Profit from change before change removes your profits – the Sales Challenge
The UK retail environment is currently undergoing violent change. This is in part driven by a change in attitude and circumstances of the shoppers – but also by a lack of response of the key retailers to this change.
This blog is about how you can turn the current position to your advantage.
Cull your range – and improve your sales at the same time
Tesco are already planning to remove products they don’t feel are worth their space on the shelf. To be fair there is a very long tail of low performing products clogging the shelves, and using space that could be better utilised as flexible space for offers or as additional fixed space for the best performers makes absolute sense. Shoppers have really complained in the past about Tesco availability – in particular during promotions. So full marks for picking this up.
Tesco/Sainsbury/Asda have a tail. But so do you. The knee jerk reflex in the past has always been to build range to gain additional sales. This will be much less of an option in the future unless you can make a very strong case – and back this case up with more money. Make no mistake, all the retailers will increase the listing cost for new products to reflect the higher value they now place on every foot of shelf.
The RVS profit matrix chart gives you exactly what you need to understand how the retailers, and your shoppers, see your products. The green blobs are products that do better than your shelf average return. The Y (left) axis, shows the return you get from space overall. While the X axis shows how well they do in smaller stores. The size of the blob indicates the number of stores the product is in.
This chart offers some really obvious opportunities, to go with the space return issues. Simply trade places on the shelves with your poor performers to meet both of your objectives. Promote change NOW before the change is implemented for you.
Make sure new products get on their feet immediately
It is quite usual for new products to go on the shelf with a discount. However, anyone familiar with the profile of promotion performance will be fully aware that this is just like a Chinese meal. A few hours later you need another one.
However, if you spend a little more you can get seriously better results. Retailers tend to treat all of their customers as a homogeneous mass. You,. however, don’t have to. The “Try me free” stickers are very powerful in recruiting new people who will come back. Of real interest to you is that you can get the same uplift as an 80p drop in price for a reward cost of less than 1p. The stickers link directly to our yousay site which rewards the purchaser and gives you instant feedback. Meanwhile the Shelf Adder®” on the front is absolutely ideal as an alternative to the shelf strip in the channel. Apart from anything else, you can actually see something, as opposed to price labels! However, it is also there to hold your space and let the night shift know what should be in place.
Close to the product (Layer 1 investment) is the most powerful way you can spend to build loyalty and instigate change. You still need discounts for volume BUT you need growth above all.
Horses for Courses
Every product has stores in areas where more people than the average seek to buy. People of like mind tend to live together, their children go to the same schools, and they shop in the same range of stores. In short, we tend to behave just like our friends. So when we visit our local store, the average shelf space will be wrong when the product filling it is in more demand than the average.
Build your Core
If you can identify these core stores, (RVS Pulse provides you with a complete list of each of these) then you can invest a little more with larger shelf adders geared to giving you a little more space. These can be placed after discussion with store management.. It is typical for companies – if they focus at all – to choose just the large stores. Actually, if they are not core, they usually have more than enough stock cover and space to manage standard demand. So whatever the size of the store, it it is core, work with it.
Some managers may look at the figures and say “lets work with the poor performers and bring them up to speed”. Wrong. Poor performers have many fewer of your target market passing the shelf. Catching their eye will get you a much smaller reward than working with your core, if indeed you manage to convert anyone at all. If you are in Sales, ask your Marketing colleague why they target their money at specific high potential and not at low potential areas. It’s the same calculation.
Store managers in your core are important. Build sales by investing behind them, and they look like superstars to their area management. Core2Store have developed a full range of shopper targeted techniques that offer you guaranteed store based growth based on PULSE data that you, and the managers you talk to, can depend on. And make sure these core stores understand that they need to allocate much more space as soon as you go on promotion. The uplift they will give you makes them vital for your sales, and for your core shopper happiness (see the next section). Whatever you do though, do not rely on field calls to give you this rapport. Field teams, no matter how good they may be always have variable quality in front of your managers. Talk to Core2Store about how they received this accolade without any field team usage at all;
I have been at a Local Sourcing Conference today where we received an award for ‘Understanding the Tesco Strategy, Category Strategy and Local requirements’ and ‘Working 24/7 to drive growth’.
This is a really positive acknowledgment from the Tesco Local team and its thanks to all the hard work you put in that is helping our business move forward in Tesco.
Check your Stock
Those amongst us with long memories will understand the concept of stock pressure! Managers will always seek to get rid of stock hanging around in the back. The problem for them, and for you, is the way that retailers manage stock at the moment, leaves too little in any of your core stores normally (out of stock at key demand periods) and in particular when you are on promotion.
This may be organic (such as at weekends) or artificial, such as promotionally via price, couponing or advertising.
Store support needs to be proportionate to shopper demand, and not store size if you want to get sustainable growth from satisfied shoppers.
Raise your sights by looking at more stores
It is becoming increasingly important to give stores and their shoppers what they need, rather than what they say they want. Central systems have lead to local problems. Moreover, the habit of retailers to allocate products to convenience retailers simply on the basis that it sold well in large stores is perverse. We have brands where they only sell in smaller stores simply because they appeal to the impulse purchaser. It will surprise many Sales Directors, I am sure, but the 2,500 Tesco Express stores have the potential to sell a third, or better, than the sales in the larger stores – in particular in core areas. If you have the right product then, that’s equivalent to 800 large stores. That’s bigger than all Tesco Extra and Supermarkets put together. And, of course, convenience stores are growing. Not just vs their larger competitors, but organically. Have a look at this;
him! has just interviewed 20,000 shoppers, across 20 leading convenience chains, as part of its Convenience Tracking Programme (CTP) and found 18% of them admitted to picking up something on impulse vs just 15% in 2014 and 14% in 2013.
“Interrupting shopping behaviour in a convenience store is no easy task; 3-in-4 shoppers want to get in and out as quickly as possible and 42% don’t notice any comms or signage in-store. But retailers and suppliers have been putting a real focus on ‘interrupting and inspiring’ their shoppers in-store in order to disrupt this shopper often on auto-pilot,” suggested Katie Littler, Communications Director at him!
The number one driver of impulse purchasing is promotions, according to shoppers. “But it’s not just the cost saving which tempts shoppers,” explained Littler. “The focus and visibility given to promotional products help the get noticed by shoppers.”
The other area which is driving impulse purchasing is the till and queue area. 1-in-10 impulse shoppers pick up the product from this area of store, according to the 2015 CTP research.
The way to get into the smaller stores is to prove how well you can do there. Seem impossible? Not so.
Commit to Change
Many companies are keen to do more of what they already do, but negotiate the price down. You need to ask yourself if what you are doing at the moment is actually taking you where you need to go. If it isn’t or you don’t know, this is a Green Shield moment for you.
Back in the day, Green Shield stamps were offered everywhere – but the biggest giver by far was Tesco. It was commonly felt that it would be suicide to pull out. This is the Wikipedia comment
In 1977 Tesco launched Operation Checkout, price-cutting aimed at countering the new discounters such as Kwik Save. A decision was made to abandon Green Shield stamps, saving £20m a year and helping to finance price reductions.
Recognise the scenario, and want to bet against dunnhumby being bought out? Nothing wrong with the Club Card, except when you call it a loyalty card. It’s not. And if you can’t target your competitors, it has no value for you either. Remember, a pack based promotion does target your competitors. Shoppers who are lapsed users became so for a reason. There is a direct relationship between more purchasers and more loyalists. Target always getting more purchasers and you get the loyalists as a bonus.
Thing is, if you invest to your core, and you know where it is, you can measure the impact via the sales data you get for free from all the majors. If you don’t see the impact, you aren’t getting any. If you don’t measure, you can’t do better.
“If you don’t know where you’re going, any road’ll take you there”
This quote loosely from Alice in Wonderland should be placed on the wall. The data exists (and PULSE from RVS makes it readily available) to understand where you are, and plot a measured course ahead.
This can then be shared with retailers at all levels, as well as within the company so that all activity is directed, supports, and is measured together.
Keep your fingers on the PULSE of your business