11
Game-Changing Retail: A Manifesto
In the months since completing the draft of this book, I have seen growing interest in the practical application of the findings reported here to the opportunities at retail. This manifesto is a distillation of critical action points that will lead to double-digit sales and profit increases, and which have actually led some retailers to achieve as much as five times more sales over the past many years.
The adage, “The good is the enemy of the great,” is possibly nowhere more applicable than in retailing. With a global population nearing seven billion, the world demand for goods and services is swelling. The movement from developing societies (traditional retailing) to highly developed societies (modern retailing) continues apace. Demand alone has been the driving force behind good retailing, globally.
A striking feature of good retailing has been almost a single-minded focus on matching the right selection of merchandise to the customer base, with little or no regard to the time it costs shoppers to acquire the merchandise. Good retailers, with their suppliers’ complicity, regularly squander (waste) 80 percent of the shopper’s time. Great retailers will make productive use of that “lost” time.
A new movement in retailing will change the global game. The principles outlined next are listed roughly in terms of urgent priority for those who aspire to survive and thrive when their competition is not simply good, but great! In most cases, the advance is one of recognizing important distinctions, and responding appropriately, and distinctly, rather than leaving it to shoppers to sort it out for themselves. Although all of these principles are relevant to both retailers and their brand suppliers, the first five deserve the greatest attention by retailers, whereas the last five are most relevant to suppliers:
1. Focus on the short trip. For supermarkets around the world (the same principle applies to all classes of trade), half of all shopping trips result in the purchase of five or fewer items, with one being the most common. These short trips typically account for one-third of store sales. The new strategy is to increase the size of each of those baskets by one or two items. Quick trippers spend money very fast, and getting them to buy one or two more items is far easier than motivating stock-up shoppers to buy ten or twenty more items. This focus, focus, focus on the quick trip could deliver an easy 30 percent sales lift (and a lot more when the synergies with other types of trips become apparent).
2. Focus on the “vital few” items that drive success. Fewer than 1,000 items, and perhaps as few as 100 to 200, make the difference between good retailing and great retailing. Which ones are they? Just as the store transaction log tells how many items are in each shopper’s basket (Focus 1), it also identifies the exact items. Dump all the baskets together, sort them by item (SKU, UPC, EAN, PLU, and so on), count each item, and rank them from the highest selling to the least sold. Your shoppers are voting every day for what they want to buy. Good retailers don’t know (or don’t care) about this, but great retailers do. Good retailers are obsessed about what they (and their suppliers) want to sell to shoppers. Great retailers are obsessed about what shoppers want to buy!
3. Display the “vital few” (or the “big head”) along the dominant path your shoppers take, rather than expecting them to find them. Good retailers expect shoppers to find the merchandise they want; great retailers learn all they can about what the shoppers want, and take it to them! This, of course, presupposes some modicum of understanding of the shopper’s dominant path. Good retailers are unsure; great retailers have this down pat. Points #2 and #3 are components of the new science of item management, a far-sharper instrument than the category management used by all good retailers. Point #3 distinguishes high-value real estate, within the store, from the rest.
4. The most important promotion is place, not price. In a typical store, probably 2 percent of the total items in the store at any one time are being promoted on end-of-aisle displays or other secondary promotional displays. This 2 percent of items may constitute a full 30 percent of all the sales in the store. However, half the shoppers purchasing an item from one of these promotional displays are unaware that it is at a reduced price. Of the half who are aware, half of those really didn’t care about the price. Good retailers are locked in a mindset that price considerations dominate shopping. Great retailers realize that there are other currencies that matter to shoppers in addition to money (time and angst). Great retailers focus on value and convenience: Convenience means fast, fast, FAST! Using less of the shopper’s time will lead to more sales. Hence, Sorensen’s primary principle of retail sales is the faster you sell, the more you will sell.
5. Open space attracts! Shoppers compete with products for space in the store. Good retailers might be oblivious to this competition, and freely tip the balance in favor of the products over the shoppers. Jamming the store with products leads to lots of narrow aisles (“aisleness”) and psychic discomfort for shoppers. Great retailers refuse to sacrifice shopper space, and use wide promenades to lead crowds of shoppers through a speedy, efficient, high-dollar trip. The allocation of open space is of paramount importance in store design—and there is no single recipe for success.
The following five principles are more closely aligned with the concerns of brand suppliers:
6. Balance the role of your store’s vital few with the rest of your extensive line. Keep offering the “long tail,” but make it easier for the shopper to reach the “big head.” Although the sales of the “other” 30,000+ items, the “long tail,” do add up to significant sales and profits in aggregate, on an individual basis they are not terribly consequential in total sales. They play a far different and distinct role: Shoppers are attracted to the store by the long tail, but when they get there, they buy the big head (the vital few). The 50 million books Amazon carries encourages me to think they will probably have the few a month that I want. But they would be out of business (I think) if each time I came through their virtual door, they started from scratch to identify what I most likely want to buy. This is the challenge at all retail stores, whether online or offline: How to have a huge product selection (very attractive to shoppers) without suppressing sales by burying the vital few in that massive selection? The key is distinction, so that the shopper can immediately reach and recognize the vital few.
7. Paying to get your own vital few into favorable placement within the store makes sense, depending on the “reach” of the location. To make a sale, you must reach the shopper with the product; then the product must stop shoppers; and then you close the sale. As noted in point #4, place is more important than price. In fact, charging cut prices at high-value promotional locations devalues both the real estate and the brand. Selective price promotion would be more appropriate for long tail items displayed in-aisle, and particularly for those items that are closest in sales rank to the vital few.
8. Focus on the vital few within your brand, and that of your competition. Some of your own vital few will not make it into the retailers’ vital few. Just as retailers can more readily obtain double-digit sales increases for their vital few, so you can more easily turn your top few sellers into super performers than bring up the laggards. Again, long tail principles apply—the long tail attracts, and the vital few sells. Maintaining a reasonable long tail is essential for both attractive purposes, as well as the competitive imperative. Make clear distinctions in your planning and thinking on these issues.
9. Reach you can buy, but stopping power and closing power are inherent to the product, primarily through the package. Both stopping power and closing power can be measured for individual products, as well as categories. The significance is that some products are good at attracting attention, but poor at closing the sale, whereas others are good at closing, but can’t seem to stop the traffic. Besides remedial package design, appropriate shelf management and promotional strategies can increase the stopping and closing power of existing products.
10. Stores have massively excessive verbal communication. Products and packaging are a significant part of the clutter. Using iconic images, colors, shapes, and appropriate emotional totems is a better way to connect to shoppers than more words. Using category reinvention, you can upgrade the emotional feel of an entire aisle or department. The coffee aisle, for example, can be redesigned to give it a café ambiance. Remember, the goal is to make your winners win bigger. This will be more easily done with large displays that you can dominate—appropriate to your vital few. And now on the near and far horizon, digital media, even interactive, is a tool of greatest value to you as the brand owner. This means that you can win even in good retailers. Great retailers will expect and appreciate your cooperation with game-changed retailing!
These are just a few of the principles that can be extracted from the research that informs this book. Although these general principles hold across many retail settings and types of products, precise solutions need to be tailored to the specific context. Above all, great retailers and brand owners continue to experiment. They test to find out what works, and what doesn’t, so they can continue to improve their strategies. This rigorous investigation and testing is how we arrived at the principles discussed previously. Good retailers and brand suppliers, on the other hand, stick with the tried-and-true conventional wisdom. But as the world changes through new technologies, consumer shifts, and new competitors, the great retailers and brand suppliers create the new conventional wisdom and tailor it precisely to their own situations. In that context, the preceding ten points represent an initial hypothesis for this process of ongoing experimentation.