discoveries, including the following:
1. How deep into the shopping trip, aka how long it takes for the shopper to select their first item for purchase from the time they enter the store.
2. The miniscule percentage of time shoppers actually spend “shopping” as opposed to the time they spend traversing the store getting from one “shopping event” to the next.
3. How little of the physical store shoppers actually traverse on any given shopping trip.
4. How few aisles shoppers actually fully navigate as opposed to “diving into an aisle” quickly for a planned purchase and then revert quickly back to the perimeter of the store.
5. How shoppers migrate naturally to open space, where they can clearly view the entire store, and conversely how consistently shoppers avoid tight, confining alcoves and aisles
Each of the aforementioned shopping tendencies represent opportunities for the retailer to embrace. By understanding these consumer practices, retailers can make both subtle and overt changes to their layout and merchandising plan, resulting in a more efficient shopping experience for the consumer and larger baskets sizes for the retailer.
Much has been written and pontificated relating to customer segmentation schema and related strategies. We all know that there are many ways to slice and dice shoppers, whether it their spending behavior, their demographic profile or life stage/lifestyle mandates. Of course, once you have segmented the shopper base, you should be able to connect with them with more relevance. Makes sense, right?
As someone who has spent the majority of his career on the retail marketing side of things, when I talk to brand people, especially the ones who are relatively new to the food industry, one of the first questions they have pertaining to retailers is;
“Why are so many doing so little with so much customer data?”
Here is the short, slightly glib answer. Most retailers, being basically simple folk who are typically immersed with the blocking and tackling activities necessary to run stores and make a few pennies at the end of the day, have little time or even acumen for complex customer segmentation theories. In fact, many retailers that have assembled fairly impressive customer databases over the years, still struggle to leverage these data efficiently and effectively. I count myself among this group. Trying to ingest all this data can be tantamount to “drinking out of a fire hose”
Despite some progress among few, most still rely on the tried and true mass marketing methods of yesteryear, i.e., the weekly circular, TV and radio advertising and other mass modes of reaching their shopper base
Scars of experience have led me to the painful conclusion that “great is indeed the enemy of good” when it comes to retailer customer strategies. Most that are offered today are too complex to execute and maintain. These complex strategies require content and funding that can only come from the buckets of dollars retailers use for mass marketing programs.
To be blunt, retailers and brands remain all too entrenched in their more traditional programs and their short term benefit to divert funding to targeted customer specific initiatives. These programs are still sacrosanct to most retailers and brands, that enjoy the predictability and reach these programs afford.
So that leaves us with starting simple, building incremental credibility, and subtly diverting dollars and human capital to a more targeted marketing approach.
I call it “knocking off a few gas stations along the way to the perfect crime”.
Tracking this discussion to its logical conclusion, retailers that are struggling with their data need a “bridge” plan, one that gets them in the game, but does not tax the entire enterprise by competing with mass marketing programs for funding and attention.
- Step One: Identify your best shopper base. Track them, reward them, and make certain best shoppers know that you know they are special.
- Step Two: Devise a way to recognize first time customers. If you have a loyalty program, develop a mechanized bounce back reward or message at the point of the very first engagement that incentivize a second trip. If there is a second engagement, recognize that as well. If, after a reasonable period of time, if there is no second engagement, devise a plan for that scenario.
- Step Three: Track defection and attrition. Devise intelligent ways to understand how to allocate resources to ameliorate losing shoppers or share of shopper’s wallets.
Focusing on just these three aspects of Customer Relationship Management will enable retailers to smartly use their customer database in a measured, reasonably affordable way. Once “wins” are gained in these three areas, more specific strategies can be employed, hopefully with funding from brands and other sources that are convinced your CRM program works and delivers results.
June 16, 2017
Most of us would agree that over the past twenty years the lion’s share of the focus and creativity within the supermarket has occurred on the perimeter of store. This is true for a number of reasons. Retailers have deliberately placed their fresh foods departments on the perimeter to be close to prep rooms and refrigeration. In addition, the majority of the store’s best deals reside on end cap displays on the back and front aisles of the store.
This all made a lot of sense until it was discovered that over time, fewer and fewer shoppers were entering the “center” area of the store and consequently, the categories and items found in this forgotten area were beginning to suffer from the resulting under exposure.
Understandably, for the past decade or more, retailers and their brand partners have frantically worked to devise new incentives to lure the shopper from their current behavior of remaining on the perimeter to venture down the long and arduous aisles of Center Store.
Some of their efforts have paid dividends, but despite new ‘intrusive” signage, fixtures and fixture configurations, Center Store is still very much under siege. While gains in Dairy, Frozen and Salty Snacks are encouraging, the majority of the remaining Center Store categories have seen sharp decreases in unit sales and in some cases as much as three to five percent over the past five years*
Further, the driving forces behind Center Store decline are largely out of the control of bricks and mortar retailers. For example;
- Smaller household sizes yield fewer stock-up trips, meaning fewer trips down the center aisles of the store.
- New Competition, in the form of smaller specialty stores, sometimes called ‘category killers’ have diluted the sales of supermarket Center Stores over the past decade, with more of this type of competition to come.
- Finally, shoppers have found that buying those Center Store items consumed on a regular basis such as baby products, pet food, water and beverages, paper and detergent can be conveniently purchased on-line and scheduled for home delivery.
This downward trend of Center Store performance begs several questions, chief among them is “Can Center Store survive without radical changes?’
If you believe as many do that the answer is an emphatic “NO”, then the next logical question must focus on what should and what can be done. The true transformation of Center Store should begin with an honest assessment of the controllable factors that are attributing to its diminished shopper relevance.
From the shopper’s view, research and intuition tell us that today’s Center Store presents a number of negative issues;
- Configuration: Long aisles within Center Store are uninviting to shoppers as they look down the aisle from the perimeter and quickly become visually overwhelmed.
- Item Count: Once down the aisle, there are too many items crowded into tight category sets that make it difficult to find items. Variety is good, but too much variety suppresses sales.
- Visual Clutter: Overuse of large signs, shelf tags and other point of sale materials clutter the shopper’s view even more. In an attempt to make things better for the shopper, retailers are providing a busy shopper too much to read and absorb.
- Size: Many Center Stores simply occupy too much floor space and are counter-efficient, consuming too much of shopper’s precious time in order to find what they are looking for. ‘Bigger’ has become an albatross, rather than the panacea retailers once regarded it to be.
From the shopper’s perspective the entire physical concept of ‘Center Store” is becoming ‘unnatural’ when compared to their experiences either on-line or in smaller specialty stores. Even when compared to most restaurant apps like Foodpanda for example the concept is more unfriendly.
Most recent remedial solutions for Center Store deal with making ad hoc changes to category variety, new fixtures, additional signs and of late, new technology such as in-aisle digital engagement through mobile devices. Few if any however, deal with seriously re-thinking the entire concept of Center Store.
Re-categorize According to How Shoppers Buy
Any serious improvement to Center Store must involve the mitigating the four aforementioned negative attributes. A logical first step in that process involves a re-categorization of Center Store, from the contemporary shopper’s perspective.
The adjacent chart depicts four quadrants of Center Store items that reflect current shopper behavior and options.
- Quadrant 1: Those Top Selling items that are consumed by most of the shoppers for everyday consumption comprise a very important list of categories and items. This group typically includes the retailer’s list of top 300-500 selling items. Sometimes referred to as the ‘Big Head’ these are the items that the contemporary shopper must have easy access to, without searching and wandering thorough the Center Store to find. Top Sellers should be accessible in this quadrant, even if only through secondary display.
- Quadrant 2: The second category of items is a subset of the first. This group contains the permanent shelf placement of Top Selling items that lend themselves to scheduled consumption. Paper Towels, Bathroom Tissue, Bottled Water, Pet Food, Diapers and others are all conducive to having their in-store inventory and space they occupy reduced as shoppers are incentivized to schedule their delivery at home or for in-store pickup (BOPIS).
- Quadrant 3: This leaves the slower moving items, which unfortunately comprise the vast majority of Center Store inventory. As opposed to the ‘Big Head’, these items represent the ‘Long Tail’ and their presence in store should be reevaluated. Quadrant 3 contains those Infrequent Selling items that have High Affinity with Top Selling (Immediate Use) items, meaning that these items are often bought with Top Selling (Immediate Use) items. These sku’s should be stocked in-store, but aggressively merchandised via secondary display with those fast-selling items with which they have affinity.
- Quadrant 4: This group contains items that most food retailers stock either because brand partners pay them to do so or retailers believe they must carry deep variety in a particular category. In today’s shopper centric environment, these are the items that make viable candidates for removing from the in-store shelves, de-listing those that show little or no movement, but keeping others that have seasonal value or index higher among the retailer’s best shoppers. In order to necessarily reduce item count, many of these slow moving ‘keepers’ would no longer be stocked in the store’s showroom, rather be available via on-line or in-store kiosk purchase only.
Where to Put What
As monumental of an endeavor as the re-categorization of the Center Store will be for bricks and mortar retailers, dealing with the size and configuration of Center Store will even be a larger challenge. Of those leading bricks and mortar food retailers are designing and build smaller formats. Within these smaller stores, the process of re-thinking which items are kept and which is discarded is critical.
The adjacent graphic illustrates the beginning of the re-organization of Center Store. Notice that each of the four Center Store Quadrants are contained within this layout as well as multiple opp
ortunities for shoppers to pre-order in-store for immediate consumption or simply pick up to take home.
What is also note worthy is the placement of Top Selling-Immediate Use items positioned where shoppers can more easily access them coupled with the placement of Top Selling-Scheduled Use items being available closer to the kiosks where they can also be ordered for regular delivery.
As opposed to long aisles with multiple categories, this approach compartmentalizes items according to their relevance to the shopper and how they would likely prioritize placing them into their shopping cart. With this approach there is no ‘racetrack’ around the store’s perimeter, but rather a natural flow from one shopping ‘priority’ area to the next.
Perhaps the most critical aspect of this approach is the tangible merging of Center Store with On-line. While reducing inventory and clutter, the retailer offers the shopper an easy and practical means to access additional items via kiosks for either same trip pick up or delivery to the home or office.
Finally, this new configuration of Center Store categories also serves the needs of traditional types of shopping trips, Quick Trip, Fill-In, Stock Up. Contrary to most current supermarket layouts, this approach facilitates a quick trip when one is warranted, but also efficiently accommodates larger trip sizes when shopper’s needs change.
Any approach to keeping Center Store categories viable within the bricks mortar store must be in context to the many options of convenient alternatives now available to shoppers.
While very basic, this approach represents leveraging shopper behavior data to re-think and reconfigure a vital part of the supermarket that most would agree is in need of updating and in a way that actually makes sense for the shopper.
* 2015, Nielsen Category Trend Report
Mark Heckman is CEO of Accelerated Merchandising, LLC a shopper research based merchandising agency. His career was highlighted by senior executive marketing and research positions at Marsh Supermarkets, Randalls Tom Thumb, Valassis, and Smith Cline Beecham. At Accelerated Merchandising he is partnered with Dr. Herb Sorensen, a noted expert on Shopper Behavior. Their recent new book, Inside the Mind of the Shopper, Second Edition contains the principles of shopping behavior that drive the need for a shopper-centric merchandising approach.
In my view, the over-storing of America is perhaps the most immediate and imposing problem facing retailers, especially those who have invested heavily in expanding their physical footprint over recent years. The public investment community, industry pundits and retailers themselves have used the “plan for new store growth” as one of their key metrics in judging the health and future vitality of the enterprise. Things are changing. The rapid increase in the percentage of retail transaction on-line
(about 15% today with it expected to reach 50% by 2030, the strategy of investing heavily in physical stores is now put many of these retailers behind the proverbial ‘eight ball’.
In fact in the U.S., the overstored marketplace equates to about 7.3 square feet of retail space per capita. That’s well in excess of the 1.7 square feet per capita in Japan and France, and the U.K.’s 1.3 square per square feet. Most believe that U.S. number to be unsustainable and the recent announcements of store closures and Chapter 11’s in the retail industry
provides evidence of that belief.
As we have seen, in an over-stored marketplace, new store growth typically slows and actually begins to cannibalize the retailer’s own existing sales to the point where it no longer represents the most profitable way to grow sales revenue. Dollars per square foot performance begins to drop and suddenly once profitable stores become a “drag” on the chain’s performance. In such situations, the once powerful asset of a new store has turned very suddenly into a lethal liability.
There is a way forward for bricks and mortar retailers in a market with too many retail outlets, but it requires a radical change of focus and success metrics aimed at customer growth rather than store growth. Measurements such as new customers, customer share of wallet, transaction size, and repeat transactions all become worthy of becoming Key Performance Indicators, (KPI’s). These metrics focus upon the shopper, not the store. Further, in this new metric paradigm, customer lifetime value should displace store related metrics like dollars per square foot, same store sales and store volumes as the key standards of success.
Operating in an over-stored marketplace requires much more than new metrics. This new customer-centric approach also involves assessing how the internal real estate of each store is utilized. With each passing day, shoppers are becoming more acquainted and comfortable with web-based shopping options. Past purchase history and the use of subscription lists expedite and enhance their shopping experience. Point and click technology has become more ergonomic as website use tracking research to refine their sites according to customer usage.
Concurrent to the progress seen on-line, retail stores have experienced minimal change. Upon occasion, in-store kiosks and other technologies are beginning to surface to ease the pain of searching for products and deals within the physical store, but all too often, nothing of substantial change is evident when shopping in-store. It is an experience very much designed for the shopper to do all the heavy lifting in terms of finding and purchasing the items on their list and beyond.
Successful physical stores going forward will be more concise in it’s merchandising. Studies tell us that today shoppers spend about 85% of their time in-store searching for the next purchase event, not spending! These inefficient stores will continue to suffer lower sales productivity numbers as the ever-changing in-store shopper will demand the same level of efficiency they experience on-line, or at least stark improvement over their current in-store experience.
To accommodate this new standard of shopping, bricks and mortar merchants must place the items that sell the most within easy grasp of the passing shoppers as they traverse the store according to their needs. This approach stands in stark contrast to traditional merchandising that places priority ‘manipulating’ the shopper’s footsteps through the store by placing key categories and items in all corners of the store to insure shoppers must traverse more of the store’s aisles and departments.
The adjacent chart depicts a typical U-turn Dominant Path that the majority of the shoppers take and leveraging that path to place the most frequently purchased items along that path.
Finally, in an over-stored environment, those stores that survive and thrive will not only view their shoppers holistically across both physical and on-line touch points, their stores will reflect this approach by offering access to on-line options to the in-store shopper.
Progress is evident in this area among several retail channels, with home delivery, BOPIS (Buy On-line, Pick up in-Store) and with kiosks enabling shoppers to buy additional items not stocked in the store. Each one of these services can increase the retailer’s share of wallet with a shopper, without the cost of additional stores and inventory.
Such strategies must be more than ad hoc efforts to accommodate a new shopping trend, but rather they will require a re-thinking of the business, its success metrics, and an entirely new commitment to change from a traditional retail operation to a shopper-centric agent. Physical stores that overtly reflect this new way of doing business will provide the shopper faster access to products, more efficient trips, and a new array of purchase options that do not exist currently.
In an over-stored marketplace new stores will be built, but they will be fewer, smaller, smarter and much more shopper friendly. Those stores that are not will likely join the growing list of closures that have dominated the retail industry in recent months.
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.
- 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.
From the Teradata Conference, September 13, 2016
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.
By Mark Heckman / August 2016
It is not news to anyone associated with retailing, that Amazon and other on-line retailers continue to carve out increasingly large portions of market share traditionally owned by bricks and mortar stores. This phenomenon is driven both by vastly improved technology and a corresponding increase shopper adaptation of the on-line process.
Much of this growth can also be attributed to on-line retailers leveraging the plethora of shopper behavior data that e-commerce sites yield. Accordingly and to their great credit, e-retailers have used this information to create an increasingly efficient, customized, shopper centric on-line experience.
Such has not been the case for physical retail facilities. While some progress can be claimed in terms of improved fixtures and in-store technology, most retailers are still mired in the past as they design, merchandise, and operate their physical stores.
You Can Only Manage What You Can Measure
The vast majority of traditional retailers continue to do a very credible job in tracking what I will refer to as ‘P&L’ metrics, that is those critical numbers that reflect sales, profits, expense control, and return on investment. With these vital numbers driving their merchandising, marketing, and operations, retailers continue to manage their business. Unlike their on-line counterparts, among other critical customer data, traditional retailers do not, on a regular basis track the time spent in-store by the shopper or how shoppers engage (or not) their merchandising efforts.
To put a finer point on this topic, ask any retailer how long shopper’s spend shopping their stores and how long it takes to make a purchase. The on-line retailers will be able to tell you immediately, while their cousins on the bricks and mortar side will mostly likely wonder why you asked the question.
A Shopper’s Time is Much More Limited Than the Amount of Money They Are Willing to Spend in Stores.
Millions of data points indicate that shopper’s are gifted with an internal clock that dictates how much time they are willing to spend in-store. Most retailers are either unaware of this or are in some degree of denial that their merchandising and store offerings will entice the shopper to remain in the store past the time they desire to move on.
Retailers are often surprised as to the average trip length times, even in their largest stores. The adjacent chart reflects such measures in a package liquor store with 5,000 sku’s.
The average trip time is just 6.5 minutes, which puts extreme pressure on the retailer to merchandise efficiently to the shopper in such a brief visit.
Supermarkets and mass merchants with stores over 100,000 square feet of selling area are faced with the same problem. Fifty to seventy-five thousand sku’s are offered to shoppers often spending less than 15 minutes in their stores.
The point remains that even as stores have grown significantly larger, the average trip times for shoppers are on the decline. In addition, the consensus of many recent shopper-tracking studies reveals that shoppers spend more than four times as much time searching in-store than actually engaged in making a purchase.
Measuring the Physical Store’s Shopper Centricity is Not Only Possible, It’s Imperative to Future Success
Affordable and practical technics now exist to provide retailers all the information they need to measure in-store shopper efficiency.
Traffic counters with clocks provide the time shoppers spend in the store from the moment they enter the store to the time they leave. The neighboring chart is an example of an observational shopper-tracking audit.
Personal observational technics enable a comprehensive shopper map that includes density of shoppers, their directional flow within the store, the time they spend in each area of the store, as well as their gender, and the direction they are facing. This information, coupled with compatible transaction logs from the retailer’s point of sale system, yield important diagnostics as to efficacy of the store layout and design and the critical merchandising plan within the physical store.
Shopper Tracking Map
Enter Category Management
While most retailers manage their business at the category level, their shoppers are most oblivious to this approach. They shop at the item level and in their world, the faster they can find the items they are looking for, the more likely they are to have the time to impulse purchase unplanned items.
Accordingly, it is incumbent upon category-organized retailers to better understand how and where those categories are merchandised in their stores. The shopper centricity of a category can be defined on two distinct levels.
Shopper Exposure: (What percentage of shoppers actually travel by the category in the store)
Purchase Conversion: Once a shopper ventures by a category, at what rate do these customers slow down to browse and actually shop and most importantly, at what rate do shoppers actually put an item in the basket and make a purchase?
Scoring each of a retailer’s critical categories with exposure and conversion rates is vital to truly unleash the potential of category.
Techniques to measure category level shopper centricity have been in existence for a number of years. What is changed is the cost and the ease of measuring exposure and conversion and the vital importance of actually doing so to remain competitive in the new, challenging world of digital commerce. There is much more on these topics to come in subsequent writings.
In addition, look on Amazon.com for Dr. Herb Sorensen’s new edition of “Inside the Mind of the Shopper” later this summer for expanded thinking on the new mandate to understand the shopper inside the physical store. The contributions of Mark Heckman are found in Chapter 2, Transitioning Retailers from Passive to Active Mode.
A recent Supermarket News article rightly touted the remarkable comparable store sales record of Kroger. Fifty consecutive quarters of positive same store sales comps (without fuel). The article went on to explain the simple but rare approach that Kroger leadership took to enable such remarkable results. The article’s author, Liz Webber, quoted Andrew Wolf, a food retailing sector financial analyst from a conversation Wolf had with then Kroger CEO, David Dillon;
“I had a meeting with him 10 years ago or so, and he told me they were never going to make a sales or earnings number again by moving the pencil, i.e. raising prices, as long as he was CEO,” said Wolf. “So I think he had remarkable courage and a strong spine.”
Under Dillon’s leadership Kroger became amazingly disciplined and strategic. He demanded that despite likely short-term hits to their stock price and profitability, Kroger was to keep their eye on the prize, GROWTH.
As a battered veteran of many Monday morning retail meetings, I can tell you that while sales growth is almost always discussed, it is seldom given the prominence of profit and hitting a near term EBITDA number. It would be foolish to infer that profit and margin metrics are not critical numbers to track, but the question should be asked, which number drives the other. My point is that tracking EBITDA as the lead metric often results in tweaking margin rates up with the false notion that there will be little or no impact on same store sales or longer term market share.
Dillon understood that while his competition was mired in P&L calculations, he was focused on driving sales with the confidence that ultimately, his sales driven approach would produce acceptable, if not pleasing profitability. That is exactly what happened.
Certainly, there are other factors at play in the Kroger success story. For starters, their store and service improvement programs, coupled with their strategic investment in customer segmentation intelligence have been key. None of those initiatives however, would be nearly as effective without a cogent pricing strategy with an objective of constant sales growth.
It does matter what you measure and prioritize. Competitors of Kroger should take note. Short term paper profit gains often morph into longer-term negative comparable store sales and all the woes that condition carries.
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.
When 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.
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.
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.
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.
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.
Welcome to the vagaries of retailing, Amazon. With the advent of the recent “Prime Day ” event that promised “Black Friday” type deals and excitement, many (if not most) shoppers were left with the equivalent of looking at bare shelves. Certainly there is an understanding among shoppers that really “hot deals” carry the “while supply lasts” caveat, however when the supply is so small that only a fraction of the audience can participate, the risk of alienating more shoppers than you endear, becomes very real.
Ironically, for e-retailers, one of their key advantages over bricks and mortar stores is their ability to access “endless aisles” or virtually unlimited inventory, minimizing the notion of out-of-stock. However, when Amazon and other e-tailers overtly promote specific deals and sales events, they better be prepared to sell some merchandise, or risk alienating the very audience they are attempting to attract. If an on-line shopper logs on one hour after the sale begins…. only to find the popular items such as portable chargers. Click here for reviews of portable battery. Deals are gone and only remnant items are left, the e-tailer will have done more damage to their customer constituency than good.
Further and finally, social media provides an instantaneous shopper feedback forum. Yesterday’s post event tweets were dominated by such terms as “garage sale”, “flea market” and “crappy yard sale”. Angry shoppers tweet more than happy ones. E-retailers should know that the report card on their efforts will be immediate and cutting if their sale disappoints more than it delights.
“Small” is the latest “big thing” in contemporary retailing in 2015. 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;
- 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.
- 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.
- 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.
- 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!
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.
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.
Resource: Daily News
Walgreens Drives Customer Engagement through Personalized Marketing
By: Jim Tierney, Loyalty360 BACK TO RESULTS
Walgreens has a powerful loyalty program, Balance Rewards, which has a membership hovering around 130 million.Reaching that lofty status, from a membership perspective, didn’t happen over night. Mindy Heintskill, Senior Director of Loyalty and Vendor Collaboration, Walgreens told attendees during her Tuesday session, “Driving Customer Engagement and Sales Growth through Personalized Marketing,” at the 8th annual Loyalty Expo presented by Loyalty360 – The Loyalty Marketers’ Association, that she started at the company around the time the Balance Rewards loyalty program launched in September 2012.“We’re getting great engagement in the loyalty program,” Heintskill said.
Why did Walgreens start Balance Rewards? “We wanted to thank our customers and gain customer knowledge and customer behavioral data,” Heintskill said. “It’s important for us to focus on retaining best customers. Data is very important. Walgreens doesn’t make any assortment decisions without looking at customer data. We had the opportunity to be more personalized. We have a commitment to testing. What we’re doing now is very traditional. We have all kinds of tests going on through different forms and different channels. You can’t be customer-centric on your own.”
MH-Comments. The headline is somewhat buried in this article. Ms. Heintskill is not only responsible for shopper loyalty, but also “vendor collaboration”. Too many retailers have not transitioned their vendor partnerships from pure trade support to actually providing targeted content for their loyalty programs.
This commitment by Walgreens is significant and will bode well for the continued success of their program.
During a recent panel discussion* on the topic of digital coupons, I asked Ajay Amlani, General Manager and Founder of You Technology what his three top areas of priority in terms of increasing the efficacy and volume of digital coupons and content in the coming year.
His answer, without hesitation was adamantly
Mobile, Mobile and Mobile!
He went on to assert that the overwhelming penetration of smart phone ownership and increasing usage during the shopping journey should be enough provocation for anyone with a proactive marketing strategy to include a healthy dose of budget towards reaching shoppers via their mobile device somewhere within their shopping process.
Devising a cogent mobile strategy presents an array of choices and complexities that are unknowns to even some of the most experienced marketers. Arguably, before retailers and brands get into specifics on mobile (smart phone) marketing, it should dovetail into a more traditional, comprehensive marketing strategy and a broader Omni-Channel Strategy as the neighboring graphic depicts.
While retailers are becoming increasing more comfortable with budgeting and executing Omni-Channel initiatives they are often done as tests or ad hoc. In turn these forays into new media are not strategically linked with more traditional merchandising and marketing programs.
So is it the case with Mobile Marketing. The following are quick points of consideration when building a mobile strategy.
- A good place to start the process is to view mobile as a distinct medium to the shopper with the same stature of print, television, radio and outdoor. With an increasing number of shoppers using their smart phones to access circulars, deals, coupons, comparative pricing, and product availability, mobile deserves its own line item in the budget.
- Secondly, gain an understanding of what is different about mobile vis-à-vis the other forms of communication. Establish the measurable elements associated with mobile and determine accordingly how success is measured. Clicks, Views, Open Rates and other new metrics are vital to understanding the basic level of engagement. If mobile marketing employs SMS texting, email blasts or banner web advertising, benchmark successful engagement metrics in each of those elements. Be knowledgeable of what constitutes best of breed performance among your key competitors and retail channel.
- Additionally, keep in mind that of all the Omni-Channel media, mobile is clearly the most pervasive as can serve as a connective tool to all the other facets of a marketing program or campaign. Consequently be prepared to measure impact of mobile communicated programs on sales, customer count, transaction size, category penetration and other traditional metrics. Without eventually correlating the impact of mobile programs with the metrics share holders and senior management value, even successful mobile programs can go unappreciated.
- Finally, I think it wise to use mobile engagement as a means to better understand your shopper base. With each mobile engagement, be positioned to use the results of the engagement as a means to segment your shoppers. Knowing which shoppers and shopper profiles display a high propensity to engage via mobile is extremely valuable information as plans are made for future mobile outreach.
* From Panel Discussion at the Association for Coupon Professionals Conference, April 16, 2015 in San Antonio, TX
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.
While 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.