Why In-Store Implementation Is the Next Frontier

I CALL IT the Paradox of Scale: Grocery chains keep getting bigger, but industry profit performance remains stagnant.

It’s been a doggedly persistent trend. Between 1992 and 2009, the top 20 U.S. grocery retailers increased their cumulative market share from 39% to 64%, according to the U.S. Economic Research Service. Meanwhile from 1996 to 2010, industry net profits have hovered consistently around 1% of sales, according to the Food Marketing Institute.

These facts seem to run counter to intuition. After all, bigger chains are supposed to have top-of-the-line executive talent, fine-tuned supply chains, advanced IT systems, greater buying clout and economies of scale. A deeper look reveals the paradox: Bigger chains also suffer from intensified store operational complexity, larger assortments and poorer visibility from the home office.

Bottom line – as chains expand, store performance management gets much, much harder. This begins to explain why out-of-stocks continue to run at 8.2%, unchanged in 15 years, yet 78% of items sell fewer than 3 units per week. It begins to explain why as many as half of all authorized in-store display promotions are never erected or erected late. It begins to explain why most retailers have no effective process in place to ensure or even monitor everyday planogram compliance.

A Rich Prize

Where some may find darkness and frustration in these statistics, others identify a golden opportunity. The In-Store Implementation Sharegroup identified tens of billions of dollars at stake – a rich prize indeed. Bold retailers and marketers who commit to improve retail compliance practices in the next few years should gain a distinct performance advantage over their less nimble competitors.

In-Store Implementation is not an isolated solution; it’s a multi-threaded initiative that incorporates improved in-store sensing and measurement; better inputs into planning processes; a performance-oriented culture; and alignment of trading partner resources. Many of the enabling practices and tools already exist, ad hoc. Still needed is an organizing principle that can tie them together into an effective set of best practices for the industry.

Workshop at LEAD

In just two weeks, a select group of industry thought leaders will come together to explore how to make this ambitious agenda a beneficial reality. They will be participating in a pre-conference workshop at the LEAD Marketing Conference in Rosemont, IL, on Sept. 19.

The workshop is presented by the In-Store Implementation Network, a membership organization with an educational mission centered on advancing awareness and knowledge of ISI practices. The group boasts more than 1,400 practitioner members in 28 countries who share a common goal – the establishment of a culture of performance at retail that makes stores work better, shoppers more successful and businesses more profitable.

Thanks to the generous sponsorship support of our friends at Gladson, ISI Network has assembled an all-star faculty to address key facets of the opportunity. The workshop format is intended to ensure that participants will leave the half-day event with a fresh perspective and practical ideas that may be applied immediately to their own ISI business challenges. As Executive Director of the ISI Network, I will be the lead facilitator of this workshop.

A few seats remain available; admission is complimentary to retail and CPG practitioners. I look forward to greeting many of you in Rosemont!

To register for the LEAD Marketing Conference, click here.

For a detailed agenda about the ISI Pre-Conference Workshop, click here.

© Copyright 2011 James Tenser

Social Media? – Nah, It’s Personal

New way to a shopper’s heart?

ALL THE RECENT chatter about “social media for business” is driving me around the bend.

For some time now, I’ve been searching for a terminology that would rescue us from imprecision and allow a meaningful business conversation to take place around the impact of smart phones within the retail environment.

At the National Retail Federation Conference and Expo two weeks ago in New York, the presentations and pitches frequently turned to the impact of social and mobile media, and I kept cringing every time I heard it. Here’s why it bugs me so much:

When new business phenomena have arisen in retail marketing, sloppy terminology frequently led to poor initial understanding of the business opportunity. Often it is due to a choice of words laden with confusing prior connotationor the absence of a suitable term.

We sometimes used “consumer” and “shopper” interchangeably; now we distinguish between those two customer roles. We spoke of “manufacturers” or “vendors” before the term “brand marketer” was introduced in the mid-90s. A deficient thought vocabulary renders some concepts virtually unthinkable.

In Your Facebook
Today, most of the marketers and solution vendors obsessed with “social media” are in fact formulating new ways of delivering one-on-one messages to targeted shoppers and attempting to influence what they do and say on social networking sites. It’s undeniable that one particular application Facebook happens to be used heavily for social play and sharing of consumer lore. Marketers are dazzled by the massive “audience” it has accumulated and are salivating to exploit the opportunity. How fortunate for Facebook investors.

But setting up corporate pages on Facebook or Twitter does not a strategy make. Indeed the existence of these pages implies a broadcast mentality from us to them. Despite the open visibility of customer comments on the wall, there seems to be relatively little interaction between consumers on these pages. Old comments get quickly buried behind newer ones, and only our social media hired guns bother to track and analyze them – in reports calculated to justify their existence.

Regardless of the channel, shopping is primarily about each individual’s personal success get the best deals; satisfy my needs most efficiently; manage my budget; impress my friends; etc. When a shopper turns to his or her personal mobile device to access tools to enhance in-store success, it’s a very personal action motivated by very understandable self-interest.

Getting Personal
I submit that when it comes to tapping shoppers via those pocket two-way radiowave computers we call smartphones, there’s very little “social” about it. It’s not social – it’s personal.

If we conceive of the mobile device as a personalized channel for interaction between retailers or brands with individual shoppers or consumers, then we would do well to set aside the imprecise term “social media” and start talking shop. These new media are personal media. Much of what happens on them may be social in nature, but everything that happens on them is personal.

The personal mobile device is taking shape as a personal nexus, where online, in-store, social, and commercial communications converge in unique combinations tailored by and for each individual. Each of us shifts roles at will, according to our objectives of the moment – searcher, receiver, reporter, sender, aggregator, re-transmitter, gatekeeper, purchaser, advisor.

Businesses that hope to play effectively in this incredibly fluid and fast-changing media environment had best get their minds around the personal nature of the shopper experience using mobile devices. When we discuss our strategy for personal media, the marketing mindset shifts in what I think is a constructive direction. Better decisions and practices must surely follow.

As for me, I have nothing against online friendships; but when it comes to business you may count me as anti-social. My reasons? Well, they’re personal.

© Copyright 2011 James Tenser

What Constitutes Compliance?

Is this shelf set correct?

IN MY ROLE as Director of the In-Store Implementation Network, the challenge of merchandising compliance is frequently addressed, from a variety of perspectives – both theoretical and solution-oriented.

Several recent conversations have centered on the question of measuring the accuracy of a shelf set; that is, its degree of compliance with the schematic or planogram. This is actually a non-trivial matter when seeking a practical solution. Since a planogram is a complex tool covering many details (items, facings, positioning, quantities, etc.) determining what data to measure, how often and to what end(s) requires a thoughtful process.

Our valued colleague Mike Spindler, CEO of ShelfSnap has championed this discussion in several items posted on the ISI Network LinkedIn Group page. He is one of the better thinkers we have on this topic, and his company offers a promising tool for digitally comparing an image of an actual shelf set with its associated planogram.

How Close is Close Enough?
If the comparison is “perfect” – that is, all item are present in their proper locations and quantities – we can safely declare that a shelf set is compliant with the plan. This is, however, a rare occurrence which probably exists only for a few minutes after the re-set work is correctly completed. The moment shoppers get to removing items into their baskets, perfect compliance begins to deteriorate. Darn those pesky shoppers!

As I like to say, the “half-life” of a typical shelf set is less time than it takes the re-set crew to leave the building. A slight exaggeration, maybe, but you get the point.

So when do retailers declare a merchandise set to be “out of compliance”? When 9% of items are out of stock (the industry average in grocery)? When 15% of items are present but mis-located? When the number of facings is off on more than 25% of items? Alternatively, what criteria define “in compliance”? All items present and accounted for? 90% of items in the correct place? 99% in-stock? How close is close enough?

Evidently, the ways a planogram can go wrong are numerous but not always numerical. More significantly, they are not easily recognized by human inspection. That is, compliance issues can be hard to spot without a scorecard in hand – and even then it takes concentration and focus and time. 

Compliance Shorthand

What if we could define a short-hand method instead – perhaps three to six yes/no metrics that could be taken as a proxy for overall compliance? ISI Network member Larry Dorr, a respected expert on retail merchandising and founder of Jaguar Retail Consulting, described an approach that is worthy of discussion.

He proposes measuring the condition of approximately five or six “destination” items for each category or major subcategory. These are often the highest-velocity items in their respective sections. “Measure the items adjacent to those items,” he says. “If those five and their adjacencies are in correct shape, then the set is probably in good shape overall. If two of the five items are off, you may assume a compliance problem.”

This approach offers economy, speed and ease of implementation. A limitation, he concedes, it that this doesn’t provide a measure of item distribution. While the five-item rule may deliver a directionally correct conclusion about planogram compliance, it may not help very much with gauging the performance of non-destination items.

Also worth noting is how the criteria for compliance may vary across different product categories and classes of trade. Our example above is drawn from a grocery/mass perspective. In specialty apparel and department stores, where color, size and style factor in, the definition and metrics for compliance will differ. Consumer electronics retailers will face their own compliance issues. 

Storecard Metrics Needed

So let’s grant that merchandising compliance is a slippery quantity using presently available methods. That doesn’t absolve practitioners from the requirement that they track and measure merchandising performance. In fact innovation in Shopper Marketing, segmentation and automated planograms only intensify the need.

We need creative thinking and some consensus on what constitutes compliance success; on what to measure, how and how often. The goal is to define some compliance best practices and incorporate the metrics into in-store scorecards – what I like to call storecards – that support and enable those practices.

Which leads me to offer this challenge: Use the comment form on this post or on the ISI LinkedIn Group to help us define: What constitutes merchandising compliance? How do you/should we measure it? What are the thresholds? How good is good? What’s the cost of good?

This could be the first step along the road to In-Store Implementation Best Practices. I look forward to reading your thoughts.

© Copyright 2010 James Tenser

Next Era for In-Store Implementation

Expanded Educational Role, Case Study Effort
The In-Store Implementation Sharegroup is expanding membership and redefining its mission. The decision follows the overwhelming response to the April 2008 release of the Working Paper, In-Store Implementation: Current Status and Future Solutions. To date, the group has received more than 600 inquiries and dozens of membership requests.

To harness all of this positive energy, it is creating a new, more inclusive vehicle for the group, the In-Store Implementation Network. The ISI Network will continue and expand upon the work of the ISI Sharegroup. An e-letter last week outlined the following mission:

  • Continue to research and publicize ISI issues
  • Develop and share ISI case studies and superior practices
  • Research effective and practical ISI tools
  • Promote education on Implementation and at-retail compliance
  • Share learnings through industry conference presentations 
  • Maintain an ISI knowledge resource for members 
ISI Network membership opportunities will be communicated shortly. If you haven’t yet joined the free ISI email list, you are invited to do so now at http://instoreimplementation.com, where you may access more detailed information and many document downloads.

Coordinating the ISI Network and expanding its base is a major focus for my firm, VSN Strategies, and I consider it a privilege to be associated with the founding member companies. In coming months I anticipate playing a key role in advancing the group’s educational and communications missions.

The In-Store Implementation initiative will assume a high profile in 2009. It is a multi-billion dollar industry opportunity that may be realized only through concerted efforts of many in the retail and consumer products industry. The ISI Network will be a channel for that energy.

© Copyright 2009 James Tenser
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