How do you know when it?s time to do a reset? Some of the signs are obvious: big gaps on the shelves at the end of the day and customers complaining of stockouts, while other items languish under a thick coat of dust or freezer burn. Perhaps you?d like to make a bigger commitment to new products, but don?t know where you could possibly shoehorn them into your store.
Other signs are less obvious. Some are deeply hidden in scanner data from your store and in the minds of shoppers. Mining that data, and doing the hard work of designing a store to meet consumer needs, can pay off enormously in sales and profit growth, says Bob Burke of the Natural Products Consulting Institute in Andover, Mass.
?The most important factor is how to best satisfy your customer,? he says. Burke suggests doing a little math before undertaking the heavy lifting of a reset. ?Most people begin by allocating space on a ?space-to-sales? ratio, and then tweaking for local customization,? he says.
Space-to-sales is a key metric in other areas of category management, including pricing, promotional strategies and overall store positioning, Burke says. Its benefits can include improved relationships with vendors, lower costs and a more nuanced understanding of customer needs.
To calculate space-to-sales, you will need SPINS data, which shows national trends, and your own store?s data, which shows local trends, for the subcategories you?re thinking about resetting, according to Burke?s self-published book, The Sales Manager?s Handbook.
In each subcategory, determine its percentage of total category sales by both dollars and units and then divide units by dollars. The resulting dollars-to-units index will show you which products generate fewer dollars per unit than averageâany product with a $/U index of less than 100 can be considered ?price-driven.? The higher the index over 100, the more premium-priced the product is within its category.
Then, by comparing national and local results, the retailer can see which subcategories lag behind national trends in dollar and unit volume, which are steady performers and which are on fire.
Another source of data: paying attention. This notion is underscored by retail anthropologist Paco Underhill, author of Why We Buy: The Science of Shopping (Simon & Schuster, 1999), who gleans information about people?s shopping habits by following, videotaping and taking notes on thousands of shoppers every year.
Underhill found that seniors and children buy (or influence the buying of) a disproportionate amount of pet treats. Yet supermarkets stocked them on the top shelf. ?Our cameras caught children climbing the shelving to reach the treats? and an elderly woman batting them off the shelf with a box of aluminum foil, Underhill writes.
Independent retailers don?t have access to Underhill?s sophisticated data-gathering methods. But neither do they experience the headaches of stocking what a faraway headquarters buyer tells them to stock. And they have the ability to pay close attention to how people move through the store, what they ask for and what they complain about.
By listening, you may find out whether it?s smarter to organize sets by product type or by brand. Are customers asking for Annie?s Homegrown and Fantastic Foods, or are they asking for mac and cheese and rice pilaf? If the former, Burke says, consider blocking the set by line and putting all the Annie?s and Fantastic products together.
Jay Jacobowitz of Retail Insights in Brattleboro, Vt., says retailers should consider the big current trend in grocery shopping: meal solutions. ?The latest thinking about the use of space for stores is to facilitate assembling meals,? he says. That could range from regularly changing displays, such as end caps, to cross-department thinking, such as merchandising cheddar cheese next to the apples, to major (and expensive) design changes, such as putting cold cases in the pasta aisle so that frozen ravioli, fresh pasta and sauces, grated cheese, bunches of basil and jars of garlic all live together.
?Displays in the front end of the store, including end caps, should be rotated weekly in large stores, biweekly in medium stores and monthly in small stores,? says consultant Danny Wells of Vacaville, Calif. ?The displays need to be left long enough to deliver multiple impressions, but rotated frequently to keep the themes fresh.?
How does a smaller operator get help? Big supermarkets send planograms from headquarters like Moses descending from Mount Sinai with the Ten Commandments engraved in stone. Small store managers, by contrast, are on their own.
Distributors, brokers and manufacturers are only too happy to help. This may concern skeptical retailers who worry about product bias. But your store?s primary distributor can be a good first line of contact, especially if you plan to overhaul the whole store. Big distributors will work with retailers to develop floor plans, planograms and stock for every category because they work with so many manufacturers and know what deals are available. They will coordinate staffing of the actual reset with brokers and store personnel. Regular participation in resets means the distributor rep has an accurate idea of the kind of time required.
?Distributors are there to help,? says Tara Estabrook of Indigo Natural Marketing and Sales in San Rafael, Calif. ?This is one of the many reasons why having a primary distributor who a store sends the majority of its business through will provide a store with services as well as discounts.?
Major manufacturers in the category are sometimes designated ?category captains? by larger retailers, Burke says. ?The idea is that they stand the most to gain by growing category sales. They need to be objective in their recommendations in order to be credible.? Many companies offer a new store-opening deal and a reset deal, and can provide written recommendations for product sets, posters and consumer promotions like brochures or sample-sized products, Estabrook says.
Brokers come with an agenda, but that?s not necessarily a bad thing, Estabrook notes. They will advocate for the lines they represent because that is how they are compensated. But their success depends on a positive relationship with stores, and a professional broker will bring expertise and an extra set of hands to the reset project without being pushy.
?The way to avoid having a person be inappropriate, such as pushing to put their line on a shelf where it doesn?t belong or bringing in SKUs that may not be a good fit for the particular store, is to only invite brokers who already work well with the store personnel, whose products the store will want to bring in, in large measure anyway,? Estabrook adds. ?The best brokers are those who not only advocate for their lines but are willing to put in hours on whatever lines need to be put on the shelves.?
What causes problems to crop up? Space constraints, especially in ?fixed? displays such as refrigerated and frozen, Burke notes. ?Retailers sometimes find it difficult identifying which items they can drop with minimal consumer distress to make room for the promising new ones.?
Bad coffee during middle-of-the-night resets, Estabrook suggests, adding that orders that arrive late or mispacked can be costly and time-consuming. ?There is no substitute for good planningâit saves lots of time and lots of money,? she says.
Natural Foods Merchandiser volume XXVI/number 5/p. 20, 22