Shopper-Centric Model Poised
To Emerge as New Process

By James Tull

The challenge in category management today is transforming a retail organization skewed heavily toward the traditional process to one that is driven more by skills and capabilities in shopper insights.

Retailers can meet this challenge by deploying a shopper-centric model that relies on collaboration with trading partners, says a noted category management expert. But many hurdles remain in the path forward.

“Approximately 70 percent of all purchase decisions are made within the store, and consumers today are much more analytic and information-focused than they have ever been,” says Winston Weber, president of Winston Weber & Associates in Memphis. “For a consumer who is seeking solutions within a store, it is the role of the retailer to construct the information needed to help make the right choice.”

This means using merchandising to spark creative thinking about possible purchase solutions effectively. It is the joint responsibility, he believes, of both retailer and supplier to create an effective shopping experience and assist the shopper in making the right decisions to ensure that the trip is worthwhile.
 
Are retailers not ready for a shopper-centric approach?

“At the executive level, most retailers grasp it, and both the shopper and the shopping experience are strategic priorities,” says Weber. “Unfortunately, there is a misalignment of business processes and performance measures between category management and store operations.”

He believes that current performance measures are geared almost solely towards the financial component, as opposed to being balanced between the financials and the shopper. Such an alignment does not encourage shopper centricity. What’s more, the “art” of merchandising skills having seen serious deterioration lately, even though true shopper centricity demands it.

“Store execution has been, and continues to be, horrible,” Weber says flatly. “Out of stocks stood at 8 or 9 percent in the early ‘90s and is still the same today. Promotion execution
is about 60 percent at best. This is a problem that must be fixed in order to be truly
shopper centric.”

While many executives believe this situation can be fixed by improved processes and measures alone, Weber has built a strong argument to suggest otherwise. His organization is calling for a restructuring of store operations to accommodate a shopper-centric environment.

“We feel that there has to be a merchandising manager at retail, responsible for the total store, who has full responsibility for execution and is measured and paid on that execution,” Weber says. “And if those measures are aligned with the category manager on what has to get done in the store, I guarantee there will be a significant improvement in the quality of store execution on headquarter-approved programs.”

The consultant feels as though this structure breaks down departmental silos and better aligns in-store priorities, as well as puts the store in a better position to adapt to local merchandising opportunities and complimentary product and category merchandising. Another must, he says, os a senior merchandising or “shopper solutions” executive in operations who is focused on shopper solutions and is responsible for merchandise execution.
 
“Considering the major initiatives designed to improve the shopping experience in the category, aisle, department and store, as well as growing supplier investment in shopper insights and shopper marketing, this new position is a must,” argues Weber. “There should also be a shopper insights support function in category management – a function that has a direct interface with a supplier that has a similar function.”

He prefers to avoid the title of “category manager” and is instead calling for a transition back to the role of merchant. If a retailer is truly focused on a solution orientation, he says, the word “category” is too narrow, as complimentary categories and the entire aisle must also be taken into consideration.
 
“A category manager is focused primarily on cost, price, assortment, shelf and promotion, which is basically Efficient Consumer Response. The title of merchant, on the other hand, means that the focus is on cost, price value, solutions and the shopping experience, which translates to shopper loyalty,” he says.
 
In discussing the importance of communication between retailers and suppliers, the consultant says that in a shopper-centric environment, there must be a business development strategy between the both parties. This should cover a two- to three-year time frame if it entails signature and priority categories.
 
“The frequency of meetings really depends on the importance of the supplier to the retailer
and the supplier’s brands to the retailer when you are talking about meetings at senior management levels,” Weber says.  “Of course, there must be strategic alignment between
both parties.”

What about the importance of business reviews and the basic sales call? Weber recalls a major retailer who mentioned that during the last twenty business reviews from suppliers, 75 percent of the time was spent talking about the past.
 
“That is unacceptable.”
 
Weber talks about another retailer who tested and built a repository of knowledge which enables an electronic transfer of the supplier’s presentation to the category manager 48 hours in advance. The category manager then has the presentation in hand, studies it, and prepares his or her questions before the meeting.

“Only 25 percent of that meeting consists of answering questions and seeking clarification on that presentation, and 75 percent is on discussing issues related to driving the business,” Weber points out. “This approach is much more productive and a huge difference in terms of how we are looking at restructuring the collaborative process and the sales call.” 


FEBRUARY 2009

What Are the Benefits of Store-Level Planograms?

By David King

We’ve talked about store-level planograms since the 1980s. But truth be told, the job has just seemed too daunting to do in the past because of technology, limited data and the perception that the amount of time, labor and investment needed to create and execute store level planograms would outweigh the benefits.

So the industry has been stuck on chain and cluster planograms that are “good enough” for
25 years while retail competition has become crushing, channels have blurred, margins have eroded, merchandising effectiveness has slipped, out-of-stocks have risen, market demographics have become more diversified, and consumers have become less loyal and
more selective.

Here is the good news: Today’s technology and data can make store-level planograms work! And retailers and manufacturers are looking past the perception that it’s too hard and are starting to see the vision of many new benefits store-level planograms can deliver.

The bad news is you have to “move the cheese.” Yes, you have to invest time and resources and you have to implement new technology and new processes to make store- level planograms work. But the payback is out there.

Here is a list of fifty benefits of doing store-level planograms: 25 for retailers and 25 for manufacturers. This list is certainly not all inclusive and there are probably fifty more benefits, but it should get your wheels turning.

Retailer Benefits:

1. Identify assortment opportunities by store and neighborhood to increase sales and boost shopper loyalty.
2. Identify space and positioning opportunities by store and neighborhood to increase impulse sales and enhance store image.
3. Balance inventory to movement to increase turns, reduce out-of-stocks and improve Return on Inventory Investment (ROII) in every store.
4. Improve Store Planning – right-size planogram and department sizes and plan adjacencies, location and traffic flow to match sales and demand.
5. Use Spectra Geo Demographic Demand Indexes with store POS to predict expected sales and planogram stores by their potential vs. historical results to optimize sales, reduce out-of-stocks and increase efficiency.
6. Use store-level shelf holding-power to calculate more accurate display orders and plan display types and sizes for promoted items.
7. Use capacity and movement by store to calculate opportunities to fill truckloads and optimize replenishment schedules.
8. Print only the shelf tags and POP needed for each store to cut costs and eliminate tag-sorting and confusion with weekly price changes and at resets.
9. Print shelf tags and POP in planogram order for faster tag changes and promotion signing with less labor, much faster retagging at resets and new store set-ups.
10. Put store level planograms into store planner software and print the shelf tags and POP by planogram in store order (section and aisle sequence) for even faster tag changes and promotion signing with less labor – faster price changes and faster store set-ups and remodels
11. Reduce reset time with store specific reset tools such as image strips, image back tags, and the right planogram documents at every store.
12. Produce accurate fixture orders and product fill orders for new stores and remodels
13. Predict reset time and labor needs more accurately by store.
14. Plan re-stocking time and labor needs more accurately by store.
15. Prove merchandising best practices by testing and comparison of cause and effect in
like stores.
16. Measure planogram performance and execution by stores, by district, by departments, and by merchandisers and vendor partners.
17. Prioritize stores for resets based on estimated reset time and labor, and expected payback.
18. Compare weekly POS data to planograms to find stores where authorized products are
not selling, quantify the lost sales due to out-of-stocks or missing SKUs and fix the outages proactively.
19. Lock in planogram compliance with store-level planogram specific tools such as permanent image strips, pegboard guides and product maintenance racks and fixtures such as those by Campbell’s Soup, McCormick Spices.
20. Forecast replenishment more accurately by product, vendor and department using exact shelf capacity with POS data and order cycles by store.
21. Find stores with over-stocks and proactively cull the excess idle inventory with proposals for reduced facings, item swap-outs, or store-specific promotions.
22. Benchmark and compare space-related KPI’s across stores including in-stocks, sell through, overstocks, sales per facing, sales per linear foot, etc.
23. Attack chainwide performance issues by drilling into the root causes of underperforming stores at the merchandising and execution level, not just the sales numbers.
24. Make every store more competitive in its local area with optimized space, positioning and assortment and better planogram execution.
25. Reinvest savings, additional profit into organization.

Retailer and manufacturer collaboration is still the key to successful planogramming. And it is up to manufacturers to provide more merchandising muscle, know-how and new ideas to help retailers achieve their 25 or more benefits from store-level planograms.

So here are 25 benefits that manufacturers can gain by helping to drive the transition from chain and cluster planograms to store-level planograms:

Manufacturer Benefits:

1. Identify store-specific opportunities for new distribution, based on actual space available in each store, as well as performance and demand forecasting.
2. Identify opportunities to gain more space (facings as well as capacity) based on store-by-store needs.
3. Identify opportunities for better positioning in the stores where it will pay off.
4. Use actual capacity and movement by store to forecast replenishment and production schedules with more accuracy.
5. Anticipate promotional sell-through based on planogram capacity and movement by store and identify which stores need MUST DISPLAY orders based on the actual planogram holding power of each store.
6. Manage In-Stock % (service level) by store based on capacity and movement.
7. Locate stores with Out-of-Stocks by analyzing space management KPIs with POS data, forecast and orders by store.
8. Find stores with over-stocks and proactively cull the excess idle inventory with proposals for reduced facings, item swap-outs, or store-specific promotions.
9. Predict scope of markdowns based on inventory, pricing and sell through by store.
10. Forecast merchandising labor needs for resets and new product cut-ins based on the scope of merchandising moves required in each store.
11. Provide field merchandisers specific work plans by store based on exact distribution, positioning and changes required by store.
12. Prioritize stores for resets and new product cut-ins based on expected time and labor requirements, store performance and expected payback.
13. Evaluate personnel: Compare store performance by field merchandiser or rep
14. Compare weekly POS data to planograms to find stores where authorized products are not selling and estimate the lost sales due to OOS.
15. Save time and money by conducting space and facing audits from accurate store-level planograms instead of expensive, time-consuming physical audits.
16. Save merchandising labor and improve speed to shelf with store specific reset and compliance tools such as Image Strips and Image Tags.
17. Implement store-level planogram specific tools such as Permanent Image Strips, Pegboard Guides and product maintenance racks and fixtures (Campbell’s Soup, McCormick Spices) to lock in planogram compliance for optimized sales over time and to protect your investment
18. Prove merchandising best practices by testing and comparison of cause and effect in
like stores.
19. Store-level planogramming offers more opportunities for collaboration with retailers. More work and more payback means more ways to be involved in the solution instead of watching your competitors control your destiny.
20. Assemble store-level planograms from multiple retailers and sort by neighborhood, channel or market to create Geo Demographic Best Practice Analysis that leads to more effective planning. 
21. Use Spectra Geo Demographic Demand Indexes with store POS to predict expected sales and planogram stores by their potential vs. historical results to optimize sales, reduce Out-Of-Stocks and increase efficiency.
22. Measure and compare the effects of section size, traffic flow and store location on sales.
23. Benchmark and compare space-related KPIs across stores and across retailers including in-stock %, sell through, overstocks, facings, capacity, etc.
24. Improve your understanding of each retailers’ business to devise better overall strategies and tactics for your brands and categories.
25. Reinvest savings, additional profit into organization.

There is something good for everybody with store-level planogramming. The gains in sales and efficiency and proactive problem resolution will more than pay for the additional investment.

Today’s software, data, ultra-fast servers, image-recognition planogram capture tools, 3-Gig internet speed, cell phones with digital cameras and Internet access, laptops with the power of fifty 1990s-era PCs, handheld computers and other technology are ready, willing and able. There is also a new breed of time-saving reset tools and sales-saving planogram compliance tools out there waiting for retailers who are able to implement them in stores.

And there is a new generation of young people brought up using computers who can take on any technical challenge we give them! Plus, there is a legion of dynamic people in the retail trade today who have come of age making technology and advanced analytics work in the space management and category management era. We’ve got the people who can do the job!

Remember, planograms affect the sales and replenishment of every item in every store, every day and they impact every shopper and stocker in every store, every day. What could be more important in retail to get right? 

So, “Make a new plan, Stan!”  Now is the time to make the move from “good enough” to “operational excellence” in planogramming.

David C. King is the author of “Selling With Space Management.” He has 30 years experience in retail merchandising and has worked with many leading retailers, manufacturers and suppliers in the area of space management.

CATEGORY MANAGEMENT

Shopper-Centric Model Poised to Emerge as New Process

What Are the Benefits of Store-Level Planograms?
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