There was another part of merchandizing I wanted to discuss about in my previous post, but that was discussed only briefly at the IFM: Online Merchandizing. To be more precise, Drive Merchandizing.
Indeed, Drive thru grocery retailing will soon account for 8 to 10% of the global market. And it is constantly growing. And yet, a lot of opportunities are not leveraged so far:
Cross merchandizing: You have a lot of opportunities to cross merchandise items that you could not do in the real world. For example: milk. You can't place it in a real store at two places, even though placing it near cereals make as much sense as placing it in the cooking section. You can have several cross merchandizing strategy for a same section online.
Enriched content: In store, you may have limited information about the usage of one product. For products such as stews, you may have video to advice you which receipes to make with.
You may test more depending on the shopper behavior: you have history purchases so you may display the categories differently to try to have the most efficient merchandizing strategy.
You may adapt to your local area, with for example specific offers, depending on the local store activities.
Work on the different screens: You should adapt to smartphones, tablets, or even other screens to provide a great shopping experience. Maybe there will be different merchandizing strategies.
Extra activities to develop: Why would there be no hardware on drive thru somedays?
Some extra stuffs I have seen during the IFM days. It was about merchandizing. Most of FMCG marketing & retail experts would agree on how merchandizing is key to boost in store sales. Especially when discussing about having clear planograms to organise one section.
But it is not that easy to keep updated planograms:
It takes a lot of time to edit planograms
It requires a lot of information, between sales figure, pictures of the product, specific information on products features
It needs to be updated almost each month, as new products don't stop coming in
It needs to be adapted to each store, depending on the retailers strategy: geolocalization, size of the store, specific segmentation, specific store features...
I found 2 interesting companies working on planogram and merchandizing that are worth checking out:
Klee Commerce: It is a company specialized in planogram building. It has a powerful tool allowing to create in minutes top of the line planograms, based on a specific strategy: Profit maximization, sales generation, brand blocks, stockout limitations, etc...
I have seen a demonstration which was quite impressive. I believe it is very interesting as it could secure updated planograms, which are to me key to secure a good execution in store.
Planorama: It is a company that provides a tool for salesforce. You take pictures of a whole section and it will analyze it in minutes in order to give you data about the planogram: Which product is misplaced, which one is missing, are your products there... It is interesting because a nice in store execution is also very important to monitor. This image recognition technology seems pretty accurate.
Check out the video to see how it works.
Before, it was difficult for a national retailer to have a clear view if its planograms were actually followed. Now this tool allow to do so.
Thanks to all of those tools, I believe that merchandizing will become more and more important to generate sales, especially because the investments will be easier to follow, and cheaper.
We often discuss about the promotions topics on this blog. Promotions have been the last few years the magic word to develop sales, market shares and secure volumes. This is the reason why we have seen in the retail business promotions blossoming with higher and higher discounts.
Most of those discounts are based on yearly earnings, so most of the time disconnected of any profitability aspects. You may know what you lose when you promote an article with no margins, but you also know that you may lose way more if you don't go hard on the discount.
But there are other side effects to these promotions, even far more dangerous: it kills the price perceptions.
"Consumers who were offered free bread sticks as a promotion from a pizzeria said they’d be willing to pay $5.06, on average, for them once the promotion ended, only slightly less than the amount consumers were willing to pay when there had been no promotion, say Mauricio M. Palmeira of Monash University in Australia and Joydeep Srivastava of the University of Maryland. By contrast, people who were offered the bread sticks at a discounted price of 50 cents were willing to pay just $2.76 once the promotion was over. "
“Since consumers believe the value of a free product is likely to be consistent
with the value of the purchased product, pairing a free product with a high-end
product may very well increase perceptions of its value,” write authors Mauricio
M. Palmeira (Monash University) and Joydeep Srivastava (University of
Maryland).
These days, companies often offer bonus products for free or at a low discounted
price with a required purchase. For example, high-end cosmetics companies like
Lancôme or Clinique offer free gifts with the purchase of a full-priced product.
In one study, participants were offered a free or discounted package of spaghetti
with the purchase of a jar of organic tomato sauce for $8.95. They were then
asked how much they would pay for the spaghetti individually. People offered
free spaghetti were willing to pay an average of $2.95 for it, but those offered the
spaghetti for $.50 were only willing to pay an average of $1.83.
When a free product is paired with an expensive product, consumers assume it is
worth more than if it was offered at a low discounted price.
For example, if a
luxury jeweler offers a free bottle of wine with a purchase, consumers assume it
isn’t cheap. But, according to the authors, customers might assume the same wine
is cheaper if the jeweler offers it for $1.
“Promotions with low discounted prices devalue products more than free offers.
In fact, free offers may not devalue products at all when they are paired with an
expensive purchase, as consumers will use the price of the focal product to
estimate the value of the supplementary product,” the authors conclude. “If
Mercedes-Benz promotes a car with a free GPS system, we expect the GPS to be
high quality,” the authors explain. "
When you see discounts over 50% off the price tag, how could you consider the standard price tag? You expect to buy your product 50% off. And once you fell in the promotional trap, you are doomed. It is very unlikely you would be able to get out of it.
Alexandre Bompard has been the CEO of la Fnac for several years, and is right now in a great position:
He has been able to grow its sales despite technology markets plumetting
He has launched a merger with French competitor Darty to create a leading European retailer
He has been able to set back up profitability of its company despite tough competition, especially from Amazon.
Alexandre Bompard was invited by French TV channel BFM TV, to discuss mostly about Sunday openings (a law has recently passed in France allowing retailers to open on sunday in specific touristic locations, if an agreement with the union has been set).
Alexandre Bompard actually explain that with the Internet competition, he has no other choices but to open on sundays, as Amazon or Cdiscount never closes, and customers are eager to shop on sundays.
But what I really wanted to highlight in this video, is how Alexandre Bompard has been able to leverage Fnac's brand in order to open new categories, in order to find alternatives to declining markets.
The two historical markets of the Fnac where going in limbo:
Cultural goods, with digitalization of music (with online streaming services like Deezer), videos (with video on demand services like Netflix), and books (with e-books like Kindle, even though standard book remains the larger part of the market)
Hi-fi equipment with a maturing marketing which declines in sales and innovation, and is getting tough price competition with E-retailers.
Alexandre Bompard announced it in its interview: The new categories launched now generates 15% of its sales and growing. I let you imagine how the situation would have been without such a move by the company (in 2015, Fnac has kept its overal sales steady).
Indeed, those categories (scrap booking, cooking, drones among others) represents offers that don't canibalize previous one, so you can say that they are 100% incremental.
Moreover, what is interesting to see, is that Alexandre Bompard actually leverages the brand Fnac, something very few retailers do. La Fnac, it is a lifestyle, it is a store concept, it is a customer experience. If you consider that and work on it, then you may add new categories that are related to this lifestyle instead of setting up for your historical product range.
Fnac consider itself, further than the cultural aspect, as an entertainment retailer. By doing so, obviously you can go way further in terms of categories to propose to your customers. And its probably because of these new categories that la Fnac is able to grow its margins even though sales are steady.
Also, Fnac announces that 45% of the sales are linked with both brick & mortar and online activities. Fnac is to me the retailer that has been able to merge both activities by providing better customer experience through both channels.
Nevertheless, one information that did not convince me: Alexandre Bompard explains that they have an edge on Amazon because they are going to have downtown warehouses thanks to their store network, in order to propose 2 hours delivery for their online store. But I believe Amazon is going to work on this plan, and actually are going to invest massively in such warehouses in cities in a near future.
One of the most known technique about Merchandizing is cross merchandizing. How it works: you place near a best selling product a complementary product, to lift its sales, so you can add an extra product in the basket of the shopper.
For example, you place the batteries near the remote control sections for the shopper to get both. Most of the time it is highly beneficial, as the complementary product is more profitable than the best selling one.
Now it does not mean that you should add cross merchandizing all over the store. Indeed, because if you use too much of this technique, you may annoy customer. Moreover, the cross selling product must be consistent with the product where it is placed near. Here are bad examples I found during different store checks.
Why would you place lipsticks near the perfume section? Same thing: Batteries near the milk area?
Obviously you may have impulsion purchases anywhere, but by having such cross merchandizing initiative, you are just showing out how complex your offer is, and you are not helping at all your customers.
Two good examples now: The cooking books near the frozen veggies at Picard (which makes sense to use them), and the coffee machine cleaning products near the coffee section. By doing so, you are clearly helping the customer in the purchase and the usage of its product.
But once again, you should be careful at having a clear sense at cross merchandizing initiatives.
Simple ideas are most of the time the most efficient ones. I love to discuss about the history of business, and this is a great story about how DHL has started its business.
To make short stories short: DHL bought free airplanes tickets to people in order for people to deliver fast important documents with them.
Somekind of the new economy, somehow... Very inspiring.
Very interesting movie to watch, detailing Amazon's history, and key factors of success. It is pretty well detailed. I believe you should watch it to understand a bit better what makes Amazon so special.
I wanted to share with you this very interesting article I saw. Job search is like a marketing effort: you are selling yourself, you have marketing content (your resume, your LinkedIn Profile, your cover letter...), you need to advertize at the best place, send direct marketing content (email, mail, phone call) to the accurate target...
And sometimes it can be quite deceiving. Because when you check at all the different job positions you may be interested in, you will never be experienced enough, or have worked in the field you would have liked, or have the proper degree required... But as we all know life is more complex than just filling the requirements of a job descriptions. On top of that, most companies are seeking for higher profiles than what they need.
Saying that, I read the article I told you about. I love the approach the guy have. Indeed, more than your career path, what really matters as a recruiter is to have a go getter that will be able to get the job done.
"Step 3: Do one pre-interview project per company
Now that you know what the company expects you to do day to day, you can actually do it ahead of time and prove to them that you can solve their problems.
When I was applying for a business development role for Kiip, I pitched a few companies on forming partnerships with them, and introduced them to the biz dev team. I ended up getting an offer.
When I was applying for product development related positions, I ran quick usability tests on companies’ products, documented my process, created some design suggestions and sent it to the head of each design team. Here’s an example of what I did for Airbnb.
This sort of thing got me interviews at major tech companies like Quora, and it even led to Shutterstock creating a position specifically for me.
My friend Francine Lee did something similar (but MUCH more in depth) for Dropbox, and then got a job there."
What I like about the idea is:
You show how motivated you are
You show you have a clear understanding of the job you will need to do
You show you can deliver results fast
I believe you should really focus on that idea.
This is actually an advice I give to people asking me some help on how to get a job in the retail business. I tell them to go in store and do an extensive report of what they have seen:
Take pictures of interesting merchandize idea
How the category has been set up
How is the pricing? Compare with specific prices you would have check previously in other stores
Check the competition of the store and how the store has adapted to it
Has there been any stock out? Has there been anything that an expert would have seen (such as a missing leading product)?
It has been a while I wanted to share with you an interview I found about Paul Polman, CEO of Unilever, about leadership. This is a must read article, because it gives a clear and great insight. I love the philosophy and the way he perceives his position, and the way to conduct its business.
A great CEO indeed must be able to prepare the future rather than managing the present.
"My career has been a level of serendipity all along. I've never planned anything out more than a few years. All the places we lived—the 12, 13 countries—and the companies I worked for were a combination of circumstances."
I believe that in our nowadays world, serendipity is indeed a factor of success. In a constantly more connected & changing world, you need to open your eyes, share as much as possible, in order to size new opportunities that would not have come to you, or have not been planned.
New generations seeking for purposes:
Paul Polman points out clearly the challenge to find purposes for businesses in order to hire top talents. Why? Because new generations are seeking for ways to improve the world. And in fact, working for a company that don't share the same value, in the end, don't have much future.
"But, for example, if you work at an insurance company that sells premiums you wouldn't even sell to your wife or your mother, how happy would you feel to work there? It's going to eat you up over time. It might last a few years, but it doesn't attract the best people, and it certainly doesn't create the energy and engagement that you need to be a long-term performing company."
Having a clear purpose matters as much as the paycheck, and as Paul Polman said, it is an issue that some financial companies have, now top talent looking for other career options.
How to pursue long term goals rather than short term
Paul Polman has been known in the industry for having abandonned its exhaustive quaterly report. Why has he done it? Because it was shifting the focus of companies on short term goals fix, rather than long term more efficient goals and actions. He also says that by dropping quartely results cleaned its shareholder profiles from some short term speculators.
"The issues we are trying to attack with our business model and that need to be solved in the world today—food security, sanitation, employment, climate change—cannot be solved just by quarterly reporting. They require longer-term solutions and not 90-day pressures."
About the real focus of a CEO
The philosophy of the CEO position of Paul Polman is interesting. He believes (and I agree), the job of CEO is not to do by yourself, but to let people do for you.
"The moment you discover in life that it's not about yourself, that it is about investing in others, I think you're entering a steadier state to be a great leader. Because above all, I think the main quality of a leader is to be a human being. There's no reason you are special because you happen to have this job or this office or these responsibilities."
I totally agree with the article. Inserting samples, customized messages or promotions could be a highly performing move, for 2 facts:
The event happens once the customer receive its package, so therefore a highly emotional event. Hence it is a timing when the customer is highly receptive to your messages.
Because, if you are creative enough, you may leverage the touching sense of the customer. When you are an e-merchants, you have rare occasions to have contact with customers that are not remote. At this time, you actually materialize the relationship.
I like the examples they give. Indeed, you don't necessarily need to stick with the promotional coupon technique. It is actually a great way to create added value to customer and create real brand preference. This is the reason why I like the personnal note example.
1. Discount Offers
2. Product Samples
3. Small Gifts
4. Thank-You Cards and Personal Notes
5. Product Review/Share On Social Media Request
I actually found this interesting video showing how Costco was cheaper than Amazon, offering then more added value to Amazon.
For those who read this blog often you know that I love Costco. But I don't want to write about how Costco could or could not be "Amazon Proof". To be "Amazon Proof", you don't need to copy Amazon, or to try to beat them at their own game, by expanding more your product range, or to be cheaper. You need to find a strong concept to rely on.
Costco for instance, has a membership short bulky product range concept, and hence is able to provide a clear service with a clear added value to customer. But you have other concepts that in my opinions are "Amazon Proof", like Ikea and its furnitures in kit concept, or some clothing stores like Zara or Primark.
This is also the reason why is developping right now some new services to bring extra added value thanks to its Amazon Prime service, not to compete solely on price, but to create added value despite not owning brick & mortar stores.
If you are a retailer, you need to get a clear and unique offer in order to stand out of the competition, and therefore compete with online actors.
