Pay Cycles: When Month Outlasts Money

I WAS STRUCK to read comments a couple of months ago by Walmart CEO Mike Duke who stated that the chain’s shoppers seemed lately to be running out of money in the waning days of the month. He cited the shrinking size of market baskets as evidence. Tough times leading to tough choices.

Separate recent reports about the worrisome state of our consumer economy observe that budget-conscious shoppers tend lately to purchase smaller package sizes near the end of their pay. This, of course, is a key contributing factor to smaller baskets. William Simon, Walmart U.S. stores chief, made reference to this “paycheck cycle” at a recent analyst meeting.

This morning a report in Bloomberg News described shoppers upping their use of credit cards for purchase of household necessities and gasoline. This is a confounding signal that looks on the surface like a rebound in consumer confidence. In fact, it seems to be concentrated at the end of the calendar month. This may be a sobering sign that many households’ flat and declining paychecks can’t keep pace with price increases.

I’ll leave the economic and social import of this behavioral trend to the true experts. But I would like to offer a few thoughts about the time-based shopper insights that allow analysts to detect and measure the trend. Looking at detailed market basket trends day by day, it seems, can reveal a great deal about short-term household economics.

Not Card-Sharp? Then Be a Basket Case
This is interesting because we hear a different tune about insights from the many advocates of frequent shopper programs, a.k.a., loyalty cards. The detailed segmentation data these programs can deliver offer a wealth of target marketing opportunities for retailers and their suppliers, along with behavioral insights so detailed and profound that we don’t always know how to apply them in practice.

This is very cool stuff and it is credited with upping sales and profits at some pretty sharp retailers, like Kroger. Card-linked data allows marketers to put together a picture of a whole customer relationship over time, evaluate it, and group customers into target-able groups. Walmart and the so-called “dollar” stores, however, do not go in for those card marketing schemes. They stick deliberately to their EDLP guns instead, and resign themselves to data-poverty.

Or so it may seem. Actually, there is a great deal that may be learned just by looking at basket trends, especially at those retailers who enjoy very large footprints and shopper penetration. Card-free chains like Walmart, Publix and Dollar General can track the transaction logs by day and by local geography to extract very meaningful insights. Even if the shoppers are not individually identified, their collective behavior reveals much about pay cycle trends on a store-by-store basis.

Here is where even “data impoverished” retailers can find basis for some global and targeted merchandising tactics. Carrying sufficient smaller pack sizes in key categories every day is one obvious response Walmart says it has pursued. Sales and events may be scheduled to coincide with payday for local large employers. Managers’ specials may be timed to hit key mid-month and end-of-month dates.

Well there you have it. It’s still a share-of-wallet game, even when wallets are growing slimmer. Walmart knows, there’s much of tactical value embedded within store transaction-logs, even where there’s no loyalty data in sight. It’s not just dollar size of baskets that may influence action, it’s also item counts, categories included/avoided, package sizes and purchase influences from outside factors.

When the month runs long, wise retailers jump on their cycles.

© 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

Marketside Rises in Phoenix

IT’S NOT QUITE your grandmother’s corner grocery store.

I had the opportunity to join residents of several East Valley communities near Phoenix at a preview of a possible small-supermarket future on Oct.4, when Walmart simultaneously opened of four 15,000 square foot Marketside stores.

The Marketside openings seem like a challenge to UK grocery powerhouse Tesco, which already operates 25 of its small-footprint Fresh & Easy Neighborhood Markets throughout greater Phoenix.

“This is a conventional grocery store shrunk down,” said John Rand, director of retail insight for Management Ventures, Inc., who was spotted taking notes at the Tempe Marketside location. “Shoppers will understand it immediately, whereas people are still figuring out Fresh & Easy.”

The Marketside assortment heavily features national brands, a marked contrast with Fresh & Easy, which emphasizes private label. However like the Tesco format, this new effort from Walmart features an appealing range of ready-to-eat, and ready-to-prepare foods and meal kits, evidently intended to serve the grab-and-go lifestyle of many busy consumers. The company also claims some 300 natural and organic products throughout the store. Prices were deemed “competitive” by several observers and competitors on the scene – some visibly lower than conventional supermarkets, but only a few matched the Walmart Supercenters that seem to permeate the area.

The four Marketplace units are located in freestanding former Osco drug store locations. At least one location still had its drive-thru intact – a porte-cochere-like structure that could be adapted for grocery pre-order pickup, although no such services were offered. On the opening Saturday, arriving crowds were tempted by indoor and outdoor sampling stations offering deli meats and cheeses from suppliers Dietz & Watson, Sushi rolls from Chef Select, Marketside pizza, and 8 ounce bottles of Vitamin Water beverages.

A variety of prepared food items – side dishes, entrées and “family sized” meals – were offered for $2, $4, $6 and $8 each, displayed in sleek coffin coolers. Shrink-wrapped meal kits, priced at around $10 and $11 included chopped raw ingredients and sauces for such dishes as chicken fajitas, Mongolian beef stir fry and Asian orange chicken. Staffers clearly were challenged to keep these displays filled, as shoppers armed with opening day coupons (one offered a discounted price on an entrée of six cents) emptied them into their carts.

All prepared and ready-to-prepare foods had two-inch wide adhesive labels indicating the date each item was prepared and when it should be used by. These items are packed and delivered to the stores by an area contractor, according to an employee. In contrast with Tesco’s Fresh & Easy operation, which does its own food prep and pack at a centralized facility for shipment to the stores, Walmart has not yet set up such a facility.

We learned some local residents had received gift bags filled with product samples and coupons in the days prior to the opening. They may have brought in the crowd at the Chandler store on Saturday morning, but there were also an impressive number of observers, staff, and local Walmart employees on hand, and at one point a busload of Asian visitors who were evidently on an organized tour.

Three of the four stores offer beer and wine, however the Chandler location did not, and employees volunteered that this was because of its location directly next door to a KinderCare day care facility. As a result, the Chandler store had a little bit of floor space to spare, which was largely absorbed by what may be described as a “power square” where temporary promotional displays were located. One pallet display was stacked with cases of Niagara drinking water, 24-count half-liter bottles, priced at $2.97. Another offered 3.25-ounce bags of Pop Chips, “market value” at $1.50 each. Other display tables offered baked goods and fresh fruit – bananas were 68 cents a pound, and medium honeydew melons were $3.27 each. One shopper commented that this area, at least 20 feet wide, would easily accommodate eight or more café tables and chairs during the lunch trade.

A visiting Walmart operations person informed that energy-saving features adapted from the well-known Walmart green project stores in Texas included pull-down “shades” on the cooler cases that can be closed at night to save on electricity use. Overhead lighting was compact fluorescent throughout, with liberal use of LED lighting in the black-framed freezer cases that made product stand out clearly, even through the double-glass doors.

Notably, package sizes throughout the store were small, a contrast with Walmart’s supercenters. Individual steaks were available in the meat case, and the largest size liquid laundry detergent available was the 50-load concentrate. This perhaps reveals a great deal about the Marketside method – it’s designed to serve the grab and go world of commuters and single-person households. Mass consumers would do better to pilot the SUV over to Sam’s Club or the Supercenter.

© Copyright 2008 James Tenser