Accelerating Sales & Profits. Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail & Shopper Retail & Shopper 1

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1 Accelerating Sales & Profits Herb Sorensen, Ph.D., Scientific Advisor, TNS 1

2 Small Levers, Big Impact 3-6% Lift in 3-6 Months For the retailer a little longer for the brand.

3 Tiered Sales Customers Supplier Retailer Shopper Consumer

4 Retailer Profits (US supermarkets) Supplier funds slotting fees, promos, trade allowances Float interest on cash received, pending disbursements Real Estate buying, developing, managing property Margin on sales to shoppers

5 The BIG Problem... Up to 80% of the shoppers time in the store is WASTED!!!*... it is also a BIG Opportunity!!! *The 'Traveling Salesman' Goes Shopping: The Efficiency of Purchasing Patterns in the Grocery Store 5

6 Twin Sales Barriers Where is the...?... which one do I want?

7 Very attractive but not very selling!!!

8 Sorensen s First Principle of Retail Sales The faster you close sales the more you will sell!!!

9 Annual Store Sales (millions) $40 $35 $30 $25 $20 $15 $10 $5 $ Means more Sales!!! Speed of Closing Sales (seconds per dollar) Faster Selling! 50 40

10 The Holy Grail Active Retailing To know exactly what each shopper wants, or may buy, as they come through the front door. To deliver that to them right away, accepting their cash quickly and speeding them on their way.

11 The Amazonification of Walmart 11

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13 The Faster You Buy, the More You Buy Shopper Efficiency H 1 : Decrease in Purchase Time results in an increase in basket dollars and items Shopper Efficiency Regression A one second Basket $s Purchase Count Coeff t Coeff t Intercept ** Avg Purchase Time *** *** Trip Basket Length Size by *** *** Trip Duration *** *** decrease in average Purchase Time increases $0.21! Prob > F R Sq Adj R Sq *p<0.10 **p<0.05 ***p< A one second decrease in average Purchase Time increases Item Count by

14 Decreasing Purchase Time results in larger baskets more effectively than does encouraging longer trips

15 Faster Buying Results in More Purchases Avg Purchase Time (Seconds) Total Basket Size $ $ $ $53.8 6

16 Planned Purchases Take as Long to Buy as Impulse Purchases

17 The Three Key Things to Know 1. How many items does the shopper want to buy or you might be able to sell them? 2. Exactly what are those items? 3. How best to sell those items locations and techniques?

18 Most Common Number of Items Purchased (Globally) All classes of trade: big stores, little stores, hyper-markets, auto parts, drug stores 18% 16% Mode (most = 1) Basket Sizes Share of Shopping Trips 14% 12% 10% 8% 6% 4% 2% Median (half = 5) Mean ("average = 12") 0% Items Purchased Supermarket scale

19 Spending Speed ($/minute) $8.00 $6.00 $4.00 $2.00 $0.00 Quick Trippers Do More Spending Than Shopping! Shopping Trip Length (minutes)

20 1. Focus on the small basket

21 Contribution of Single Items Item Share (Count) for the Total Store 1.00% The BIG Head to Total Sales 0.75% 0.50% 500 out of 32,000 items contribute 25% of total store sales 0.25% The L - O - N - G Tail 0.00% Rank of Single Items

22 Focus on the Few Products that Sell the Best! (The BIG Head) # 3% 1,000 SKUs Big Head All Others $ 33% 97% By Count 67% By Dollars Think About Those few Items, NOT Categories

23 Item Management... Well, we have never been a category company that was decided long before I came... We look at it item by item. That doesn t mean we don t have a fair representation with a category. But usually it s only the top five or six items in that category, and we look at them as items! $1 million per day in their top store! Charlie Burnett, COSTCO If an item doesn't pull its weight in our stores, it goes away to gangway for something else. Trader Joe s What's not to like? They're very good retailers [Trader Joe s], and we admire them a lot. Jim Sinegal, co-founder CEO, COSTCO

24 2. Focus on the Few Products that Sell the Best! (The BIG Head) 300 items dominate total store sales. 30 items dominate total category sales 3 items dominate total brand sales Typical household buys only items per year! Half of those, , they buy regularly. Sell them what they are buying.

25 Item Management... So our traffic is up, our sales are up. We re in the 3% range right now over last year... March 2010, Drug Store News Charlie Burnett, COSTCO

26 3. Two Options for Accelerating Sales of Items Move the items to the shoppers mostly by secondary placement Focus on, and close on the items... wherever they are

27 No technology!!! Call out the top sellers

28 Total grocery sales up up 4% for the 1 st st quarter 2009 over 4 th th quarter 2008!!! Item Lift After Top Sign Corona 16% Angel Soft TP 67% Store Brand Butter 324% Ice Cream 116%

29 For the Brand...

30 For the Brand...

31 Mid-Caps: End-Caps in the Aisle 23% lift plus halo effect!

32 Break-Through Tools Graphic distinction (don t add to clutter) Top Seller - #1 (use social forces) New (novelty minimizes clutter filter ) Price (communicates VALUE!) Personal Shopping Assistant

33 Personal Shopping Assistant ( Internet in the Store?)

34 ... an array of mobile devices... continue their inexorable march from cellphone novelties to virtual personal assistants. USA Today, March 31, 2010 The Convergence of Online, Mobile and Bricks-&-mortar (COMB)

35 Personal Selling Fundamentals Determine what people want Narrow their choices to a manageable few Make the process easy focus on selling the few Upsell them on related items Close as quickly as possible

36 theshopper.com Read the Views (and subscribe! ) Read my RetailWire blog! Receive notices on Twitter! herb.sorensen@tnsglobal.com