Optimizing Checkstand Merchandising

Transcription

1 Optimizing Checkstand Merchandising Maximizing Shopper Interaction in a New Era of Technology Retail Conference June 13,

2 The Future of Retail Checkout: No Checkout at All? People have said when checkout is working really well, it will feel like stealing." Apple Store Source: The Atlantic, JOHN TIERNEY MAY 9,

3 The Future of Retail Checkout: No Checkout at All? Amazon Go 3

4 The Future of Retail Checkout: No Checkout at All? Panasonic Retail Lawson outlet in Osaka, Japan 4

5 Current State The Checkouts We All Know and Love? How is the Current Environment Optimized Until the Market is Disrupted? Presentation Goal: Strategies for Optimizing the Current Retail Environment and Develop Solutions for the Future Market Disruptors 5

6 Current State Full Service Checkstands Low Investment, Highest Conversion Rates, Strongest Retail Profit Generators Front End Shopper Profile - Grocery BUYER CONVERSION ANNUAL PURCHASE FREQUENCY Front End SPENDING PER TRIP ANNUAL Front End SPENDING 81-84% 8.9 $2.86 $25.45 Front End Impulse Shoppers are Critical for Basket Building and Margin Contribution Source: Kantar Retail Shoppergenetics Latest 52 Weeks Ending December, 2016, Front End Focus 6

7 Research Methods FEF Relies on Several Methods Individual Pages Contain Detailed Research/Data/Methodology Footnotes In Store Video Observation (conducted by VideoMining) Primary Metrics: Conversion Rates, Consumption & Shopping Behavior In-store video (including facial recognition) captures consumer behavior T-log data matched with video to understand purchase behavior N = Front End trips 4,173,178 National Sample of Grocery Retailers Mobile Eyetracking (in collaboration with Indiana University) Mobile Eye Tracking Device (eye glass mounted) used to capture visual attention Exit interviews: Shopability & Attitudes/Shopping Questions N = 313 National Sample of Grocery Retailers & Lab Research C/O Category Performance Data for C/O Consumption (provided by IRI) National data for Grocery COT 4 5 Total Grocery COT Department Data for C/O Categories = C/O + Gondola (provided by Nielsen) C/O Space Allocation Audits (conducted by TIR) Detailed Category Measurements National Sample of Grocery Retailers 7

8 Front-End Check stands Deliver $6.5 Billion in Supermarket Sales Estimated 2015 Front-End Sales Dollar Sales % Change vs. Year Ago Total Store Front-End Check Stand 3.3% 1.7% * FMI Supermarket Facts 2014/2015 ** Front-End Focus $6.5 Billion Front-End Share of Total Store Sales = 1%** The Front-End Check Stand is Growing at a Rate Almost 2 Times the Total Store Growth Rate 8

9 Front-End Power Categories Are Defined By Key Metrics High performing retailers consider 4 essential shopper demand criteria when allocating space 1 Household Penetration 4 $ Share of Front-End Sales Front-End Power Categories 2 Frequency of Purchase 3 Impulsiveness of Purchase Source: Front-End Focus, DHC Analysis 9

10 Items Consumers Purchased Most Were Gum/Mints, Followed by Candy, Beverages and Magazines Did you purchase an item at the checkout today? Checkout Purchases % of Respondents 81% No 19% Yes Candy Gum / Mints Gum/ Mints Magazines Magazines Carbonated Soft Drinks 11% 11% 32% 46% 46% 82% 88% 90% Non-Carbonated Drinks 35% 58% Salty Snacks 24% 38% About 20% of shoppers purchase a checkout item on any given day Meat Snacks Batteries 4% 0% 33% 39% Phone/Gift Card 3% 52% Cigarettes/ Tobacco 8% 14% Source: TIR In-Store Survey, November 2015 Purchased Today Purchased Ever 10

11 Confectionery, Beverages and Salty Snacks Are Purchased Frequently How frequently do you buy these products? (% Respondents purchasing once/month or more) Candy 49% Gum/ Mints 60% Magazines 35% Carbonated Soft Drinks Non-Carbonated Drinks 71% 68% The Power Categories Lead the Way in Purchase Frequency Energy Drinks 55% Salty Snacks Meat Snacks 62% 67% Razors/Blades Batteries 11% 11% Phone/Gift Card 23% Source: TIR In-Store Survey, November

12 Candy, Magazines, Books & CDs/DVDs Were Items Most Purchased on Impulse Candy, Magazines and Beverages are at the top of the impulse spectrum While Books & CDs/DVDs were impulsive purchases, only 2% of consumers purchased those categories at the front-end checkstands Recommendation Do you plan to buy the item you actually purchased before coming into the store? (% Respondents purchasing category on impulse) Candy Candy Gum/ Mints Magazines Magazines Carbonated Soft Drinks Non-Carbonated Drinks Energy Drinks Salty Snacks Meat Snacks 48% 53% 57% 56% 67% 69% 78% 84% Front-end focus should be on Categories that: Are impulse-driven Many people buy People buy often Batteries Phone/Gift Card Razors/Blades Cigarettes/ Tobacco Books Audio/Video/ CD/DVD Audio / Video / CD 14% 20% 19% 29% 54% 58% Source: TIR In-Store Survey, November

13 Importance of Front-End Sales to Total Store Sales Varies Greatly by Category % of Total Store Sales Generated By Front-End Checkstands* Front-End SALES % CHANGE Total Store* Carbonated Beverages 9.9% 2.9% -0.2% Chocolate Candy 43.3% 3.4% 1.7% Non-Chocolate Candy 25.8% 4.7% 2.5% Gum 88.6% -1.4% -1.6% Energy Bars 29.5% 7.6% 0.5% Magazines 69.0% -9.6% -8.5% Bottled Water 12.0% 2.6% 8.2% Salty Snacks 1.4% 3.0% 3.7% Batteries 20.4% -2.8% 2.0% Razors/Blades 14.4% 5.8% 3.5% Focus attention on front-end checkstands on Magazines, Gum and Mints since most of the total store sales come from the front-end checkstands Source: *Nielsen All Grocery Store Sales, 52 weeks ending Sept. 24, 2016 #IRI Front-End Sales, 52 weeks ending July 10, Magazine sales data comes from Magnet data 3 quarters ending Q The information contained herein is based in part on data reported by IRI through its Market Advantage service as interpreted solely by Time Inc and/or Dechert-Hampe & Co. (Copyright 2013), Information Resources, Inc.). The information is believed to be reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI. 13

14 Beverage, Confectionery, & Magazines Drive Front-End Sales Dollar Shares of Front-End Checkstand Sales Beverages Carbonated Energy Drinks Non-Carbonated Drinks Bottled Water Confectionery Chocolate Candy Gum Mints Non-Chocolate Candy 15.2% 11.0% 5.1% 9.3% 9.1% 4.1% 4.9% 16.7% 34.8% 40.5% 84% of total checkstand sales comes from 3 Power Categories Magazines 8.7% Salty Snacks Batteries Razors/Blades Energy Shots Meat Snacks Energy Bars 3.0% 1.7% 0.7% 1.5% 3.3% 5.8% Source: IRI 52 weeks ending July 10, 2016; DHC Analysis The information contained herein is based in part on data reported by IRI through its Market Advantage service as interpreted solely by Time Inc and/or Dechert-Hampe & Co. (Copyright 2013), Information Resources, Inc.). The information is believed to be reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI. 14

15 Best Practice: Manage The Front-End Based on Consumer Buying Behavior Low Scores Mixed Scores High Scores Health Items Razors/Blades Baked Goods Lip Care Oral Care Household Products Audio/Video/DVD Other Snacks Beauty Care Grocery Products Film/Camera Supplies Children s Items Nutrition/Energy Bars Books Maps/Horoscopes/Puzzles Salty Snacks Batteries/Flashlights Cookies/Crackers Nuts/Seeds Meat Snacks Gift/Phone Cards Tobacco Accessories Energy Shots Confectionery Beverages Magazines Source: Front-End Focus Recommendation Focus on key categories that Have high Household Penetration Have high Purchase Frequency Provide higher Impulse Sales Generate higher Front- End Sales 15

16 Dollar Sales Importance Does Not Match The Amount of Linear Space That Front-End Categories Receive $ Shares of Front-End Checkstand Sales* Share of Front-End Linear Space (All Lines) # Space to Sales Index Over/ Underspaced Beverages 40.5% 8.1% 20 Under Candy 16.7% 24.1% 144 Over Gum 9.1% 14.0% 154 Over Mints 4.1% 5.0% 122 Over Magazines 8.7% 13.8% 159 Over Salty Snacks 3.0% 4.6% 153 Over Batteries 1.7% 2.8% 165 Over Razors/Blades 0.7% 1.1% 157 Over Meat Snacks 3.3% 1.1% 33 Under Energy Shots 1.5% 1.0% 66 Under Energy Bars 5.8% 1.4% 24 Under Best Practice Beverages are underspaced while many other categories are overspaced and in need of rationalization Source: *IRI 52 weeks ending July 10, 2016, DHC Analysis; #TIR Audits, Sept The information contained herein is based in part on data reported by IRI through its Market Advantage service as interpreted solely by Time Inc Sales & Marketing and/or Dechert-Hampe & Co. (Copyright 2013), Information Resources, Inc.). The information is believed to be reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI. Without limiting the generality of the foregoing, specific data points may vary considerably from other information sources. Any opinions expressed herein reflect the judgment of Time Inc Sales & Marketing and/or Dechert-Hampe & Co. and are subject to change. IRI disclaims liability of any kind arising from the use of this information. 16

17 Seven Key Insights for Checkout Optimization The power categories of Beverages, Magazines & Confectionery generate over 84% of front-end checkout sales Improving C/O Shopper Conversion by 1% nationwide could add over $65M in Revenue Annually ($1,707 per store) Merchandising the Power Categories on every lane is critical Shoppers spend more time looking at the Customer Left Arm & ROS top tiers when approaching checkout. Power Categories must be available in these areas Secondary displays detract significantly from primary end-cap displays 6 7 Most C/O categories are not growing in step with historical growth rates; ensure that space designations are justified by the categories with the highest sales potential Focus should also be provided on those categories that get a higher percentage of their total store sales from the front-end checkouts. Those categories are primarily Magazines & Gum. 17

18 Implications/Recommendations - Magazines Magazines get 69% if their total store sales from the front-end checkouts so retailers should focus on getting key titles on every lane Magazines should be located on 100% of Checkout Lanes to maximize sales (C/O Performance Index 107) Maximize Checkout sales by placement of Magazines both In-Line and on End-caps (C/O Performance Index 114) Magazines should be allocated at least 14% of Checkout Space to maximize sales (C/O Performance Index 114) OTB Space Productivity is maximized when Magazines, Gum, Candy and GM are merchandised in this area (C/O Performance Index 103) 90% of shoppers rate Magazines as somewhat, very, and extremely important to carry on the front-end so once again, make sure that key titles are available on all lanes Secondary displays in front of Magazine endcaps significantly reduce viewing time of the primary display and negatively impact total sales of the checkout 18

19 Questions? William A. Romollino III Vice President, Shopper Insights 6 Upper Pond Road 1st. Floor Parsippany, NJ Phone: Mobile: Fax: