Merchandising and Shelf Management to latch shoppers

Back in the “old days,” store brand product merchandising was easy. A retailer simply placed its store brand widgets to the right of the national brand widgets on the shelf, and called it a day.

But times – and store brand products – have changed. Most food, drug and mass merchandise retailers have made significant improvements to the quality of their own-brand products, and many of them now boast multi-tiered store brand programs. They want shoppers, therefore, to view their own brands as true brands.

Accomplishing that mission is easier said than done, however. After all, retailers lack the deep pockets of the national brands when it comes to marketing. For that reason, merchandising plays an especially critical role today in attracting consumers’ attention – and dollars.

Photo by Vito Palmisano

“With limited ad dollars to support these brands, merchandising may be, in some cases, the only way to differentiate them versus national brands beyond price,” stresses Mike Kowalczyk, vice president and general manager of the In-Store division of Livonia, Mich.-based Valassis, a media and marketing services company.

Andres Siefken, vice president of marketing for Daymon Worldwide, Stamford, Conn., agrees that strong merchandising plays a significant role in store brand growth. Effective merchandising techniques not only help drive transactional sales of store brand products, but also help make such products more accessible in the store – educating consumers and driving incremental trial.

“Data [have] proven that many people developed a better perception of private brand quality during the recession,” Siefken adds, “and that people tend to keep buying private brands after trying them.”

With rising fuel and commodity pricing wreaking havoc on consumers’ budgets, proper merchandising is even more critical than ever, notes Scott Kern, management consultant for the Parker Avery Group, an Atlanta-based boutique strategy and management consulting firm.

“While merchandising is always important, in these times of household financial stress, merchandising of private label is critically important,” he says. “Merchandising must ensure there are price-competitive private label offerings as part of the assortment for the value-conscious shopper, but not so many private label products that they take up too much of the assortment and push out brands that customers are loyal to, thereby driving them to competitors.”

Consider the shopper
Before devising any sort of strategy for a store brand merchandising overhaul, retailers will want to gain a strong understanding of basic shopper behavior within a store.

Photo by Mimi Austin

“Humans deselect before they select,” explains Dorothy Allan, vice president, business intelligence for Plano, Texas-based Crossmark, a sales and marketing services company focused on the CPG industry. “There are 7 billion people on the planet, and all of us sort and class information the same way. It is a very efficient way of processing millions of data points in a short period of time.”

That reality does not amount to an invitation for retailers to clutter up their stores, Allan notes. Instead, they need to be decisive about product placement and create a pattern within the store onto which shoppers can latch. She points to a personal example from her annual holiday store walk.

“The majority of stores were ‘painted’ with red and green displays,” Allan says. “Four months later, the one I still remember more than any other was a gum display. It was light blue and had a great offer and true appetite appeal. It certainly broke through the sea of red and green.”

Consumers also approach store shelves and displays with a mindset that varies according to the category, notes Todd Maute, a partner and senior vice president with CBX, a New York-based branding and design firm. For example, a shopper has a different mindset when he is looking to buy a differentiated product such as laundry detergent than he would have in a commodity-type category such as canned vegetables.

“I think it’s in retailers’ best interest to understand the value and role that private label plays in the category,” he says, “because the role the brand plays in the category will vary, and the role should help shape the merchandising strategy.”

Because geography also plays a part in in-store shopper behavior, retailers should take location into account in store brand merchandising.

“Localization of the merchandising strategy based upon the store demographics seems to provide the most consistent performance results,” says Daniel Galvin, executive consultant for the Parker Avery Group. “Price optimization is also most effective when combined with clear brand demographics at the local level.”

Rethink placement
Whether merchandising store brands, national brands or a combination of both, placement is key, Allan says.

“Perfect pairing or solution sales are one of the eight rules of shopper marketing,” she notes. “Make it easy for the shopper to say ‘yes’ and save time in store. Studies show if you can help the shopper find what they need more quickly, they will use the balance of their time to shop and buy more!”

Photo by Vito Palmisano

How much more? Allan says a shopper with 100 items on her list will walk out of a “shoppable” store with 104 items, citing a retail shopability study from Dr. Ray Burke of Indiana University’s Kelley School of Business in Bloomington, Ind. Therefore, retailers must find a way to engage the shopper and fortify the emotional connection with her. Building trust is all-important here, so the brands that will come out on top are those that are “authentic” and live up to their promise to the consumer.

“While innovation is important, the fundamentals of having the right products in stock – in sight and in the right locations with the right message or offer – are key to driving shopper loyalty,” she emphasizes.

The multi-tiered aspect of many retailers’ store brand programs, too, presents a challenging but exciting merchandising opportunity, Maute believes. Premium products, for example, have no national brand match for comparison purposes. And when niche store brands such as organics are added into the mix, the complexity only increases.

“You can have a three- to four-brand presence in a given category, so merchandising is critically important to communicate that you’ve got depth in the category – you’ve got price if they want price, and you’ve got unique and differentiated if they want unique and differentiated,” he says.

Maute points to New York-based Duane Reade as one retailer that really knows how to merchandise its premium food tier right along with its opening price point items. The retailers’ assortment of premium cookies, for example, gets a prime eye-level space block, with its no-name skyline-themed value brand situated below it. The national brand, meanwhile, gets non-prime placement, meaning Duane Reade gives its own brands the star treatment.

Still, the traditional approach – with store brands placed to the right of the national brands on the shelf – does still make sense for certain products and certain categories, Maute says. For example, it can work with ibuprofen or canned commodities to suggest store brand quality is on par with that of its national brand shelf-mates.

“At the same time, if you’re trying to say you have breadth and depth in the category – and different types of canned fruit items, for example – you might want to block set them together because then you will have a much larger presence in the category versus being checker-boarded throughout the aisle,” he says. “And some of those aisles are quite large.”

When done right, cross-merchandising also can be an effective element in a store brand merchandising strategy.

“The cross-promotion of private label products with complementary national brands is a great way to drive sales for both and provide solutions for shoppers at the same time,” says Jeff Weidauer, vice president of marketing and strategy for Vestcom, a Little Rock, Ark.-based specialist in retail shelf-edge solutions. “One of the more successful implementations we’ve seen is to include a private brand product as a tie-in to every end cap in the store.”

The best strategies, Weidauer adds, strive to build customer confidence in store brand products, treating them as quality brands in their own right instead of simply low-cost alternatives.

Retailers also should support strategic store brand placement with additional marketing, says Rick Davis, CEO of Davaco, a retail services provider headquartered in Dallas. He says point-of-sale and other store signage, in-store coupons, promotions and “seasonal pushes” all are proven methods of moving product and boosting category sales.

Go above and beyond
With all of the current interest in store brand product innovation, retailers also have a huge opportunity to infuse a bit of innovation into the merchandising of such products. Shopper-engaging placement could involve the creation of category “destinations” within the store, Siefken’s favorite innovative strategy. Although he notes that the vast majority of “good retailers” have been busy creating such areas, the best ones pull it off by going beyond just entertainment – they have an “experiential” focus. Moreover, such destinations make a fine showcase for premium and specialty-type private label offerings.

Photo courtesy of CBX

Siefken points to Schnucks’ Culinaria with cooking classes inside the store, Wegmans’ tea bar/center and Carrefour’s wine club/in-store destination as great examples. They make for “retailtainment,” he says, providing a total product and category experience.

The approach also allows shoppers to use all five senses in key categories within the store to drive incremental category sales, Siefken says. Moreover, such creative merchandising really sets one retailer apart from another.

For his part, Maute sees opportunities for retailers to merchandise store brand “solutions” in certain categories, rather than facing off product by product against the national brands.

“I think there’s probably value in assessing if it makes sense to merchandise the ‘baby solution’ versus diaper to diaper, baby oil to baby oil or wipe to wipe,” he says. “And I think you’re seeing more and more private label expand into the perimeter of the store – you can also block set in those categories.”

‘One of the more successful implementations we’ve seen is to include a private brand product as a tie-in to every end cap in the store.’
– Jeff Weidauer, vice president of marketing and strategy, Vestcom

Speaking of category-specific merchandising, Kowalczyk likes what Supervalu has done in the launch and merchandising support of own brand pet offerings.

“Through an innovative positioning and strategy perspective, they have introduced a viable alternative to pet owners with their evoked set of brands,” he says.

And Kowalczyk points to product coupling as the “next level of innovation” on the store brand merchandising front, a practice that once was limited to the national brands.

“The costs for both in-home and in-store coupling strategies and the associated tactics are such that private label products can now reach consumers actually seeking to test, try and hopefully become loyal,” he stresses.

Another innovation gaining traction on the merchandising/marketing side is digital signage, Davis points out. In addition to being an easy-to-change, cost-effective configuration that helps to sell products, the technology can serve multiple functions within the store.

“For example, some retailers are selling advertising space on their digital signage for incremental profits,” he says. “And because content is controlled from a centralized location, retailers are even using their digital signage to facilitate internal training programs to be reviewed before or after store hours.”

Siefken believes integrated programs, not stand-alone programs, are the wave of the future. They are not so easy, however, to pull off.

“My advice is to take a close look at how the world has evolved and how people are now all connected,” he says. “It’s easy in theory for a retailer to create a program around their brands and integrate it with a social media strategy. The problem I’ve seen is in execution.”

He advises retailers to seek outside help from the experts when they need it here.

Photo courtesy of Fresh & Easy Neighborhood Market

“The new integrated programs will not only help drive sales, but store traffic and loyalty,” he adds.

Although grocery retailers generally have been slow to adopt new technology – in part because they realize razor-thin margins in comparison to other retail segments – Galvin expects mobile retail to play a bigger role in grocery’s future.

“In the near- and mid-term, the increase of retail price optimization and the basic blocking and tackling of marketing and merchandising coordination, brand management and supply chain integration are likely to absorb any grocery retailer’s appetite and capacity for change,” he says.

Avoid mistakes
When it comes to store brands, no one merchandising approach will fit every retailer or every category – a combination of different approaches almost always will work best. But the most successful retailers also will be careful to avoid some common merchandising missteps.

The most common of these mistakes is not treating own brands as real brands, Weidauer contends.

‘Creating clear brand architectures that are relevant to the defined target demographics are critical to maximizing private label success.’
– Scott Kern, management consultant, Parker Avery Group

“This results in poor shelf placement, meaning not at eye level or without a sufficient number of facings,” he says. “Retailers should merchandise these products as if they are proud of them.”

Failure to give store brand products their fair share of end cap placement and over-promoting these items on a price-only basis also are mistakes to avoid, Weidauer says. Ongoing price promotions not only weaken the value proposition for the shopper, but also change the perception from “quality alternative” to “cheap substitute,” he contends.

Compared to retail “leaders,” retail “followers” tend to have longer planning and strategy cycles, Kern notes – 12 months or more. What’s more, they typically fail to coordinate marketing and merchandising to the extent of the leaders.

Yet another common retailer mistake, Kowalczyk says, is not using all the tools available to them in store.

“While TV, magazine and traditional advertising may not be in the budget for most private label brands, using call-to-action tactics such as signage, at-shelf couponing and advertising certainly is within reason and has been proven to grow these brands as much, if not more so, than other forms of support.”

Too often, retailers do not take consumer demographics into the product development plan, Kern says, which ultimately has a negative impact on merchandising. By offering a single brand for all store brand products, he believes retailers send “muddy messages” to shoppers and typically reap less-than-optimal results.

“Creating clear brand architectures that are relevant to the defined target demographics are critical to maximizing private label success,” he says. “Many grocers tend to focus on low-end private label products, and there remains an opportunity for premium private label offerings in such areas as organics. Multiple brands focused on targeted brand demographics enable clearer messaging and can be price-optimized to compete with national market equivalents and value-priced competitors.”

Finally, Maute believes many retailers underestimate the relationship between product design and merchandising. The two are so connected that his company attempts to get a handle on a retailer’s merchandising strategy before designing a new store brand package or packaging line.

“We’re working with one customer that is very active in the promotion of frozen commodities, and products tend to move a lot because of promotions,” he says. “We actually changed the design strategy to get more continuity across colors and items so that even if the items do move around a lot, they still get a good brand presence. If we didn’t understand that merchandising strategy, we probably would have approached color more on product than on brand.”

Pantaloon sees future in Value Retail

IN A move that could pave the way for new investors to step in, Pantaloon Retail will spin off two of its biggest revenue grossers — Big Bazaar and Food Bazaar — into a new entity, Future Value Retail. The two formats constitute over 55% of the turnover of the country’s biggest retailer. Food Bazaar president Sadashiv Nayak has taken charge of both Big Bazaar and Food Bazaar while Rajan Malhotra, president of Big Bazaar, has moved to the Future Group as president, retail strategy.

When contacted, Future Group CEO Kishore Biyani said: “We have been evaluating the option of creating a new entity for our value retailing businesses.” Last year, Pantaloon Retail had secured board approvals for hiving off the businesses into independent subsidiaries that could be listed at a later date.

Under the proposal, Pantaloon Retail will be a holding company. Pantaloon officials familiar with the development said the group is examining a structure that would eventually enable it to strike a JV with a global retailer. Pantaloon Retail has been in talks with Carrefour, the world’s second-largest French supermarket group, for a JV in India.

Under the scheme of things, Future Value Retail would serve as a major supply-chain entity for all Future Group store formats and help the company prune costs, a group official said. Technically, the sourcing and back-end of the store formats would be one while the front ends would continue to operate as separate entities. Currently, all Food Bazaar outlets, comprising its food and grocery supermarket business, are located within Big Bazaar formats.

While Big Bazaar is the group’s hypermarket business and has 109 stores, Food Bazaar is a supermarket chain that has 152 stores with most of them housed adjacent to Big Bazaar. Food Bazaar’s business model resembles the value model of global retailer Wal-Mart. According to Nielsen data, Food Bazaar’s share in the FMCG space in terms of modern trade is about 28%. Pantaloon Retail is estimated to report sales of Rs 10,000 crore for 2008-09 while the combined revenues of Big Bazaar and Food Bazaar are estimated to touch Rs 5,000 crore.

A proposed joint venture with a foreign retailer would enable the Future Group access sizeable dollar funds needed to expand its business. A foreign partner will also help the group bring in more efficiency in sourcing and logistics, helping it drive down prices and boost margins. Besides Big Bazaar, the Future Group runs Food Bazaar, KB’s Fair Price shops, Pantaloons, Central, Home Town, eZone and Aadhaar. The Pantaloon Retail stock closed at Rs 130.15, up 5.46%, on the BSE on Monday.

In a challenging consumer environment, bargain hunters are flocking to modern value-retail formats like Big Bazaar, Food Bazaar, D’Mart and More, which have been coming up with discount offers to attract customers. This reflects a global trend, wherein value-retail formats are growing despite the overall slowdown in the economy. Last month, US-based Wal-Mart reported a strong 5.1% increase in same-store sales (excluding gasoline sales) in the US, even though lifestyle chains, like Target, Macy’s and Abercrombie & Fitch, suffered a drop in sales.


Pantaloon may use the new format to strike JV with France’s Carrefour
A proposed JV would bring in the required funds for Future Group to scale up its business Presence of a foreign partner, in all likelihood, will have a positive impact on the efficiency level, which would bring down prices and help margins

Marks & Spencer Launches International Delivery Service

LONDON – Britain’s top clothing retailer, Marks & Spencer announces the launch of its international delivery service to France, Germany, Spain, the United States, Canada, Australia and New Zealand from its shopping website at

The group, which also sells food and homewares, said customers would be able to order clothes, lingerie, as well as selected beauty and home accessories from its website and send them to friends and family abroad in time for Christmas. Continue reading

Co-op to give mini-bank utility inside its convenience stores

The Co-operative is to put banking operations inside its convenience stores to encourage customers to use more services within the sprawling mutual group.

The move follows similar strategies by Tesco, Marks & Spencer and J Sainsbury. It marks a new campaign by the Co-op to compete with mainstream competition by pushing its ethical message.

The Co-op began trials six weeks ago in stores in Nottingham, Brighton and Hove. Of its 2,200 food stores, it believes it could open mini-banks in the 250 biggest.

The Co-op is investing £1m in the project, part of its strategy to double market share in financial services over five years. David Anderson, chief executive of Co-operative Financial Services since June 2005, said there was a “huge opportunity” as “there is very little cross-holding between products”.

On average customers have 1.3 financial products. “We think we can push that to over two, which would mean we can almost double our customer base without finding any new customers.”

The Co-op is also aiming to boost cross-selling between the group, which includes pharmacy, funeral arrangement, travel and legal advice services. The organisation has three million members, and a third of those have no Co-op financial services products.

The roll-out will vary from some stores where there is a machine to withdraw cash and deposit cheques to others where there will be staff to advise on products including mortgages and investments.

Having more banking branches should support the Co-op’s phone and internet bank, Smile, as customers like to have the option of a physical branch even if they carry out most banking transactions electronically, Mr Anderson said.

The Co-op also believes it has a competitive advantage because of its ethical investment credentials. “One-third of our profits are from customers who say they joined for our ethical policy,” he said.

Formalized Services in Retail Stores

Retail stores have always given away advice along with selling products. Now some stores are turning helpful services into a profit center. Medical services are leading this move into retail stores. Medical clinics are popping up in pharmacies across the nation, and thousands of new clinics are planned to open in stores over the next couple years. No appointment is necessary to get quick, cheap fixed-price treatment for minor illnesses. This is a wonderful development in a nation with runaway health care costs and where fewer and fewer people even have a family doctor. The convenience will obviously draw lots of customers into the stores. Wal-Mart is even testing clinics in some stores.

Are there other services that might be popular in a fixed-price convenient retail setting?

How about “instant handy-man” services at the hardware store? The handy-man could have a small workshop for repairing or assembling stuff that people bring in. Or the handy-man could follow you home to install a ceiling fan or wire a new outlet “while you wait”. Garden centers could offer the same for tree-planting. Computer repair clinics would be great too, but computers are designed to be disposable these days and a small part is often too expensive to justify repair. Apple could set itself apart by designing its computers for ease of repair and then offer the services while-you-wait in the Apple brand stores.

Similar services have always been a part of other businesses. Jewelry stores offer repairs and ear-piercing. Photo development kiosks were a big deal before the coming of digital cameras (it’s interesting that they were located in drug stores and discount retailers, just like the new clinics). Home centers offer kitchen planning and installation services.

Repair and design services could be added to many retail businesses. You might offer the services already — to make it a bigger part of your business you’ll have to increase awareness. Set aside an area of your store for the service and give it prominent signage. Then include it in your advertising and watch your traffic grow.

Visual merchandising (VM): a makeover or a massacre?

VM is an art, science and business of presenting merchandise in a state of the art retail environment. It is a very powerful tool that can be effectively used to program, channel, and lure customer into impulse buying in the world of cut-throat competition. It is a silent communicator and a bridge of a retailer to connect a customer reinforcing its vision, brand and seasonal themes. And when used successfully, it creates a feel good shopping experience. When I say connecting a customer, it is a very important phrase. It has to be understood that VM should be on the same page as a customer. Overdoing it, will scare customers away with a mind-set it is out of their league, poor show will keep them away for future visits. Having said that since India is riding on aspirations, VM should also implicitly induce raising the bar feel. In my findings, I have seen poor VM efforts across all organized retailers barring a couple of instances. Looking at quality of overall scorecard of VM, you can almost sense old and stale sab chalata hai attitude. In my opinion it is a very important key result area (KRA) to treat like a step-child. Before discussing VM further, let me touch briefly on its inseparable triplets: store design, layouts; space optimization and planogramming.

Store design and layout: A good store design; interior and exterior, is optimized on types of merchandise, store format, available area, location, demographics, estimated traffic (footfalls), scalability factor, customer circulation plan, browser to buyer ratio and other broad based factors like retail brand and vision,. There are quite a few standard store layouts available labeled according to its customer circulation in aisles in a store.

Popular once are radiator, race-track, grid, herringbone, spine and free flow. Wal-Mart layout is a rough herring bone, while Target USA uses race track. For grocery supermarkets, radiator type is very popular. Department store usually uses grid type. High-end luxury retail usually have free-flow layout. All of these layouts have advantages and disadvantages which need to be analyzed while selecting an appropriate one. Unlike western countries, India has very complicated neighborhood customer profile. Along with that, demographic and population shifts are high. So stores have to be designed to facilitate frequent planogram refreshments and high scalability. So I believe combination of layouts with a good use of displays, end caps, frames and other portable modes of presenting a product will be effective. For presenting a product, there are number of ways; shelving, hanging, stacking, pegging and dumping. An exterior store design need to work very closely with facility planning for parking space, smooth logistics to receive goods and entrance walkway.

Space planning and optimization: A first step towards space planning is analyzing non-selling and selling space. Non-selling space includes aisles, backroom (storage) and functional spaces like customer service office/desk. I have seen aisles in many of the retail stores are not appropriately designed to move customers with baskets and shopping carts/trolleys. Backroom/storage room has to be designed to store maximum and needs an adaptable planogram to facilitate quick restocking. Other important factors in designing non-selling space are product movements, perishable & delicate goods.  For optimal use of selling space proper store layout, storeware (fixtures, displays and merchandise presentation mode) and a planogram is must. Profit per square footage is one of the main KPI of space allocation. Space planning needs to work toward eliminating cold areas of low sells. Space planning should also be modular, so that any subsequent store layout and planogram changes would be easily supported.

Planogramming: A planogram/plan-o-gram/POG/schematics is a pictorial representation of merchandise in as is fashion of retail store. It is a one of the most critical assignment as available selling space is limited and available potential products are always increasing. Just to make planogram decision more interesting, there are following factors, historical sells, demand trends and seasonality, anticipated schedule receipts, category, sub-category, top brands, high margin brands and private labels, product margins, relations with suppliers, financial budget, number of facings and depth, timeline. Attempts have been made to obtain optimized planogram using optimization techniques of operations research. But defining these parameters and assumptions, constraints are almost difficult and henceforth formulation of a planogram problem. There are no standard types of planogram but few retailers do use a loose standard within category to create a planogram. There are various types of planogramming softwares available which are very productive and make the process faster. Along with planogram, communication on how to do set up is very important, as “lost in translation” has been frequent occurrence. A detailed instruction guide; fast and accurate form of communication medium is very important. It is always good to have trained VM representative carry out initial planogram reset and also train couple of store floor staff on how to restock. The communication gap between corporate VM team and store personnel is easy to iron out but have always seen challenging process even in countries like US and UK where organized retail has been around for few decades.

Visual merchandising (VM): As I said earlier, VM is an art, science and business of presenting product in retail store. Since it is no exact science also relies on creative and business aspect, there are no strict rules. It is broadly defined by objectives which are usually result of customer feedbacks, business strategy, retail chain vision, demographics, promotions and other increased sells opportunity in the form of events and festivals. VM is just not about displaying products but also about method of displaying like fixtures, displays. VM helps store and chain create its unique image in the minds of customers. It also makes decision on colors, music, lighting, housekeeping as it is geared toward creating conducive environment for impulse buying. It is geared for converting browsing into buying, so the focus has been made to create one on one interaction between a product and a customer. VM also educates and communicates to customer about why customer should purchase a certain product in subtle fashion. With-out bringing out value addition features of a product; customer will not have that fulfilling shopping experience, so VM could effectively be used to connect with customer in that respect to cement long-term relationship. VM should also be done in centralized manner so that there is an overall harmony and customer could easily transition from one state to other state of mind. This is essential especially in big stores. Another aspect of VM is sourcing and making right storewares (Fixtures, displays, hardware used to present the product); there are so many method of presenting a product. It is very important to use the right method depends upon product, type of business, financial budget. VM when managed productively can be used as the most beneficial and cost saving tool to the retail business. Since VM is a cross pollination of art and business with loosely defined objective, success of VM team lies in practical projects with a manageable scope.

Realistic performances of measures (KPIs) are also needed to attest its success to the organization.

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