When merchandising become indispensable

Bennet Holmes — Wed, 25 Feb 2009 08:55:00 +0000

The right product, the right place, the right time, the right price and the right quantity.

Consider the usual definition of “merchandising”. For decades, the corner grocer has been slowly transforming into a self-service operation over time in an almost scientific manner.

It must be stated that, with the explosion of competing brands and modern business needs in all areas of commerce, there is a great risk of loss and/or failure unless a minimum degree of order and organisation is maintained.

This is even truer in a hypermarket where there are often 60,000 to 80,000 SKUs (product types) all of which must be placed in a multitude of aisles and on hundreds of shelves. But how? Imagine our poor grocer of yester-year, could he accommodate all this? Probably not!

Profitability can only be maintained by extensive analysis of the positioning of products on shelves, the variety of stock, the quantity of product per “SKU”, etc.

Who takes charge of the merchandising?

A well-designed, attractive point of sale that is customised to match the habits and needs of the clientele increases the sales turnover per shelf and, thus, per SKU. Today, some distribution companies are working hand-in-hand with industrialists in order to increase profitability and, in some cases, the merchandising is completely controlled by industrialists.

From this point of view, brand-name companies, who often work together with several distributors (and who know them well) can help them to be profitable by using their knowledge of consumer habits as well as changes in the preferences of “average” clients but this only works when the competition is not too overbearing and the clientele profile is relatively simple.

On the other hand, many distributors have sought to regain control of their merchandising in order to customise their shelves and selection to the specific nature and needs of their own store. “Geo-merchandising”, as it is sometimes called, is often appropriate because the distributor knows his local clientele best (age, social position, preferences, lifestyle etc.). A degree of “fine-tuning” in accordance with local habits, rapid population development, etc, can greatly improve the merchandising effectiveness.

Industrialists, in spite of their advanced research methods and best intentions, often miss subtle nuances that can harm product sales if they are not quickly detected and resolved.

I am thinking of brand-names that will be seriously affected by the departure of entire regiments of the French Army in certain regions. Good-bye youth, family, celebrities etc. How are they going to manage these rapid changes without a finely-tuned appreciation of the consumption habits and preferences of the remaining population?

Every day they are confronted by a constant change in the “average” consumer profile. In such cases, the industry, the brand name, could never add to a deeper understanding of the local market than the store itself.

Let me give a more general example of the kind of “client knowledge” that is necessary: Carrefour has two stores in western Paris, Montesson and Sartouville separated by only a few kilometres that are designed for two very different kind of clientele. One: wealthy, high-revenue classes. The second: average, younger, “family-oriented” clientele. In this specific case, the selection on the shelves cannot be the same. Many products presented in one would be inappropriate in the other. This is also true for the pricing. The right stock variety, the right pricing, the right spatial positioning and the most effective promotional methods etc. are all very critical issues.

In addition to this, there is the competition of multiple stores!

Brand-names are trying to maintain control over their own merchandising and this has resulted in the creation of “ad hoc” services in the majority of major chains over the last few years as they try control their stock and every other factor that impacts their profitability.

The obsession with “exclusive info”, that they fear may be leaked to an industrialist to the profit of other chains, has probably played a significant role in the creation of these integrated merchandising

Merchandising methods

The purpose of Merchandising with a capital “M”, as described by the Institut Français du Merchandising (IFM), is “to increase product sales by constantly adaptating selection to market requirements and by presenting merchandise appropriately”.

In other words, any method used to help increase product sales, including in-store advertising, studies to determine a product’s ideal shelf positioning compared to its competitors, promotional strategies, aisle head displays, etc., are all among the traditional concerns of merchandising.

Today, merchandising is often integrated into the overall IT system. Everyone is familiar with “Apollo” and “Spaceman” which are widely used in major food retail chains and in industry to connect sales forces and merchandising. When used in conjunction with other software, they also make it possible to manage and plan the product assortment based on store details, as well as product and consumer data.

These same tools can help manage shelf displays, planogram design, or even, on the supplier side, to monitor sales initiatives, while communicating with merchandising software. Initially used mainly in industry, these tools are now widely adopted by distributors and appear indispensable today.

ActiSKU and certain other market solutions come into play well upstream, before implementation of a new marketing concept, before placing a new product on the shelf, before installing new signage or in-store advertising. They are used in the context of marketing studies designed to perfect understanding of the customer.

To be clear: The advantage of ActiSKU is that it provides real-time feedback that frees the user from long processing times for data compilation, unthinkable for research groups today in view of tightened budgets (time is money!). This is one drawback of Flash-based software, which also suffers from excessive download volumes.

The next step for ActiSKU and its successors will be to create the necessary technology “bridges” to other tools (Apollo-Spaceman, etc.) to increase their usefulness and improve marketing methods and research. ActiSKU was designed for such changes, a client need only ask!

ActiSKU - Tag - Merchandising methods

When merchandising become indispensable

The right product, the right place, the right time, the right price and the right quantity.