The Holy Grail of Retailing Active Retailing: Linking Shoppers with Products Faster, for Greater Profits Herb Sorensen, Ph.D.

The Shopper Represents the Consumer at Retail PRE- STORE Brand Brand Equity Equity Pre-Disposition Pre-Disposition Shopper type Type of occasion State of mind Channel choice Pre-planning Retailer choice Consumer Consumer Experts Experts STORE Shopper Shopper Experts Experts Retailer experience Store layout Store dynamics Store atmosphere Shopping style Shopping basket Shopping route In-store advertising Shelf layout P.O.P. TNS Sorensen Signage Promotions The In-Store Research Company Pack standout Pack communication Consumption Consumption experience experience feeds feeds back back into into brand brand equity equity Transaction Transaction Seals Seals Purchase Purchase decision decision

Count the number of times the ball is passed between the players in the WHITE shirts Hidden in Plain Sight!

Agenda Active vs. Passive Retailing Store Design: Seven Rules Merchandise Layout to Target Shoppers Category-Brand-Item: Measure/Manage Performance Partnership: Retailers-Brand Manufacturers-TNS

The Problem... Fewer sales opportunities Increased channels Rise of C-stores Shoppers are more diverse and complex

The Solution...... detailed knowledge of the shopper s behavior in finding, selecting and bringing their products to the checkout. TNS is now the driving force in a global retailing revolution.

Treasure Hunt?

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.

Store Design: 7 Rules

Tools: All Stores All the Time Anywhere Video Eye Tracking Paper & pencil RFID PathTracker Online - internet Tablet PC People Counters Kiosk

RFID PathTracker

Individual Shoppers

Millions of Shopping Trips; Second by Second

ZigZag Path Pattern

Racetrack Path Pattern

Racetrack with Excursion Path Pattern

Rule #1 - Concentration Your greatest opportunity to sell is in the first third of the store.

80/20 Shopper Density Very Heavy Heavy Moderate Light Very Light

What s Wrong Here?

Rule #2 Shopper Asymmetry Shoppers will move around the store in a counter-clockwise (CCW) direction. They will move from back to front. They will buy on their left when they have a shopping cart.

The Journey Through The Store Very Heavy Heavy Moderate Light Very Light

Go with the Flow Clockwise is counter-intuitive Right half of the store generally pulls better because of traffic flow Counter-clockwise shoppers spend $2 more an average trip than clockwise shoppers 90 80 70 60 50 40 30 20 10 0 55 53 left entry center entry 81 right entry Average number of shoppers

Rule #3 Trip length is important Short-trip shoppers are very important: More of them. Spend money faster. Stay nearer the front of store.

Trip Lengths Share of Shoppers 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Share of Trips by Length 0.0% 9% 0 10 20 30 40 50 60 70 80 90 100 110 120 130 Trip Length in Minutes Half the trips are over in 8 minutes or less!!! Percent of Sales 15% 12% 6% 3% Share of Trips by Items Purchased 0% 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 Items Purchased Short trippers spend money really fast!!! Half of all shoppers buy 5 items or less!!! Spending Speed ($/Minute) 35 30 25 20 15 10 5 0 Spending Speed (typical) R 2 0 10 20 30 40 50 60 70 80 Shopping Trip Length (minutes)

80/20: Implications Faster Spending Speed = shorter trip focus Short trippers are just stock-up shoppers on their other trips! Short trippers: Twice as many 5-minute shoppers can be accommodated as 10- minute shoppers = fewer capital assets and greater profits. Analogy: Turnover rate at peak times in restaurants The good is the enemy of the great!

Rule #4 Concentrated Merchandising Develop a "C-Store Plus" merchandising strategy in the right front quadrant of the store.

Rule #4 Concentrated Merchandising Entry-left before bakery tables Entry-leftafter C-store format

Rule #5 Open space is attractive Shoppers do not want to go down aisles. Encourage them with space and visual enticement.

Racetrack with Excursions

Aisle Blow Back 30.0% Visits 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Front Middle Back Center-of-Store Aisles BreadCookiesCrackers CannedDried MexEthPastaBeans HealthBeautyPaper BakingSpiceHouse LaundryCleanAuto IceCreamCoffeeCandy FrozenFood BabyPets CerealJuices SodaSaltySnacks DressingsPickles Excursions into the aisle create heavier traffic at the ends.

Rule #6 The Checkout Magnet It takes less and less time for shoppers to make a single selection as their trip progresses. Plan for more leisure at the beginning at the trip.

Quickening Pace of Shopping On the racetrack 120 BuyTime (seconds) 100 80 60 40 20 y = -13.922x + 104.63 R 2 = 0.8665 0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Trip Progression

Salad Dressings In produce (beginning): BuyTime = 28.2 seconds In grocery (near end): BuyTime = 8.5 seconds

Future Store Ideas

DiamondPyramid Fixture Profile Floor Pão de Açúcar Lower every other gondola Push the upper shelves back 6-8

Store Design Summary Rule #1 Concentration Rule #2 Asymmetric traffic Rule #3 Trip length is important Rule #4 C-Store strategy right front Rule #5 Open space is attractive Rule #6 The checkout magnet Rule #7 Difficult access penetration

Merchandising Layout of the Store

Chaos... Sort... Segments

Shopper Behavior in the Store (Segmentation Variables Summarized) Trip Measures: Store Dimensions: Each Dimension: Length in minutes; Displays visited(%) Categories visited Items purchased Dollars spent Walking speed Day part; Day-of-week By category By geographic area (left, right, front, back, center) By behavioral domain (open bazaar, constrained aisle, service, end cap, all other) Trip progression Walking speed Buy time Share of purchases Gondola or secondary purchase

Clusters

PathTracker Segments (Shoppers sorting themselves by behavior)

Chaos-2: The Products

What Each Segment Buys (Their Market Baskets ) Where to merchandise selections of this category

Putting the Pieces Together Shopper Segments and Products Categories shared by all segments Common area near the entrance Distinctive categories by segment Divergent distinctive/instinctive paths The completed sale

Putting it All Together Everything else!!! Medium Frozen Foods Dairy, Refrigerated Produce Breakfast Food Cookies and Crackers Alcoholic Beverages Long Meat, Poultry, Seafood Baking/Cooking Supplies Paper & Plastic Products Dressings/Condi/Pickles Canned Vegetables Soup Deli-Meats/Cheese... etc. Common Beverages (CSD, water) Breads/Pastries Salty Snacks Health/Beauty Aids General Merch Candy/Gum/Mints Tobacco Checkout/Exit Entry

Merchandising Category, Brand, SKU Performance

Three In-Store Moments of Truth Impressions Shopper Vision Exposures Sales Just ONE item 1 2 3 Visits Shopper Presence Shops Purchases

Merchandising 1-2-3 Conversion rates the percentage of shoppers in the store who buy an item need to be broken into 3 components.

100 80 60 Video Walking Video Shopping Double Conversion Video Buying 40 20 0 Visitors Shoppers Buyers Getting traffic to a section is only half of the battle. Good merchandising will yield high DoubleConversion stopping the traffic and then converting the shoppers to buyers.

The Two Stores Primary Secondary endcaps, lobby, etc. Candy-bags/bars 0% 12% Carbonated Beverages 0% 29% Cookies & Crackers 1% 35% H&B - Oral Care 0% 10% Bread 0% 17% Service Bakery 1% 26% Bottled Waters 1% 24% Chips2% 20% Non-carbonated Beverages 0% 13% Service Deli Spices,Seasonings 1% 11% Paper Products 1% 22% Grocery Deli 6% 18% Juice, Drinks - DG 0% 17% Produce 6% 24% Baby Food 8% 3% Salad Dressings 4% 19% Meat - Fresh 35% Peanut Butter, Jams, Jellies, Spreads2% 7% 22% Pet Food 31% Pizza/Snacks/Hors d'oeuvres 1% 20% 10% Coffee 3% 7% 21% Laundry 21% 6% 3% Dairy - Milk 29% Breakfast Cereal 12% 7% 10% Beer 3% 9% 16% Frozen Dinners & Entrees 4% 14% 9% Dairy - Yogurt 27% Prepared Food, Canned - RTS 6% 8% 8% Canned Vegetables 7% 8% 6% Household Cleaning 7% 10% 4% Prepared Food - dry mixes 10% 7% 4% Dairy - Cheese 21% Canned Soup 9% 6% 4% H&B - Body Soap & Cleansers 4% 3% 10% Canned Seafood 16% Dried Pasta 16% Canned Fruit 13% H&B - Shampoo & Conditioners 11% 16% 14% 21% 8% 25% 13% 31% 42% 30% 37% 41% 67% 49% 40% 64% 56% 44% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gondola Both A/O Locations

The Two Stores Cookies/Crackers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

DoubleConversion Shoppers must visit the area (EffectiveDistribution ) Visitors must pause or stop to shop (first conversion: visit-to-shop) Shoppers must purchase (second conversion: shop-to-purchase) VitalQuadrant Analysis Effective Merchandising Niche Few stop to shop, but those who do buy Leaders Shoppers who pass here stop to shop and buy Effective Merchandising Poor Merchandising Underdeveloped High Interest Attractive Merchandising Few stop to shop, few who stop buy Shoppers stop to shop, but do not buy

Performance across stores; primary and secondary locations Visits 1 st V>S Shops 2 nd S>P Purch averages averages averages averages averages Leader category............ 39% 68% 26% 96% 25% Bread Dairy - Cheese Dairy - Milk Produce High Interest category....... 59% 62% 37% 20% 7% Candy-bags/bars Cookies & Crackers Non-carbonated Beverages Spices,Seasonings Chips Grocery Deli Service Bakery Niche category............. 27% 45% 12% 56% 7% Canned Seafood Laundry Salad Dressings Household Cleaning Paper Products Underdeveloped category.... 28% 47% 13% 9% 1% Baby Food H&B - Body Soap & Cleansers H&B - Shampoo & Conditioners Coffee H&B - Oral Care Average category........... 38% 54% 21% 38% 8% Beer Canned Soup Dried Pasta Pizza/Snacks/Hors d'oeuvres Bottled Waters Canned Vegetables Frozen Dinners & Entrees Prepared Food - dry mixes Breakfast Cereal Carbonated Beverages Juice, Drinks - DG Prepared Food, Canned - RTS Canned Fruit Dairy - Yogurt Peanut Butter, Jams, Jellies Service Deli All Category, All Store....... 39% 56% 22% 39% 9%

The Challenge...... Traditional research thinking may be inadequate in-store. The Shopper The Relationship One-on-one Close distance Long time (15+ sec) Frontal view Center of Field of View The Stimulus

The Shopper is Omnidirectional Watching TV Surfing the Web Shopping the Store Uni-directional Uni-directional Omni-directional

In-Store Stimulus is Omnipresent or Nearly! Packages are media, too! And nearly ubiquitous.

Watching Them Make Their Decision at the P.O.P.

Seeing What They See at the Point-of-Purchase

Shopper Insights Review TNS leads active retailing Information is the foundation of active retailing Unique tools in-store shopper behavioral data and metrics framework for understanding > actions > profits Spans the brand-retailer bridge Scalable: every brand, every retailer strategy

The Completed Picture

Thank you!