Jim Hertel of Willard Bishop shares insights on why nearly 25% of the products on today's shelves should be removed -- and what food stores should focus on instead.
To win as a food retailer in turbulent 2011 requires a keen understanding of Top Shopper preferences on a store-by-store basis.
Mid-tier retailers in particular (defined as 25 to 250 stores per chain, and between $500 million and $5 billion per year in annual sales) will need to move significantly in this direction, or be forced to downsize or exit their businesses due to economic and competitive pressures.
So said Jim Hertel, managing partner, Willard Bishop Consulting, in a recent presentation at The Association for Dressings & Sauces and in a follow-up interview with The Lempert Report.
He cited the need for “unrelenting focus on retail productivity and return on investment, most critically in-store space productivity, inventory investment productivity, and in-store labor productivity….SKU-level results vary a lot store by store, but we [observe broadly] that many categories take up space and tie up working capital that fewer than 2% of Top Shoppers shop very often, less than three times per year.” Deodorants, for instance, is one example of a big category people shop for elsewhere, which means convenience sets would suffice and leave space for categories that interest Top Shoppers more.
Why Top Shoppers? They drive 75% or more of sales and even higher percentages of profits at the chains Bishop works with. “Any SKU-work must protect Top Shoppers’ needs,” he stated
Besides better-targeted assortments, Hertel also urged better-planned and analyzed promotional events. “Nearly two-thirds of promoted sales are just price reductions on [items]…people would have purchased anyway. Retailers should focus on categories, products and packages that generate incremental sales, enhance price image and build shopper loyalty.”
Best-in-class retailers do promote less than their competitors, and experience greater efficiencies and promotional lifts, he observed. Yet he cautioned, “promotions that don’t meet minimum savings thresholds (10% on items priced up to $4.99, and 50 cents savings on costlier items) fail to deliver value and often hurt price image.”
Concurring with Hertel’s insights, The Lempert Report also believes the food price rises already evident in 2011 will place a greater competitive focus on trade events this year. Consumers and shoppers will want to see consistent value, and will want to feel that retailers and CPG are working hard to keep their preferred foods affordable.