The Branded Pantry

4. August 2011

Usage Decay Rate on Mobile Applications Over 90%, Missing or Irrelevant Product Data The Cause?

One of the mobile application measurement services recently reported that the use of mobile applications generally fell off by over 90% after the initial post-download burst of enthusiasm.

In some ways this dramatic dropoff should not surprise as many low cost, reusable products and services (I-Pod songs, Happy Meal Toys) get scant attention after initial use.

Still, this 90+% decay curve is a staggering statistic and one that should give marketers pause.  Clearly in order to earn ongoing consumer usage an application must be:

  • Useful, having some utility meaningful for that consumer
  • Easily accessed
  • Easy to run (simply input in CPG that means either  a list of options salient to the user or the ability to scan a picture or bar-code for self selection)
  • Rewarding.  The application needs to have a high probability of returning data relevant to the person operating the application.

With regard to this last point,  a study run by GS1 UK examined consumer usage of mobile applications  involving consumers attempting to gain product information by scanning or taking pictures of products on the shelf.  The consumers were hoping for information  regarding:

  • health and wellness guidance
  • promotional offers
  • other product information

Over 90% of the usage attempts resulted in either no data or in images/data inconsistent with the actual brand data according to the manufacturer.

I am of the opinion that the only appropriate gauge of product image and data accuracy is one that begins with how relevant the product image and data are to the consumer when they visit the shelf.   If the product displayed in the application is not the product found on shelf then the data fails.  We call such data Consumer Relevant Product Data.  The gap between the data available for mobile and online applications and the package the consumer sees on the shelf, is called the Consumer Relevant Product Data Gap.  

ShelfSnap with two partners, are engaged in a much more in depth and ongoing review of this Consumer Relevant Product Data Gap.  We will extend the research to compare what the consumer sees in their application to the actual product on shelf (vs. the manufacturer’s impression of which product is current).  We will also test how consumer purchase behavior is affected by the disparity.   The report will cover:

  • The impact on shopper behavior
    • Sales
    • Dwell time
    • Brand - Banner perception
  • The significance of the problem in terms both of:
    • The percentage of products affected by the gap
    • The severity of the differences.

 

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So far our findings indicate that the  gap between the images that manufacturers think are current and the packaging the consumer actually sees on the shelf is well over 50%, regardless of the source of the images used in the consumer applications.   Mobile, online and even product specific paper coupon efforts are handicapped by this impediment.   Of that there can be no doubt.  This is an important set of findings and one of which marketing buyers need be aware.

19. June 2011

Part Three of the F.I.X. Approach to Dramatically and Simply Improving Planogram Compliance.

X (cross) Refer and document via pictures, any changes that are planned for the pog with the shelf status.

One of ShelfSnap’s discoveries in this journey with clients is that once a plan is built and agreed upon by trading partners, changes to that plan are never documented!  ShelfSnap’s experience with two of the top food marketers, with entries in both DSD and center store confirm the fact.

The ShelfSnap compliance service is very particular in delivering store by store discrepancies between what is found on the shelf and what is in the plan.  We routinely ask the client to review the store by store lists at the field level and at the supervisory level.

·         In one company no one could supply a list of approved trade-outs to the plan. 

·         In the other company we did manage to tease out the replacement products but no further approved changes could be documented. 

 

Recommendation to achieve X-reference to the plan and documentation of agreed upon changes: 

Whenever anyone makes a change to the section they need to take a picture of the entire 3-4’ segment(s) affected and send it to ShelfSnap.

Once uploaded to ShelfSnap the changes can be recorded, documented and incorporated into the current plan. 

ShelfSnap would also record the person submitting those changes. 

Using this method assures that agreed upon changes are documented in a way where they can be maintained.  It further assures that the period audits via pictures, and the pre reset “Fresh Start” will identify all unauthorized changes to the plan. 


Summary:basepic.jpg

 

The F.I.X. process leverages current personnel to capture the shelf.  It takes very little time and almost no training to take and upload the pictures. 

The process leverages available technology as everyone has a digital camera or PDA. 

The process is primarily external to all current IT infrastructure for the retailer or the manufacturer with the exception of the direct feed into the POG software of client choice.

The process TCO is no more than other measurement techniques and yet it increases the probability that:

·         the plan will reach the shelf,

·         shelf changes will be documented and responsibilities identified

·         the plan will actually be able to be measured for impact

Other substitute methods for achieving the measurements necessary to support the F.I.X. are certainly possible.  Direct audits through surveys or hand scan methods have been available for years.  They are expensive to conduct because they take too much time to warrant the use of the normal in-store personnel.  They are difficult to record in a way that is accurate and does not involve some subjective collector judgment or even bias.  Any further clarification of the results is impossible because the source of the collection, the shelf itself, is consumed in the collection act. 

Another method is the use of  POS scan data or delivery data to at least confirm assortment.  This of course does nothing for position, size of set, facings and does surprisingly little for an accurate view of assortment. 

These tools have been around for at least a decade.  The use of these techniques has resulted in the compliance gap we have today.  The new news, is the innovation of digital merchandising measurements brought about through ShelfSnap.  

For a complete copy of this whitepaper,  please email cyndi.metallo@shelfsnap.com

The Role of Relevant CPG Product Images in Online - Mobile and At-The-Shelf Applications

ShelfSnap has documented a great deal of learning in CPG merchandising over the last two years.

A new area of study has begun to uncover and document a stubborn and significant gap between the product images featured on mobile - online applications and the actual product packaging at the shelf.   We are pleased to have the first publication of this occur in an important new online community of CG and Retail professionals called BrickMeetsClick.com. 

The focus of this new community is the intersection of where online and in-store shopping converge.  The founder and “architect” is Bill Bishop.   He engages what he terms black-belt thinkers from a variety of disciplines to help foster the discussion.  We were pleased to be his first black belt effort.    Read the piece here http://www.brickmeetsclick.com/stuff/contentmgr/files/0/5d7c27b7e82fad98115e93aaeaf5363a/files/do_the_images_match_6_14.pdf

and make BrickMeetsClick at least a weekly visit.

We will be examining more on this subject shortly in this blog as well.

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13. June 2011

Supermarket visit declines accelerate. What does it all mean?

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Over the last few weeks we have seen some fascinating statistics continuing to chronicle the consumer shift away from traditional supermarkets.

The latest numbers document a half trip/per-household/per-week decline in year over year comparisons.  That is a half-trip per week decline down to only 1.7 trips to the Supermarket for the average household.  This is huge on a percentage basis and if memory serves, it represents the largest acceleration in trip declines on record…by far.

The per cent of households reducing their supermarket visits to once per week built from 29% to 34%.  The importance of households putting off visits to every other week mushroomed from 12% to 20%.

All of this leads to some pretty important questions.  I put down some musings for partial answers.  Any others you might like to advance?  Any questions I ignored?

While people are no doubt adjusting purchasing habits to account for the economy, they are not eating or cleaning less.  Where is the volume going?

1. Some shoppers are buying as much (or more) but doing it in fewer trips.

2. Some shoppers are hitting alternative outlets for both stockups and specific categories.  Many of these include lower cost outlets such as Dollar stores.  Others trips are based on the convenience  of local stores such as Drug and C-Stores.  Perhaps most interesting is a growing move toward online specialty (soap.com) which offers very competitive pricing and does not require fuel for the car, nor time in store or in the checkout line.

Why is the volume moving?

1. Part of the shift represents continued caution and downright increased frugality due to a lack of confidence in any sort of meaningful economic recovery.  All current indicators point toward a long slog in housing and jobs and that means uncertainty which never bodes well for the status quo.  Supermarket trips are status quo.  Finding new ways of saving money and time make a ton of sense to shoppers.  Consumers are shopping deals, private label and shifting toward lower cost outlet options.  Instead of the weekly trip to Costco for fun they are waiting until Costco member coupon week to stock up.

2. Part of this reduction can also be explained by the cost of gas, although given the timing of the data it appears the bulk of the impact from higher fuel prices will be felt in the next set of stats.

3. Rapid changes in buyer dynamics.

a. Single person HH now over 50% of population. Single HH purchases are not as large nor as frequent.

b. Many newer shoppers are NExTgen buyers.  These buyers are more comfortable/prefer to shop online.  They aren’t tied to the traditional values associated with the weekly shopping chores.  These too are primarily single person households.

c. Move toward Urban centers accelerating.  Not as many big supermarkets in urban areas so single stock-up trips become more important.

4. Supermarkets just don’t “fit” as well as they used to.

a. There always seem to be better pricing options.  Going to an Aldi or a Dollar Store has somehow become “make sense shopping.”

b. The cost of driving out of the way to the supercenter or the supermarket, by passing other outlets doesn’t make as much sense.  Planning and making that one trip count means less fuel.

c. If the store in which I normally shop is not the price leader, if the trip is going to cost me expensive fuel and I do not have the faith that I am going to have a predictable result (long lines, empty shelves, favorite brands MIA) than I should start looking for alternatives!

What does it mean to traditional outlets?

There are clearly many implications for the business health of traditional Supermarkets.  Two that I believe do not come up as often as they should, and that carry with them the danger of spiraling particular stores into continuous declines would be:

1. The impact of these fewer, but larger trips on already short staff and short shelf inventory should be more unpredictability for the consumer.  Will I find my product?  Will the person in line in front of me take 30 minutes to check-out?  Will the staff be available to answer my question about why the picture in the coupon does not match the product on the shelf?  The more uncertainty the buyer encounters the more likely they are to search out alternatives with higher predictive values, or at least with lower prices.

2. Supermarkets-supercenters are traditionally viewed as relatively fixed cost businesses.  If traffic diminishes and volume goes with it, then the store has a fairly limited band of actions it can take to reduce operating costs to match.   If on the other hand the trips are reduced but the cart increased to offset, then it becomes much more difficult to forecast labor and inventory to match the spottier shopping patterns.  Mismatches occur and the point above takes over.

How will this all end up?    Will volumes and trips return to the patterns of yesterday?

For answers to these and other questions give us a call at ShelfSnap and Panther Mountain Companies  224 512 4969.

30. May 2011

Part Two of the F.I.X. Approach to Salvaging Category and Space Managment

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Instant Planogram Access, Part of the F.I.X. approach to salvaging Category-Space Management. 

In our last blog we outlined a process, based on documenting the causes for the gaps between the plan for the shelf, and the actual shelf, for salvaging the current approach to category-space management.   We also covered the first element in the salvage process.   We said:

Our recommendations for salvaging the current category management/ shelf management model contains three process improvements. 

We call the approach the F.I.X. process:
F.I.X. stands for
• Fresh Start to the store POG
• Instant access for all parties who need to comply
• X-refer (cross refer any changes that are planned for the pog with the shelf status.)

Today let’s deal with the second element of the F.I.X. process, providing instant access to the planograms for all parties who need to comply.   In the newly released study, Optimizing the Value of Integrated DSD, from the GMA DSD committee one of the surprising findings was how difficult it was for trading partners to gain access to what was believed to be the current and store planograms.   The report indicates that access was unavailable for the store resources charged with maintaining those planograms at the shelf over 40% of the time! 

Having easy to use, perhaps even picture based, POGs available to anyone working a store shelf section is a critical step in creating an expectation that the shelf will be maintained as the trading partners have agreed.  If they cannot see and understand what the plan is, they cannot execute the shelf.  Seems obvious but in conducting the GMA study,  we ran into a number of cases where even headquarters staff had trouble laying their hands on what they believed to be the current, agreed upon planograms for a particular store.  In one case we were told by a retailer that they “thought they had some PDF files showing the plan but they were about 5 years old.”

This issue is clearly costly to both trading partners.  At the very least they cost:
• Sales for the items which are not treated as they should have been in the plan
• Sales for the items introduced but not in the plan (therefore there is not plan for them)
• Sales for a category sub-optimized on the fly by personnel who do not have the expertise or data on hand to effectively deal with introducing products, deleting products or changing facings or shelf positions, based on whatever criteria they use in the absence of an available plan
• The labor costs involved in constantly adjusting space and assortment, from the conditions encountered upon arrival at store.  In many cases these adjustments are redone by the next person addressing the shelf.  
• Ongoing credibility gap between the field and HQ on the plan vs. execution issues.
• Ongoing inability to be able to effectively measure the impact that plans are having on sales.

Recommendations:

The retailer needs to keep up-to-date planograms available right in each section.  That way stockers, brokers and others can readily refer to the set as it is meant to be.

Reading the pogs if they ARE available.
Not only do the planograms need to be easily available, they need to be readable.  I was in my local superstore the other day, which is being transformed into an even bigger superstore.  There were extra personnel wondering around trying to finish some of the aisle to aisle and within aisle changeouts.  It was pretty obvious that the plain text POGs were pretty cryptic for even experienced folks to interpret, and harder still for the unskilled.  Up to date product pictures would have helped this. 

None of this is easy, but perhaps most difficult of all is trying to match a fully filled section with a planograms and determine what is set according to the plan, what things are missing and what things are on the shelf but not in the plan.  The human eye-brain combination is not really built to generate this comparison, at least according to the Harvard Visual Attention Lab.  However, between this process and the use of ShelfSnap understanding compliance, and fixing it are well within reach for the first time. 

We will describe the third leg of this stool in an upcoming blog.  It will describe cross-referring agreed upon changes and keeping the planograms up to date so that all parties can agree on when something is not in compliance. 

17. May 2011

The F.I.X. Process of Drastically Improving Planogram Compliance

Filed under: Retail Change, Pioneering Technology, Merchandising — MikeSpindler @ 19:37

ShelfSnap was asked recently to help a retailer to bring their space management and category management from their self-assessed state of 1985 into the state of the art as it is now practiced.

Based on over two years of documenting the promotion and planograms compliance levels of the industry (well documented in a variety of our newsletters (http://www.shelfsnap.com/news-events.php) and in my blog (brandedpantry.com) we have no small body of understanding that should prove valuable.

As we have reported ShelfSnap finds that planograms compliance to plan is typically below 50%.  Type 1 compliance (ShelfSnap’s term) looks at both the items called for in the plan and the number of facings prescribed for each of those items.   The poor level of compliance is equally accounted for by assortment voids and by facings discrepancies vs. the plan.

Why this process has gone so far off the rails?  Cannondale – Partnering Group studies put the impact of a well implemented category plan at 8% for the manufacturer and 14% for the retailer.  Yet no one gets these types of increases.  With compliance at the levels we have documented it is probably a wonder if much benefit at all accrues.

So ShelfSnap sifted through findings and came up with two approaches.

•    Salvage the current category management – shelf management model with better practices.
•    Start over with a new process.

The retailer had asked for our advice on salvaging the current practice which will form the basis of this and the next blog.  Then we can touch on some ideas for starting over.

Our recommendations  for salvaging the current category management/ shelf management model contains three process improvements.

We call the approach the F.I.X. process:
F.I.X. stands for

•    Fresh Start to the store POG
•    Instant access for all parties who need to comply
•    X-refer (cross refer any changes that are planned for the pog with the shelf status.)
Fresh Start to the Store POG: 

Most current plans for a given category are built upon historical plans.

Going back to the beginning, plans were started years ago when there were few store variations and almost no knowledge of what the actual section looked like in any given store.

Each year that plan, with last year’s modifications built upon every proceeding year’s modifications, becomes that base for the plan which is to come for next year.

Very few manufacturers or retailers check the actual shelf configuration, the product flow or the assortment and/or facings in any given store.  If they do check, they have done so once and make the assumption that the set stays in place.

At some point additional segmentation or versioning has been done to account for what is thought to be store size variations, or demographic or socio economic variations between stores.

In the last 5 years, store specific planograms are being built adjusting assortment, facings and location based on actual POS sales, loyalty data and on demographic information more specific to that stores trading area.

This historical foundation issue is the primary reason that plans are almost never implemented as designed.    The impact of using the historical foundation or “last year’s plan” is that the set team:
•    Almost never runs into fixtures set up as specified by the plan.
•    May run into a section that is smaller, larger than the plan calls for.
•    Almost always runs into products not accounted for in the plan or in the “drop” instructions.
•    In many instances will run into product flow set ups that differ from the very specific plans given to them.  In some cases the set is on the opposite side of the aisle anticipated in the plan.  In others the product flow (front-back of the aisle traffic) is set up differently.

All of these are costly issues for trading partners.  At the very least they cost:
•    Time for the set team to make adjustments to the plan
•    Time for HQ and regional personnel to try and “consult” on the fly to deal with the changes, if they are consulted at all.
•    Sales for the items which are not treated as they should have been in the plan
•    Sales for the items unaccounted for in the plan (therefore there is not plan for them)
•    Sales for a category sub-optimized on the fly by personnel who do not have the expertise or data on hand to effectively deal with the discrepancies encountered.
•    Ongoing credibility gap between the field and HQ on the plan vs. execution issues.
•    Ongoing inability to be able to effectively measure the impact that plans are having on sales.

Some Findings (from the top two grocery sellers in the U.S.):
•    Plan calls for 14 refrigerated shelves in two doors for creamers.  In fact almost all stores only had 13 shelves.  Efforts to fix this saw labor install a 14th shelf with not nearly enough room to hold stock in any merchandisable position.
•    Plans called for 15 shelves across three segments for bagged salads. 15% of the checked stores had either fewer or more shelves.  Range was between 10 and 17.
•    Plan called for 16’ set across a group of stores.  Just under 5% of stores had 36’ sections.
•    Stores were mirrored in over 25% of the cases for major category.  Retailer claimed mirroring never happened in their stores.
•    ShelfSnap have found that actual shelves are out of compliance immediately after set up to almost the same degree as shelves checked 6 months after the set.  The changes are different but the magnitude of gap is almost the same.

Recommendations for initiating a Fresh Start to Each Store POG:
1.    Have store personnel capture digital pictures of the set in each store, it takes just a couple of minutes.
2.    Have ShelfSnap turn the picture into a Snapogram which documents products, positions, facings and conditions.
3.    The Snapogram exports directly into your space management software of choice, this too takes just a couple of minutes ending hours of manual prep work.
You are now ready to begin building your plan with a current list of products handled, a clear and accurate view of brand blocking and flow and an unassailable view of the space and fixture configuration available.  And you will provide a plan that can be translated directly to the shelf by any team, quickly and reliably.  Your chances of getting you plan on the shelf just increased 90%.

In our next blog we will cover the I and the X in the F.I.X. process.

6. May 2011

Tweeting Bananas

Filed under: Retail Change, Pioneering Technology, Online CPG Sales, Merchandising — MikeSpindler @ 23:10

banana.jpgThere has been a decent amount of hype about Amazon and Walmart fighting over the bones of the traditional grocery industry, at least in the digital media.  In the face of this onslaught it is easy to lose track of the efforts that those traditional grocers are making to win the digital war for the weekly (or more often) grocery chore.  

 Perhaps more accurately it is hard to find meaningful gains made by traditional grocers.   Most of the efforts are concentrated on: mobile offers and coupons, generation two of web applications, monetization of web traffic through advertising and of course social media.    

In my opinion, and with no small amount of experience in this area there has been a good deal of incrementalism passing itself off as innovation when it comes to applying a cohesive technology, process and data approach to the grocery consumer.  

Still, there have been some meaningful improvements advanced by traditional grocers.   One of those was a business decision to allow online grocery shoppers to shop as many times as they wish for one monthly fee.  Harris Teeter was an early adopter of the online grocery channel option.   They allowed consumers to shop online and pick up their already shopped items at their local H-T store as early as 2000.    

H-T traditionally charges a shopping fee for each order, as do almost all retailers offering an online grocery shopping option.   That fee is to help offset the labor costs of picking the customer’s order for them in the low-margin, high-labor cost grocery environment.    In addition to offsetting a small chunk of the additional labor, the fee encourages the shopper to time their purchases and bundle their orders to offset the cost of the shopping fee.    Thus online grocery orders are typically huge, much larger than normal grocery orders.

Since shoppers focus their online efforts on their “big, stock up orders” they still go to the store for their secondary or top off orders.   In a typical month the average shopper may make 2-4  of the “big, stock up trips” but they make an additional 6-10 trips to stores to grab milk, meals, tissue and many other things of which they have run short.   The idea behind a single fee with no limits on shopping frequency has been an effort to capture more of the shopper’s share of stomach and therefore loyalty.   Frankly the purpose is also to keep the shopper for visiting other stores where they may become enamored with other features of those retailers and abandon the primary grocer.   One of H-T’s primary competitors, Lowes Food Stores had also entered online grocery shopping early and pioneered the fixed monthly fee approach long before Amazon ever thought about Prime.     

Both of these grocers have been at the sharp end of many of the advances in the online grocery shopping and marketing arena. 

Early efforts with this ”one fee” approach were pretty successful at converting a group of shoppers, and heavy analysis of the data (by yours truly back when I was President of MyWebGrocer) indicated that the technique indeed had captured  a share of stomach/daily needs much higher than even the most effective of loyalty programs.  

Even with all of this activity I am still not seeing the next great leap forward in harnessing the digital grocery arena as part of a cohesive multi-channel effort.   The fully integrated approach to satisfying the needs of what I call Shopper 5.0 in a manner that earns that shopper’s loyalty in ways unheard of in any shopper loyalty program today or in the past.   But that ….is for another day.

21. April 2011

A “Titan” Quietly Emerges

The big guy finally started to play his cards.  Walmart announced Project Titan, their online grocery shopping effort at the beginning of the month.titantruck.jpgIt is rumored to involve grocery delivery in the San Jose area.

The press is covering the project with some enthusiasm mentioning WebVan, Home-grocer and other failures while at the same time offering some positives by looking at Walmart’s own ASDA online grocery delivery experience in Britain. 

Online grocery shopping, and other online grocery activities (promotions, other marketing efforts) have been successful in the U.S. as well as in Britain, Sweden and other areas.In the U.S. online ordering with “drive by pickup” is the preferred method in all but the most densely populated urban areas.   Walmart has no small amount of experience in this model, albeit with non-grocery items having been the focus over the last few years as they have continued to tinker with the service.   Chances seem very high that they will offer this pick-up option in addition to delivery on grocery.  With their current store based expansion plan including smaller formats (smaller super stores, more supermarkets and their new convenience effort) they will have more touch points convenient for consumers on their way home. 

The addition of the non-grocery assortment to the offering online for the shopper gives Titan a real advantage on the margin game, if they can convince the shopper to toss in a pack of socks or a can opener.   That and the CPG ad revenue will be substantial through this new channel. 

So far traditional grocers have not reacted much to current (Amazon, Amazon Fresh, Sears-KmartNetgrocerAliceFresh Direct etc.) businesses trying to move into the grocery space.  A few physical grocers offer full online shopping services include Safeway in select markets and a number of regional and independent players as well as Peapod through a number of Ahold banners.The number of stores offering is limited, under 600 in total out of a universe of 30,000 supermarkets.    The size of the business is relatively small based on dollars but is growing much more rapidly than the store based business, as has been the case in every other industry where online is a viable channel. 

So, why aren’t more traditional moving more aggressively to protect their turf?   This is most assuredly NOT your father’s WebVan.

12. April 2011

e-commerce goes to the prom

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What a wild ride this last month or so.   It’s like that frenzy of making sure you have a date or several, lined up to go to the prom. 

There has been a great deal more activity in the last six months than the transactions circled above.  However these three are of particular interest aren’t they?

While Walgreens has posted some pretty impressive numbers over the years, they have had a tough time breaking out of being seen as …well as a drugstore.    They have done a great deal to re-merchandise and remake their front ends to capture the up and down the street, milk and bread shopping trips from the gas stations and the supermarkets.  They are even putting in some meal solutions in case you want to consider them as an alternative for dinner, on the way home (huh?) 

They also have a pretty nice online presence and a great new mobile application in their own right.  So why buy Drugstore.com?  I don’t have any crystal ball into the strategy but if it doesn’t involve the two most important assets this combination can bring…they are missing the boat. The assets?  DS.coms customer base and that vast real-estate empire.  7,000 pickup locations with pickup facilities already in place.  Yum!  My experience in the online grocery biz indicates that most consumers prefer to pickup their groceries while running their errands (don’t make them get out of their car though) rather than having the groceries delivered.  

 Morrisons bought a chunk of Fresh Direct in New York.   They purportedly bought the share in order to gain access to a better set of online tools than they could assemble using their own resources.  They are certainly looking to try and gain their fair share of the growing consumer dependency on the web and mobile apps to inform, influence and generate sales of groceries and other sundries (whilst tossing in the odd t-shirt for profit enhancement).   I am not sure they are going to get their $50million worth.  Building a successful shopping application for mainline grocery is a very tricky business.  Lots of folks have tried, most have failed.   Fresh Direct always was a great experience for a first, second and third time grocery shopper.  Then the consumer wanted to move to an app that actually understood the week in-week out grocery shopper.   Further, the secret of bricks and clicks grocers is the ability to move back and forth between applications that drive coupons, or the weekly circular or a recipe, and loyalty offerings and ….well you get my point.  FD is one dimensional in that regard. 

Finally we have ebaY adding to a very curious assemblage of capabilities by purchasing GSI, the many retailer online backbone.  Add this purchase to Red Laser and Milo and you have a very, very interesting capability IF……If they are thinking grocery and if the plan is to make ebaY the odd man (or application) out in the plan.    Done right, this might be my favorite of the bunch.

15. March 2011

Deals Produce Less and Less for Manufacturer’s

Filed under: Retail Change, Pioneering Technology, Merchandising — MikeSpindler @ 18:11

Symphony IRI has reported an increase in the amount of goods sold on deal for the second consecutive year.

Given the lingering, limp economy this should not be surprising.  Further, manuacturer’s routinely try to hide commoditiy cost based  price hikes with promotions.  The product is priced at $2.89, goes on a deal for $2.29 and comes back at $3.19.  

IRI measures 70% of the categories carried in a typical supermarket sell 30% or more of their goods on deal.  The deal will include at least a price reduction, but may also include participation in the retailer’s circular ad and/or a display in store.   The 70% number is up from 60% only 4 years ago.   

The real news in this report was that the average lift per promotion had dropped by 57% in more than half the categories.  So manufacturer’s AND retailers are promoting more and enjoying lift less.    Why? Not part of the study but some educated conjecture will reveal that:

  • Most promotions, event those carefully planned collaboratively by retailer and manufacturer are not implemented fully or well.  In recent studies by ShelfSnap, which turns pictures of displays into data, they found less than have the planned displays built at all.  Further they found a significant number of the displays built were smaller than planned, had a smaller product assortment than planned, or had the wrong assortment.   In one study, the promotions were built as planned, but ShelfSnap revealed that half the stores in which the displays were built had put out price signs on the displays.  Even if a consumer were attrated to the end-cap, they had no way of knowing what they would pay for the enticing products. 
  • Consumers become conditioned to pricing discounts and product-promotion cycles.  Just as day traders develop a sense of timed pricing inflections so too do consumers react to products.  Just watch how consumers flock to Costco after the monthly spate of coupons come out. 
  • Consumers continue to trade “down” to private label or, at least have adopted some of these “just as good” PL items as their new staple.
  • Consumers have not been stocking the pantry as aggressively as they were prior to the recession.  With rising commodity and gas prices this restocking trend may reverse itself in the months to come.
  • Some of the “deal” lift that used to accrue to grocery stores is occuring in unmeasured outlets such as Costco and Walmart and some from pure play online providers like Amazon, or Alice  who can be quite price competitive.   Some of these online players have ongoing replenishment models that both offer better pricing and the added convenience of “no-thought, deliver to my door” service.
  • And online - mobile coupon providers like Shopkick,  as well as price comparison mobile applications such as Aisle Buyer and Scanbuy can move a prospective buyer standing in front of the shelf with a “special” price to another store with a better deal, particularly since that store is probably on the way home.

To me, the most interesting new application designed to move promoted volume away from the actual advertiser (combination of retailer-manufacturer who is sponsoring and paying for the promotion or deal) is a new service being tested by Safeway in Hawaii.    Their new DealMatch program evaluates the chains biggest competitors advertised deals, and then applys that same price to their customers loyalty cards so that the customer is ALWAYS paying the lowest price at Safeway.  This is one of the three legs to the author’s Shopper 5.0 model.  I would guess that it will be much more complex to implement on the mainland, but if they figure it out, it is a great new move. 

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