Collaboration Needed to
Enhance Checkout Merchandising
By Al Heller
Retailers can easily miss the lucrative opportunity to sell more high-margin treats, beverages, magazines, gift cards and general merchandise at their store’s checkstands. Worsening the problem of missed sales and profits, relatively few operators execute to build incremental takeaway at self-checkouts, which are becoming more prevalent.
Until retailers figure this out, a question remains: are they costing themselves more in lost earnings than they save on labor?
These retailer shortcomings challenge consumer-packaged goods companies to enhance impulse and brand presence at the checkout, sharpen retail front-end strategies overall and build merchandising processes that sync with shopper activity in this space. Clearly, there’s a lot more to checkout success than paying allowances for the front-end display and placement of publications, general merchandise and trial- and snack-sized products.
Four CPG suppliers – Mars Snackfood U.S., Time Warner Retail Sales & Marketing, the Wm. Wrigley Jr. Co. and The Coca-Cola Company – partnered with the Dechert-Hampe & Company consultancy to deliver the Front-End Focus: Best Practices for Superior Checkout Merchandising study. The research involved retailers that operate more than 5,500 stores and generate 20% of U.S. grocery volume.
Some of the key takeaways:
- Best Practice stores generate 30% more checkout sales than medium performers and 66% more than bottom performers.
- Overall, 14.9% of shoppers buy an incremental item at the checkout. This includes 13.6% in express lanes, 15.7% in regular lanes, and 12.7% in self-scan lanes.
- Shoppers tend not to switch lanes or shop across lanes.
- Assort and merchandise to suit consumer demand rather than to maximize allowances.
- Forty percent of all checkout purchases are multiple items, such as soda and a candy bar.
“We encourage retailers to cross-merchandise, mostly by suggestive signage such as photos of people
enjoying the items together. Occasion-based marketing such as movie night at home can work as well at checkout as in the aisle with assembled products,” Raymond D. Jones, managing director, Dechert-Hampe, told CPGmatters.com in an interview.
“Opportunities to improve checkout performance are huge. We estimate that for any basket, the incremental sales of selling one more item is about eight percent,” added Jones. “News developments drive checkout opportunities. When the avian flu was a threat, hand sanitizers were hot. And technology advances obsolete some items. Remember disposable cameras.”
William Romollino III, vice president-shopper insights, Time Warner Retail Sales & Marketing, Parsippany, N.J., observed that “retailers have acted on the research by integrating the findings into 2010-2011 plans and new merchandising solutions,” partly, he believes, because the study had the perspective of multiple categories.
Jones proposed that CPG companies assess specific brands and items for checkout suitability: Do they have high household penetration? Are they bought frequently? Are they impulse, or on a shopping list? (Hint: impulse is better.)
“Don’t just pay retailers to be at the checkout. If an item doesn’t suit, it won’t work and you’ll waste money,” he said. “Also project whether checkout will generate enough incremental sales to justify paying the allowances. And don’t place product at the front-end if it will cannibalize inline sales.”
He added that CPG companies can tailor item packaging to make products checkstand-ready; for instance, purse sizes of lip balm or mascara, trial sizes of pain relievers and cold remedies, and 6-oz packages of nuts.
An outside expert contacted for this story, Dick Glassman, president, REG Publisher Services, Syosset, N.Y., a newsstand circulation consultant, said “magazines produce high margins, turns and ROI at the checkout. People continue to buy preferred titles for several reasons, even in the recession. They’re an easy escape. From titles like Good Housekeeping and Family Circle, people clip coupons that help discount their next shopping trip. From cooking magazines, they try $10 meals that can feed four. And from fitness and health magazines, people can find exercises to do at home. Magazines fit lifestyle needs and add new dimensions to food sales.”
Glassman was an early proponent of cross-merchandising magazines with food brands. He ran programs inline between Shape and Kellogg’s cereals, parenting titles and baby food, and fitness publications near power bars and vitamins.
Jones sees magazines as good cross-merchandising partners at the checkout through the use of special signs and cross-promotions.
Both Jones and Glassman agreed that self-checkouts require a longer lead-in approach for people to peruse magazines and CPG branded items, because people no longer shop once they begin to execute their transactions. “People go through a regular checkout in three stages – waiting, in queue placing items on the belt, and transaction. Most impulse buys occur in stages one and two. Self-checkout is just two stages, so you have to catch people further back,” said Jones.
Glassman suggested that CPGs “collaborate to pull together the funding and design of a better approach and take that to retailers. Let large magazine distributors like CMG or DSI quarterback the retail pitch, which could include a cooler with wires to hold publications and fixtures to hold CPG products – to define an upcoming self-checkout lane and make the environment conducive to shopping.”
Al Heller is co-author, Consumer-Centric Category Management (Nielsen/Wiley) and president, Distinct Communications, LLC.
AUGUST 2010
Supervalu Boosts Brands by Re-engineering Center Store
By Dale Buss
When it came to the crucial but outmoded center of their stores, Supervalu executives realized that shoppers were drowning in merchandising messages, price promotions and other communications – hurting the company’s CPG suppliers as well as the chain’s own performance.
So the Minneapolis-based owner of supermarket megabrands is in the midst of a radical simplification of its in-store marketing strategy and streamlining of its execution in a new initiative with major manufacturer-partners such as General Mills and Nestle, and marketing-services giant Valassis.
Supervalu has begun to roll out the program to all of its banners nationally, which include Jewel-Osco, Albertsons, Cub Foods, Shoppers, Farm Fresh, Shop ‘n Save, Hornbachers, Lucky, Shaw’s Star, Acme, Bristol Farms, W. Newell, and Save-a-lot.
“The purpose is to give our CPG partners an opportunity still to communicate with customers at the shelf, but to do so in ways that serve their needs – and those of customers – the best,” Shawne Murphy Johnson, Supervalu’s group vice president of brand strategy and marketing, told CPGmatters.
“And we wanted to have less ‘noise’ in the store, which makes the overall shopping experience better for the customer.”
As a result, brand marketers – also including Procter & Gamble and Mars – are working with Supervalu banners as well as Valassis to rationalize and reduce signage in the center aisles, emphasize promotional pricing at the shelf, heighten the effectiveness of brand messaging at point of purchase, and provide consumers with more relevant and useful information about the products and how they can be used.
“It was driven by Supervalu and the CPG community, and we just kept coming up with ideas to try to deliver what they liked,” said Mike Kowalczyk, in-store general manager of Livonia, Mich.-based Valassis. Brand marketers “have been encouraging [Valassis] to look at this space for a long time. It was clear they weren’t particularly happy. They couldn’t necessarily describe what they wanted, but they were clear about what they didn’t want.”
Supervalu spearheaded what became an exhaustive overhaul because it shared a conviction with the rest of the industry that the supermarket center store had become an under-optimized arena, little changed over decades even as retail perimeters had become dynamically adaptive to shoppers’ changing needs – and even exciting.
“We would talk to customers and they would tell us that they didn’t think the center store was clean,” explained Murphy Johnson. “Then when we dug into what they meant by that, it wasn’t what you might think; it wasn’t things like, ‘The floor didn’t look swept.’ They were actually commenting about the amount of messaging in the center store and telling us it was way too much, or just confusing. They were feeling ‘over-spoken to.’”
Drilling down, Supervalu found one of the key problems was that there was an excess of in-store media and that shoppers considered it so “loud” that it was “interrupting the store experience for them,” Murphy Johnson said. “Instead of helping them, it got in the way and distracted them from the job at hand. It just got to be overkill, the way they saw it.”
Interestingly, CPG companies largely professed to be unaware of this major impingement to the effectiveness of their in-store marketing. Both manufacturers and Supervalu had become preoccupied with “increasing cleverness” and mistakenly “feeling that what they needed to do was get more and more breakthrough with shoppers,” the Supervalu executive said. “But it got to be more interruptive than beneficial.”
So Supervalu consulted with CPG companies and Valassis in coming up with a radical new approach to in-store marketing in the center store. Several manufacturers helped by allowing Supervalu to test some of its emerging concepts in the vendors’ “virtual stores” to see how they might appeal to consumers.
Some of Supervalu’s conclusions were as simple as they were profound. Shoppers had gotten frustrated by increasingly dimensional brand promotions that were attached to and hanging from shelves and that actually made it more difficult for them to access the products themselves. And neither the CPG companies nor the stores were doing themselves any favors with shoppers with the physical performance of some in-store media.
“Floor graphics were a problem because the integrity of the graphic didn’t always hold up,” Murphy Johnson said. “People are driving carts over them so they start to look dirty. No one was happy with how the image actually looked at the end of the cycle, and it was impacting how shoppers felt.”
How to address the disturbing and, in some ways, startling conclusions Supervalu made? Overall, Murphy Johnson said, “instead of 15 or 16 different [in-store marketing] vehicles, we’re down to just five or six. Instead of four different sizes of things, we have one size. And we’re not putting messaging on the floor anymore.”
End-aisle displays are one area benefiting from major changes, Murphy Johnson said.
Previously, signs at Supervalu banners displayed the product brand in larger type than the promotional price. “That made sense if you evaluated the sign in isolation,” she explained. “But when you consider the sign when it’s sitting against a four-by-eight-feet display of the product, the price probably needed to be bigger than the brand.” So the change was made.
In helping Supervalu implement its vision across the center store, Valassis’s Kowalczyk said one of the first things was to determine what sort of quantity and volume of in-store messaging, in general, was actually helpful to shoppers and didn’t overwhelm them.
“It wasn’t to say that just one thing was horrible, like shelf danglers, but that there were just too many things in general,” he said. “So the first thing we determined was in certain kinds of stores, with certain square footages, what were the right quantities of placements. Every store type and size is different.”
Once committed to de-populating and de-cluttering in-store marketing, Supervalu worked with Valassis to come up with three basic types of streamlining and accompanying improvements in message efficacy.
The first involved signage. Instead of one or two or even three dozen different types and sizes of signage in the center store, Supervalu’s new plan has just two essential iterations. One of them is a four-by-six-inch sign at shelf’s edge that communicates the brand, product attributes and key values. The second type trumpets price. And all the new signs are made of vinyl substrate instead of paper, which became dog-eared.
The second manifestation of Supervalu’s streamlining came in how it handles point-of-sale coupons . This was especially important in the current economic environment because couponing continues to increase in popularity with financially strapped American consumers; use of on-shelf coupons rose 10% in the first half compared with a year ago nationwide, Kowalczyk said, and usage of on-package coupons rose 30%.
Valassis and Supervalu contrived a new on-shelf coupon dispenser, just a few inches square, to attack this challenge. It allows CPG brands to use miniature signage on the dispenser that shoppers see from three sides. And the hard-plastic fixtures have clean and unobtrusive lines.
Mars, for example, “loves this fixture because it really takes what they’re trying to do with their packaging and brings it out to the consumer by putting the same image that’s on the packaging on the box. It’s pure branding,” Kowalczyk said.
Third, Valassis and Supervalu overhauled how they dispense “consumer information” such as recipe sheets and nutritional brochures. CPG brands including Bertolli and McCormick were interested in effectively communicating with shoppers how they could make meals using olive oil and spices, for example. But this imparted too
much information for a mere sign, and putting a stack of flyers inside the supermarket door wasn’t going to
cut it either.
So Valassis came up with a standardized, cardboard “Take One” dispenser, with a changeable header, that it calls InfoPop, which can dispense recipe sheets, coupons, sweepstakes entries, mail-in rebate forms and all variety of important brand information to shoppers. Brands have been queuing up. Mission Tortillas, for instance, came up with a four-by-eight-inch, fold-out sheet that included a mean recipe for peanut-butter-and-banana tortillas and other delights.
Already, CPG brands are embracing Supervalu’s new approach and helping improve it. Nestle, for instance, had some specific advice about the size and shape of shelf signs, Kowalczyk said, “and we think based on their research, it’ll be a better sign.”
Overall, Murphy Johnson said, “our CPG partners are supportive of trying to do things to improve the in-store shopping experience for customers.”
Market Watch
Retailers Have Blueprint to Leverage Mobile Technology
By Lynne Cooke
Mobile phones have changed the everyday lives of consumers who rely on texting , CPG and web browsing daily. So it’s not surprising that nearly three of four retailers are exploring mobile strategies, according to a recent survey by Shop.org. What is surprising is that more than six of ten (62%) of retailers have not planned a mobile strategy or are just starting to do so.
Clearly, many retailers are not prepared to leverage the new channel that has the potential to revolutionize shopping.
To change that, the National Retail Federation (NRF) has unveiled the first version of its Mobile Retailing Blueprint as part of its Mobile Retail Initiative. The blueprint is a virtual roadmap for retailers to assist in the use of mobile to enhance their marketing, ecommerce and store operations with a special section on implementation planning and technology.
The blueprint also explains multiple secure mobile payment processes that can provide customer convenience and lower processing costs. The blueprint is designed to help retailers answer the following questions:
- How can mobile retailing improve my business?
- What technologies and standards apply in the mobile field?
- What implementation options should be considered?
- What capabilities do mobile phones currently offer?
- What types of mobile applications help consumers shop?
- What are the choices for mobile payment?
- What types of mobile applications help associates be more efficient?
A complimentary copy of the 176-page blueprint is available through the Mobile Retail Initiative’s web site. (www.nrf.com/mobile)
“The Mobile Retailing Blueprint is the definitive document to help retailers adopt a mobile strategy that makes sense for their organization,” said NRF President and CEO Matt Shay. “As smartphones and other mobile devices become more technologically advanced, so, too, will retailers with the help of this collaborative research. We believe it will serve as a window for industry standards that will guide retailers’ adoption of mobile for years
to come.”
With the first version of the blueprint available to the industry, the Mobile Retail Initiative will launch a series of initiatives to continue its mission to help the industry adopt global standards in mobile commerce. These initiatives include special events for knowledge sharing, releasing the second version of the blueprint to further define best practices and standards to ease implementation of mobile based on reader feedback, and producing new research to help the retail industry understand the role of mobile commerce plays in the global economy.
The National Retail Federation’s Mobile Retail Initiative (MRI) brings together the collaborative strengths of NRF's IT standards division, ARTS; digital division, Shop.org; marketing division, RAMA and NRF's CIO Council. The Initiative will lead the industry in the development and dissemination of mobile-related best practices, standards to ensure global acceptance, original research, and educational events for the retail industry as it relates to m-commerce, marketing, operations and alternative payment methods.
The mobile blueprint was developed by NRF's Mobile Blueprint Committee, chaired by Richard Mader, Executive Director of ARTS; with Vice Chairs from Oracle, Smart Card Alliance and CellPoint Mobile. More than 30 companies representing a diverse group of retailers, service providers, and leading mobile association partners contributed to the blueprint.
Interactive Future of Food
Shoppers will be looking for their smartphones to help them make smart decisions about food in the store, according to a study by Latitude called ‘The Interactive Future of Food.”
The study collected and analyzed data from about 100 people who talked about needing more information while grocery shopping. The goal of the study was to learn how technology could be applied in innovative ways to help people access food information at the moment of purchase, to assist good decision-making, and create a more intelligent store experience.
More than half (56%) of study participants expressed a need for more product information such as health, food origins, organic vs. non-organic, farming practices, food safety or ingredient details, while 31% requested information about location in store, price and inventory status. More than four of ten (43%) indicated a preference for smartphones while shopping to help then obtain information.
Vending Machines for Cosmetics?
Coinstar, the maker of DVD-vending and coin-counting machines installed at retail, may have its eye on developing vending machines for beauty and cosmetics brands.
Rumors in the industry indicate that the company is developing partnerships with beauty and cosmetics firms. The company needs to diversity from its Redbox Automated Retail movie-rental kiosks and its mature coin-counting business.
Mobile Phone Kiosks in Target
To enhance its presence in the mobile phone business, RadioShack will install “Bullseye Mobile” kiosks in most Target stores nationally by the middle of 2011.
Analysts say the electronics retailer is focusing on mobile as part of a wide initiative to revitalize its brand. It sells Apple iPhones and operates kiosks in Walmart’s Sam’s Club.
