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
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,
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
February 3, 2015
Having bailed on Canada, Target is set to focus on growing its business in the U.S. Yesterday, the chain announced plans to open 15 stores this year including eight TargetExpress locations, one CityTarget and six general merchandise stores. Is Target better positioned for growth in the U.S. today than it has been in recent years?
“Smaller formats like TargetExpress and CityTarget offer customized assortments and services to meet the needs of guests who are increasingly moving into urban centers,” said Tina Tyler, executive vice president and chief stores officer, Target.
“In our general merchandise stores, we’re embracing a test and learn philosophy, innovating with layouts and experiences and bringing digital and bricks and mortar together like never before.” The retailer opened its first TargetExpress, a 20,000-square-foot beta store in Minneapolis’s Dinkytown area near the University of Minnesota campus last summer. The store was tailored to meet the needs of students and local residents. The store features fresh produce, grab-and-go foods, snacks and beverages. The unit also includes a pharmacy, a beauty department with concierge as well as areas for electronics, home and seasonal items.
Target, which had already announced plans to open new Express locations in San Diego, San Francisco and St. Paul, will open stores in Chicago and Washington, D.C. The retailer is also looking at other sites in Los Angeles and Philadelphia.
Target also plans to open a new CityTarget, the chain’s mid-size format ranging in size from 80,000- to 160,000-square-feet, at a location near Fenway Park in Boston. Next year, the company will open another unit in Brooklyn, NY. The two locations will be the first CityTargets on the East Coast. There are currently eight CityTarget stores operating in Chicago, Los Angeles, Portland, San Francisco and Seattle.
On Target’s third quarter earnings call in November, CEO Brian Cornell told analysts (via SeekingAlpha), “We believe that smaller formats present an exciting opportunity for Target, because urban consumers have such a high affinity for our brand. If we can reach more of these guests with small flexible formats like CityTarget and TargetExpress we can offer urban consumers greater convenience, unique merchandise and an outstanding value with extended assortment available at target.com.”
Mark’s COMMENTARY: One thing we know about Brian Cornell is that he is committed to expanding Target’s digital and e-commerce presence in the marketplace. Expanding Target’s physical presence with smaller stores that are likely to be in position to work in concert with their digital strategy makes sense on several levels.
- It provides an economical expansion vehicle in markets that are not likely to cannibalize existing sales from sister stores.
- The smaller footprint allows Target to focus on new technology and how it relates to the in-store shopping experience, which would be more difficult and costly in their larger formats.
We are entering a phase of retail development where physical stores are going to shrink commensurate with the retailer’s ability to grow online sales as a means to compete for a techno-savvy shopper. While there will be bumps in the road, with this strategy, Target is at least on the right street.
Price Chopper Launches New Coupon/Loyalty Program
By: Jim Tierney, Loyalty360
BACK TO RESULTS
Price Chopper’s new coupon/loyalty program launched as a result of matching customer expectations, according to Glen Bradley, Vice President Marketing Analytics, Price Chopper Supermarkets.The chain operates 135 stores in New York, Massachusetts, Vermont, Connecticut, Pennsylvania, and New Hampshire and is fueled by an extended family of more than 22,000 teammates who collectively own more than 47% of the company’s privately held stock, making it one of the nation’s largest privately held corporations that is predominantly employee-owned.
Customer engagement and brand loyalty are two guiding lights at Price Chopper.Bradley said Price Chopper launched its original AdvantEdge E-coupon program to meet the needs of its customers “who are always looking for new ways to save money on groceries. Google Zavers, who had provided back end support for our e-coupon program notified us in mid-2014 that they would be exiting the business. We took this opportunity to redesign our program with our new partner, Inmar, so that we can provide a new and improved program with enhanced features for our customers.”Bradley explained that the AdvantEdge e-coupon program allows customers to load digital coupons to their AdvantEdge loyalty cards and redeem coupons without the hassle of handling paper.
Previously, shoppers could only digitally load up to 99 coupons on their AdvantEdge card at a time, but the new program through Inmar allows more. Customers now have access to over 150 digital coupons and can also use the Price Chopper website to search for products and will see corresponding offers for favorite products.“We have an extensive list of coupons on both national brand and our own Price Chopper brand products available in an easy-to-use interface on both PriceChopper.com and our Price Chopper Apps for iPhone and Android,” Bradley said. “We will be adding new features soon- things that were not possible with our previous technology partner.
Price Chopper plans to rename its 135 stores Market 32.“The AdvantEdge e-coupon program fits perfectly into our branding initiative as we seek to provide exceptional value to our customers through technology and service,” Bradley said.
It is the retailer who will bring relevance and content to these new digital coupon programs. Without their offers, in-store support and integration with other marketing and merchandising programs, digital coupons will remain a very small portion of the overall number of coupons redeemed in the marketplace. Congrats to Price Chopper, (Market32) for taking the bull by the horns!
Haggen’s surprise acquisition of 146 spun-off Albertsons and Safeway stores will propel the small regional brand into five states — and position it as a potential acquirer of additional West Coast chains also seeking greater scale, sources told SN.Bill Shaner, the former Save-A-Lot executive hired as CEO of Haggen’s nascent Pacific Southwest division, in an interview with SN said the stores the Bellingham, Wash.-based chain is acquiring are in sound financial health but stand to improve under the Haggen brand, which the company intends to introduce at the stores in the coming months.
“It’s a blend of stores, but a lot of them are terrific — very profitable, very successful, strong sales trends, great store teams,” Shaner said. “Like any fleet of stores, some are better than others, but at the end of the day what we were able to buy are stores that are healthy, profitable and frankly, we think under the Haggen brand, have the opportunity to do even better going forward.”
MH: This will be very interesting to see how a relatively small chain, albeit a good one, can successfully absorb an acquisition of this size. If successful, Haggen will need to prioritize its capital resources and be very artful in the way they transition these stores to a Haggen banner…or other.
Marketers Start Seeing ROI From Data-Related Investments
Facebook Twitter Linkedin Google Data-related budgets will increase for the third consecutive year, as its ROI starts to increase. Investments in Big Data are starting to pay off big time for a number of marketers.Nearly half of marketers polled (47%) say they’re seeing a positive ROI on data-related marketing investments made over the past few years, according to Infogroup, which surveyed about 600 attendees on-site at DMA 2014.
In 2013 only 39% of marketers said they were basking in the rewards of Big Data spending.Furthermore, another 15% of marketers surveyed said they expect to see a positive ROI in 2015 and a quarter of respondents anticipate a return within five years. A mere 1% doesn’t expect a return at all.
The majority (62%) of respondents has already begun investing in data-driven marketing solutions; 15% expect to invest within the next five years. Only 7% have no such plans on the horizon.Infogroup also discovered that—perhaps not coincidentally—data-related marketing budgets have increased for the third consecutive year. In addition, 64% of marketers expect their data-related budgets to increase in 2015; only 4% expect their data budgets to decrease next year—which is higher than the 62% in 2014, but slightly lower than the 68% in 2013.
According to Infogroup Media Solutions President Gretchen Littlefield, these findings indicate that data-driven marketing has shifted from an emerging practice to standard operating procedure. Despite the success some have had with data-driven solutions, marketers still struggle with collecting, analyzing, and acting on their data. More than half of the marketers surveyed lament that they don’t collect enough data, and 10% say they collect too much.
Of the marketers who say they collect too much data, 25% say that collecting data is their biggest challenge. Data analysis (21%) was the top concern among respondents with regards to data-driven marketing, followed by data implementation (16%), and collecting data (15%).Ultimately, however, there’s a benefit to overcoming these data-related challenges: Marketers who customize campaigns are more confident in knowing their customers. In fact, 46% who do this are extremely confident in the thoroughness of their average customer profile; compared to 21% overall.
It has been well over twenty years since the first “electronic” card based loyalty programs entered the retail scene. Supermarkets led the way, given their propensity to offer coupons and deals, coupled with seeing their customers more once a week. Loyalty programs seemed to be a good fit for their business model. Furthermore, most supermarket retailers understood that about 20% of their shoppers were delivering about 80% of their sales. For many, it made good economic sense to focus on building further rapport with the most valuable shoppers and promote less often or differently to those outside that group.
From the early fanfare of these programs, it wasn’t long before the reality set in. Retailers discovered that creating a separate marketing strategy with offer banks full of meaningful, special deals for targeted shoppers was problematic. With the limited technology of the day, it was often too expensive to target shoppers. CPG brands, while appreciating the concept of targeting, were of little help with content given they often held different targeting objectives than their retail customers.
For those and other reasons most card-marketing retailers, quickly gave up on building relationships with their top shoppers despite having mounds of customer data to smartly do so. Frustrated and mired in the day-to-day struggle for “comp sales” and gross margin growth, they simply reverted to using the card as a new prerequisite for shoppers to get the deals they were already getting before the program launched.
Shoppers for the most part played along. However, over time these programs became very milquetoast and provided little or no point of advantage for retailers. With rare exceptions, the early promise of loyalty marketing went unfulfilled. Consequently, a number of good retailers have abandoned their programs, while other successful retailers felt vindicated by staying away from electronic card marketing.
Fast forward to present day.
Shopping technology is exploding. Shopping Apps are abundant. Some would even argue apps are too abundant and present so many options and functions that shoppers are overwhelmed with choice. Apps with “geo-fencing” capabilities like Shop Kick (www.shopkick) and Ping4 (www.ping4.com) alert shoppers when they are in geographic proximity of the store. Still other Apps, like Aisle 411 (www.aisle411.com) use iBeacon® or similar technology to sense the shopper is in a particular area or standing in front of a certain display in the store. Still, others are focusing on the collection of deals across many stores. Couple that with every major retailer having their own proprietary app, each with their own version of loyalty points or rewards.
New technology adaptation is also changing the shopper and their expectations. Upwards of seventy percent of shoppers now carry a smart phone with them while they shop. Some are even using it to help them find items, download coupons and explore nutritional content. On an increasing basis, shoppers are deciding where they shop based upon the presence of shopping technology. Said another way, retailers must innovate and adapt popular technologies or risk losing market share and shopper relevance.
Techno-Loyalty is here to stay.
In my view, loyalty programs must be communicated and executed through technology to remain relevant. Shoppers want automation, simplicity and consolidation of the many offers and rewards from each retailer, both on-line and in the physical store. Consequently, while loyalty cards live on, they are gradually giving way to shopping apps, wireless chips and other technologies that identify the shopper both on-line and in the store.
Further, options are emerging for shoppers to manage their own loyalty. Shopping sites such as Retail-Me-Not, (www.retailmenot.com) , All You, (www.allyou.com) , Savings.com (www.savings.com) and a host of others have aggregated offers from multiple retailers for the shopper to access in one consolidated place. While these sites are growing in popularity they often lack full retailer participation, meaning they work independently from the retailer’s own website or shopping app. This separation often requires the savvy shopper to visit both websites to insure they have the complete offering from each retailer.
In an effort to create the ultimate level of consolidation, solutions like LOC (www.locenterprisesllc.com) enlists the retailers to participate both in-store and on-line to extend the reach of their current loyalty program, by creating a consolidated on-line “shopping mall” where shoppers can access the full compliment of their favorite retailer’s offers and rewards, on one website. In-store, the LOC card or app either replaces or augments the retailer’s own mechanism of shopper identification. Shoppers naturally love the idea, while retailers, who are deeply vested in their own websites apps, appear to be gradually understanding shoppers will ultimate dictate the manner and place in which they interface with the retailer.
Looking Forward, the Retailer Must Take a Holistic View of the Shopper
The future is now defined as “next week or next month”, not “next year or the next five years”. The rapid development of shopping technology has accelerated the shopper’s expectations and has put the onus directly on retailers to elevate their loyalty game. The first step in that process is to first acknowledgement that each retailer, no matter how big, is just one piece of the shopper’s loyalty environment, not the alpha and the omega of the shopper’s needs as many have viewed it in the past.
Concurrently, technology companies understand that working with (not around) the retailer is optimal, as it provides the most holistic shopper solution. On the other hand, if retailers remain guarded and over protective of their programs ignoring the increasingly loud voices of their customers to become more holistic in their approach to building relationships, even their best efforts of offering stand-alone loyalty will miss the mark with the shopper.
After two decades of struggle, technology has finally arrived to deliver on the promised returns of loyalty marketing. It is now up to the retailer to either embrace a new model of holistic, technology-based loyalty or run the risk of being rendered irrelevant, even to their most loyal shoppers.
This year’s Inmar Forum brought a host of top speakers to Winston-Salem, including Andreas Weigend (formerly
the chief data scientist at Amazon), Peter Fader from the Wharton School, John Phillips with PepsiCo, Matt Gymer
of Novant Health and many, many others. But as insightful and informative as these and the other expert presenters
were, the most impactful sharing at the conference may have come from the eight “everyday folks” who
participated in a panel discussion exploring shopper attitudes toward promotions, the in-store experience and the
retailers and brands trying to engage with them.
The collective commentary from the panelists was candid, at times colorful and very, very telling. Here are some the key messages we heard from this diverse group of consumers:
Technology is critical to shoppers’ efforts, but traditional sources have not been abandoned.
The panel members, who ranged in age from 19 to 71, all spoke to their use of the internet to search for product information and availability, make price comparisons and find coupons and other savings opportunities. A multi-source search for savings was common practice among the Forum panelists who spoke of using retailer and manufacturer websites, apps and coupon blogs when looking for coupons and discount opportunities. However, while smartphones and apps were the preference of some consumers, newspapers, Sunday circulars and direct mail were all acknowledged as having real value and a definite place in the pre-trip planning process.
Engagement must be relevant, genuinely facilitate the shopping effort and deliver real value.
The collective message from this group of cost-conscious, self-described “savvy shoppers” was that outreach from marketers had to align with their demonstrated wants and needs. Random or “hard sell” techniques were not effective in moving them to trial or purchase. If they had an interest, the panelists would voluntarily engage with a retailer or brand – but, with the expectation that the “return engagement” would deliver information and offers of immediate, obvious value.
Social media also plays a part in the panelists’ shopping experience, as several in the group expressed a willingness to “like” a product or brand on Facebook in order to receive promotions. Twitter posts were also identified as influential, but more so when broadcast as informative enticements rather than direct advertisements.
Quality customer service trumps convenience in building shopper loyalty and driving repeat business.
Whatever their particular level of engagement, the panelists were consistent in their expectations of quality service – both in-store and online. Ready availability of product information, easily accessible and personally delivered offers, direct and prompt customer service, assurance of product quality and ease of return where all cited as reasons the panelists remained loyal to both retailers and brands.
The panelists also said that they would travel further to those retailers who provided superior customer service, especially when it came to retail pharmacy. Those panelists speaking to their experience in this area voiced that personal attention, close consultation with the pharmacist and the availability of information relative to medication and patient care were the primary decision drivers – having much greater influence than either cost or convenience.
While the panel did not comprise a scientific sampling, the comments from the group did represent, as our Chairman and CEO David Mounts said, “first-person verification” of previous research by Inmar Analytics showing increased use of technology by shoppers along the path to purchase as well as the desire among shoppers for more personal, relevant engagement from retailers (grocery stores, pharmacies and mass merchandisers) and brands (both food and non-food CPGs).
Hearing directly from end-users has always been a particularly powerful information-gathering experience. It’s a reminder that there is always something more to be learned from – and about – the customer.
Travis Lewis is President of Inmar Promotion Network. More information: www.inmar.com.
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!
Like many of you, I have become a very accomplished “speed deleter” of un-targeted and irrelevant retailer email. I believe my record is a hundred and seven deleted emails in twenty-five seconds. Too lazy to actually unsubscribe to the author of the email, I rationalize staying connected by believing that they may actually send me something of value someday. I wait.
En mass “email speed deletion” may be this consumer’s way of cutting a an email marketer off in mid sentence, but with more merchants doing un-targeted email blasts, the lower the open rates will become for everyone. While email has become a preferred alternative of more expensive direct mail, its efficiency is waning as more join the fray.
Alternatives are emerging. Blogger-fed websites and the more established coupon distribution sites are beginning to build a following with shoppers who seek deals and content as they plan their next shopping trip. These sites have a distinct advantage over the email distribution method. First and foremost the shopper is motivated to come to the site, looking for deals. The more relevant the offers and the retailer’s are to the shopper, the better the traffic and the results will be for that site.
All You, Retail-Me-Not and Savings.com are three such sites that are gaining traction by creating enough content from enough retailers to make the visit to the site worthwhile for the shopper.
They are on the right track.
However, they still suffer from being disconnected from the total shopping experience. Many of these sites have mere passive relationships with the retailer content they post on the site. While coupon codes, shopping lists and circular content are available, a shopper cannot fully engage with each retailer by checking on their point totals for continuity programs, or drill down into their loyalty clubs and personal preferences. For that content, the shopper must go back to the retailer’s own site in turn making the shopper’s life more complicated, not less.
One answer appears to lie in the creation of comprehensive central content aggregation site, one in which the list of participating retailers satisfy key requisites for shopper-centric loyalty. I see them as follows:
1. Content: The retailers must understand the enhanced reach they will receive by “actively” posting both targeted and mass content on an additional central shopper/loyalty site for shoppers and use the site as a means to allow full integration into points, personal profiles, and past performance. While they maintain their own sites, this new central site provides the shopper a new, additional option for engaging the retailer.
2. Community: This central site must represent the major players in each of the Shopping Communities built, meaning one or more major supermarket, mass retailer, chain drug, sporting goods, home improvement, electronic superstore, and an array of smaller complimenting loyalty retailers. Consumer Research tell us that Shoppers wildly support the concept of a single site with overwhelming numbers of intended engagement if such thing every existed.
3. Consistency: This central site must strive to grow its community of retailers in both number and volume of content, by promoting a dialogue with its shoppers and retailers, meeting their evolving needs. Shoppers and the components of loyalty are extremely dynamic and if retailers are going to actively participate, they must see the platform as one of consistent growth and progressive thinking.
4. Centricity: Big retailers will not engage any new commonly-shared platform with other retailers unless the central site and its engagement platform embrace the importance of maintaining the retailer’s control of their brand equities and their shopper database. Both are table stakes for participation. Attempting to lure big retailers to the site without recognizing their requirements and strategies, will not succeed, no matter how loud the clambering from the shopper.
Final Thoughts on the Subject
Creating a comprehensive, central shopping/loyalty site will not happen without investment in both systems and strategy. Actively sharing content from multiple retailers ultimately means a Single Shopper ID for each shopper that links to shopper back to each of the retailers on the site. “Innovators” are in the marketplace and focused on just this concept. Like many “Big Ideas”, a comprehensive central shopping/loyalty site is much easier to image than to execute, but if memory serves me correctly, I believe that’s what some said about scanning UPC Codes back in the seventies!!
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.
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.
Loyalty Programs – Walk in Your Customer’s Shoes
Pre-posted with Permission by author, Jack Kennamer
When it comes to loyalty programs, we know what we love and what we’d change if we could. We love the deals, offers, and rewards. What we hate is being aked for personal information, filling out registration forms, having to go to websites and create yet another account.
We know what it feels like giving a complete stranger our e-mail, phone number, address and more; or being asked to recite this sensitive information in front of a line of complete strangers. All of this hassle just to receive yet another loyalty card to add to our ever-growing stack or adding another mobile app we’ll probably never use more than once. We have all been there, and most the time we just say “no thanks”.
If, by some chance we do sign up, we are then faced with the aftermath of joining…e-mails, tons of them, day and night with no rhyme or reason.
For those of us in the retail business, as soon as we leave work we become a customer with the merchants we shop. We all deal with these exact same issues day in and day out. I don’t think we’d find a consumer out there that loves the current “linear” loyalty system of today. Just Ask. So, why not make it as easy as possible for consumers to enroll and participate?
What if we, as consumers could go into any merchant offering a loyalty program and enroll with the swipe of a single card, or the scan of a single app? Just one! Not a deck of loyalty cards or a smartphone full of apps. Would that make us more likely to participate? No forms, no personal questions, no websites to hunt for to enroll in, just a single swipe! Of course it would!
And what if we, as a consumer, knew that our personal information was safe and secure, wouldn’t that make it easier and safer and less of a concern to join a merchant’s loyalty program? We all know the answer – it is an emphatic YES!
What if we knew that our e-mail box was not going to explode when we joined and offers would come to us in way that makes them useable and specific to who we are? Would that make it easier to join? Of course it would!
Pennsylvania-based Weis Markets said yesterday that it is launching a Three More Ways to Save program that it said will offer discounts on more than 2,000 products in every store department.
The company said that the savings program will have three elements: a “lowest price in the market” guarantee on four weekly items, everyday lower prices on 1,000 items throughout the store, and a 90-day price freeze “on thousands of seasonally relevant items that will remain at these prices through April 13, 2014.”
• The San Diego Union Tribune reports that Baron’s Market, a four-store independent operating in the San Diego market, will open a new store in the town of Alpine, in a location formerly run by Fresh & Easy.
Baron’s has a unique approach – simplifying shopping by offering fewer options, a “curated selection of healthy and affordable foods, all tasted and approved by a committee of managers.”
An opening date has not yet been set.
• The Associated Press has a story reporting that the US Food and Drug Administration (FDA) is in the process of revising nutrition label requirements, saying that “knowledge about nutrition has evolved over the last 20 years, and the labels need to reflect that.”
No word on when the new guidelines might be released.
More than a few years back, I had the very special privilege of being a part of a strategic discussion with Feargal Quinn, the iconic Irish grocery retailer. During that discussion, the question was raised as to how Quinn prioritized his day. Without hesitation he noted that the very first thing he did each morning was to look at how many customers he had the previous day. He would then look at them in the context of last week, last year. For him, it was not about sales but rather answering the question, “Are my customers coming back to shop with us.”
Certainly he eventually looked at sales and other metrics, but his personal prioritization of “Customers” set the tone for how he ran his business, knowing if the customer is returning, sales, profit and even EBITDA will likely follow. They did. The resulting customer-driven culture was contagious. His associates were consistently rated the best and his stores as well.
The learning here is not necessarily we should all run our stores as Feargal did, but rather we should be aware that prioritizing certain success metrics often have unintended consequences. For example, those that dwell on a metric like “gross margin rate” often elevate “hitting a specific number” to such a level of importance they often forget that if it is the “wrong” gross margin number and it negatively impacts sales and customer count, then the selection and prioritization of metrics is flawed. (Unless your plan was to lose sales and customers).
Unfortunately, many retailers allow their finance department determine the metrics and goals for the enterprise. The danger here lies in the context of choosing the right metrics to achieve corporate goals. In my career, I have met two, maybe three finance people who actually understood the importance of the customer and the intangibles that drive shopper loyalty and sales. Most do not. They assume that their set of financial metrics live in a purely linear relationship with each other.
Breaking News! Raising prices and margin rate rarely result in a corresponding rise in sales. None-the-less, many business plans are built upon these flawed assumptions, totally ignoring the impact on shoppers and their wallets when labor reductions or margin rate increases are implemented.
There is a better way and it starts with an acknowledgment of shoppers and the competitive environment. From there, building a financial plan in the context of the specific investments in margin, capital and labor needed to delight shoppers and effectively compete to take market share provides more thoughtful and useful goals.
It’s not a coincidence that companies that think about the customer first are generally growing and healthy while those who begin the planning process with EBITDA and gross margin rate mandates are steadily find themselves measuring declining sales and margins in the ensuing year.
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.
As 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.
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…..