Merchandising 101

One of the most challenging jobs a store manager has is placing merchandise in his store in a pleasing and effective manner.  Many times companies try to reduce the stress of this task by providing planograms, hiring field merchandisers, etc but yet I still see managers struggling with how to fit 10 pounds into a five pound sack.  Many times it is the marketing department that is at fault since we should not be trying to fill the stores to over flow for any reason other than insanity.  If a manager is struggling with the 10 pound dilemma, someone in the office needs to revisit the marketing plan and determine why we have so much stuff in our locations.  As someone that has been on both sides of the table when it comes to merchandising, I know that the best marketing plans do not always work out the way we would like them to.  But one of the most disturbing trends in our business today is the lack of execution in marketing programs.  Recent surveys have shown that as much as 60% of the marketing programs in retail are not implemented to specification.  Signs are wrong or missing, product not correct or quantities wrong or the entire program is missing.  When we set up our stores, we need to ask ourselves just what is the customer going to experience?  Recent additions to retail such as Apple have done excellent jobs in creating an exciting and captivating experience for the customer and their sales numbers show that they are headed in the right direction.  Of course they have a product line that has strong demand but how many obstacles can you put in the way of a customer when they are looking for their desired purchase before you lose them to competition?  Why would Apple open retail locations when they could just as easily sell their products over the internet?  For one reason only and that is they are increasing their sales by letting the customer experience the product in a controlled environment.  That is what retail is about.  Driving sales through customer experiences in an environment that can be measured and replicated, much like a scientific experiment.  So in looking at retail, what are some of the rules we need to follow to have a good shopping experience? 

One:  All product needs to have differentiation.  So many times I enter a store and it is a blur of product.  Tons of color, signs, and the pile high merchandising philosophy are the main characteristics.  Everything seems to blend into each other.  A customer goes into sensory overload and then usually shuts down.  As human beings we have to be conditioned to tolerate this setting.  If is usually only accepted during the holiday season when guilt and other emotions over ride the self preservation factor.  Even now though, we see a shift away from this merchandising philosophy.  The erosion of sales from brick and mortar to the internet where the customer is in control of the flow of products shows that even with such weighty emotional triggers such as Christmas, our need to escape this assault on the senses is winning.

Two:  Everything must have a price.  Not just a price but a price the customer can see and understand.  I keep reminding my clients that as our population gets older, signage needs to be more striking.  White space, font size and design become critical so confusion is avoided. 

Three:  What are you trying to sell?  What does a customer see when they enter the store?  What profit centers are you steering your customer towards?  If you have high margin products that you want to move, how does a customer get to them?  In grocery, we know that the perimeter of the store is the high margin areas while the inside of the box is the commodity section.  How does your store sell your higher margin items?

Four:  Watch your customers.  How do they move through your store?  As human beings we do not like to make hard turns but almost every retailer designs their stores as if we are robots making hard left and rights when really we like to move through a space in a circular motion.  How many Zen pathways is there that are left right left right?  Most are in circles so we may relax and move in a manner less stressful.

Five:  Where are you pointing your customers’ attention?  Most right handed people will look and move to their right.  Did you put all your great display and impulse items behind the customer?  Will they even see them as they move through or are they in the customers’ blind spots?

Six:  Impulse vs. destination purchase habits.  We draw people to our stores with destination desires but the goal of merchandising is to sell them more while they are in the store on an impulse basis.  Increasing customer count and average ticket are the only ways to really drive sales so if your merchandising program does not address both of these key performance indicators, you are in trouble.

So there we have it.  Some basic merchandising guidelines.  If your stores are following all of them, you are well on your way to taking care of basics and can move on to controlled experiments in your stores.  With social media, new sign mediums and other technological improvements, retailing is going to be an increasingly exciting arena.  Take some time and see how your customers experience is measuring up in your stores.

Marketing: Always On

There has been so much buzz lately about new ways to go to market.  How to be the first on the street with the most effective or latest tool such as viral marketing.  What is really happening is a shift from a concentrated effort such as a marketing campaign to a 24/7 approach where you are always speaking or interacting with your customer.  What the new information age with all the tools such as Facebook and Twitter has created is a platform where your customer can access your message or product on their schedule, not yours.  While this has presented some incredible opportunities for marketers as far as ways to get your message out to the target audience, it has also created significant pressure, especially for those brick and mortar operators.  What has happened is a gap between what the marketing message has promised and the actual experience that the customer is having in the store.  While our message on our internet site is blaring exceptional, new and improved, fantastic etc., when the customer enters the store, we have out of stocks, rude service and a less than friendly shopping experience.  All of us have had such shopping experiences and as the old saying goes, if you have a good time you may tell one or two people.  If you have a bad time you will tell fifty people.  Therein lays the issue with major retailers that have failed in the last few years.  My favorite is Circuit City.  I am a minor electronics nut and love to have a few toys every year.  I used to shop Circuit City faithfully.  But then things began to change.  I would go to the store to find my latest toy only to be buried in junk that I was not looking for but the store being out of stock for the item that I needed.  Items of inferior quality were being hyped as a better solution but once they were taken home, the truth was evident and the experience was horrible.  Now let’s try and return that same item.  Five hours later and even more frustrated because I still do not have what I was looking for, I end up looking on line to find what I really wanted.  I did not get the immediate gratification I was looking for but at least I found it and the retailer would usually provide something to offset the lost immediate gratification such as a discount, free shipping or a bundle purchase that provided the value added experience we were looking for as a consumer.  So what does this mean for retail today?  Be prepared for the battle.  As our customers expect more and more value because the message is playing 24/7 and we are conditioning them to that experience, execution at store level, whether electronic or bricks and mortar, is going to be critical.  We will see retailers scale back so that their focus can be on one or two offerings as opposed to being all things to all people.  Retailers will be examining their marketing plans to determine what it is they really are to their market.  What is their key offering?  How can you guarantee that your customer is going to get the experience you desire to insure that your analysis of your marketing efforts is accurate and you are headed in the right direction and not just reaping accidental or spillover benefits?  How are you going to find the right people to execute your vision 100%?  These are the questions facing marketers today along with millions others.  As the speed and number of channels of disseminating your message increases, how are we as retailers going to create the desired experience in our locations?  More to come shortly…

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Big Oil and the Exit from Retail

What is happening this year as all the major oil companies decide to get out of the retail business?  In the past few months we have seen BP, Conoco Phillips, Super America and now Exxon Mobil decide to pull up stakes and let the smaller players buy sites while the majors just want to sell the fuel.  We all know that retail can be a set of headaches that many of the deep pockets in oil do not want to deal with but why would it reach such a critical mass now?  Here are some of my thoughts:

• Big Oil doesn’t know what they are doing.  In my opinion I have yet to see a major oil company really do an excellent job in store design and merchandising.  There have been so many individuals that I have interviewed for different positions in companies I have run that know nothing about retail.  They know to watch the street price of gasoline like their own blood pressure and know that the parent company will probably give them another few thousand dollars per site this year to try the next big thing.  They only thing that these managers do know how to do is spend money.  When put on a tight budget with aggressive numbers to hit you can see their eyes roll up into their heads and watch them go tilt.  Not a good experience.
• It is too much hard work.  Many large retailers have been through the tough growth stage and are now trying to keep growing and avoid the lethal contraction phase.  That is when it really gets to be tough.  Even the big guns like Walmart are struggling.  It is only the exclusive brands that have a very unique niche that are staying ahead of the GDP at a decent multiple.  How long before we just give up and go back to T bills as the gold standard investment.  Now there is a scary thought.
• The age of being everything to everyone is over and now they need to specialize.  True hogwash.  The only reason someone specializes is because they can’t figure what else to do.  If we could all master multiple revenue streams rather that just one, don’t you think our shareholders would prefer several revenue and profit streams?  Isn’t this why conglomerates were created in the first place? 

Even as the rest of us gladly buy up the assets major oil has offered to us for sale, some of us still have to sit back and ask what is really going on?  Major oil says they want to focus on their core businesses of exploration, development and refining.  Of course just a few years back they were telling us the reason for becoming vertically integrated was to absorb the output of the refineries and control their product from finding crude to selling the finished product to the end use consumer.  What has really happened is they are finding out that even though retail may not be the most difficult business in the world, it does take a high level of commitment, dedication of capital and focus on adding value to the customer every day of your life.  What really has happened with Big Oil is they just do not want to be bothered with trying to keep adding value to customers every day.  With a monopoly, why bother with customers?  Why bother with stores?