retail business development and business performance

Shelf-space elasticity is 17%

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The definition of shelf-space-elasticity is the ratio of additional sales to additional space allocated in retail settings.

Based on a meta-analysis (Elsend, Journal of Retailing, May 2013) of 1,268 estimates of shelf space elasticities, the author found that:

  1. The average observed shelf space elasticity is .17, which varies across product categories, with the lowest estimates for commodities, followed by staples, and the highest estimates for impulse buys.
  2. Store size moderates the effect of product characteristics on shelf space elasticity: in large stores, the difference between elasticities for brand versus category is greater than in small stores.
  3. Shelf space increases results in greater elasticity estimates than shelf space reduction, a finding that emphasizes the application of shelf space variation as a useful marketing tool.

The author does not explicitly state this, but one assumes that the findings apply ‘within reason’. That is; if you increase shelf space allocation by 10%, sales will increase (on average) by 17% - up to a point.

Also please note this does not mean that sales will increase from 10% to 17% - it means that sales will increase by a factor of 17% (and not by 17%).

Are you ready for pain? (Why PR is going to become more important than Marketing)

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BUYCOTT (an app) was launched recently that allows users to boycott the retail brand. Once you’ve scanned an item, Buycott will show you its corporate family tree on your phone screen, and if you don’t like the parent company for whatever reason, you can pick a different brand.(I haven’t downloaded the app because the Android app has been withdrawn because of a flaw. (The app is #10 in the App Store overall, and is getting 10+ new users every second. I also presume it is US only at the moment.)

In a twitter conversation, the person who first tweeted the link and I had a conversation, and her point of view was:

And my view is that, yes, I am more afraid of the leaderless, faceless mobs of the twittersphere than of the (predictable) power-elite.

I have written previously about the power of social to do harm. Some examples of community-powered change are:

  • The Arab Spring.
  • The Syrian Uprising
  • Alan Jones
  • Kyle Sandilands

These are all examples of how people power made the ‘authority’ bend the knee to the people.

You may agree or disagree with these ‘causes’, but once the mob had mobilised, there was not stopping it.

Recently there was the example of how Bernie Brookes from Meyer ‘caused a social media stink’ with his comments about the NDIS.

Again, this was a classic case of misguided zeal that led the mob to propose Meyer boycotts. In fact, a local retail consultant actively instigated this initiative under a cloak of self-righteous indignation. Obviously it has now become dangerous to express an opinion, or in Mr Brooke’s case a fact, that the mob might take offense too. I have no doubt Mr Brookes supports the NDIS; as do I and every person who has a heart. Supporting the NDIS (or not) was not quite the point, but the full story cannot always be redacted to 140 characters and reason therefore does not always prevail in a tweet.

(I suppose the point was lost on the ‘consultant-activist’ that such a boycott would actually hurt all the innocent shareholders, employees, suppliers and all their employees and so forth.)

And one more about Abercombie & Fitch to show the power of a CEO to make – or break – a brand can never be overestimated – even in an interview that took place 7 years ago.

(Apparently the mob does not condone target marketing any more.)

And there is more.

Read this story about Global noise and weep I (LINK)

IT’S NOT the first time that everyday people all o

ver the world have decided to reclaim the streets, and it surely won’t be the last. In the face of discontent and apathy about politics – in response to the democratic deficit between citizens, politicians and financial markets – citizens will always look for better alternatives to the existing political structure.

Global Noise is about making ourselves heard. In a democracy, the government should be by the people and for the people. The reality is that we are asked to cast a vote once every three years, watch our elected representatives change all their policies and just shut up. The world is facing a great variety of issues that perpetuate conflict, poverty and political apathy.

Read this and weep II (LINK)

This is the story of how ONE reader sent Victoria’s Secret scurrying for cover.

But because one person was particularly offended by this particular item, and found a ready echo chamber at a web site dedicated to issues relating to race, and then the  online ‘news’ sites like Huffington Post and The Daily Mail reported it as a controversy, the product disappeared from Victoria Secret’s site.

That’s not evidence of peer-to-peer collaboration or effecting meaningful change in the world, is it?

Most brands are realizing that there’s someone out in the ethersphere who will be offended by something it does. Online tech gives everyone a soapbox (again, I’m all for it) and makes anyone a potential rabble-rouser. And then it stops…right there…since very few people are actually equipped to propose real things, inspired to lead one another, or willing to take the time and effort effecting real change takes.

Still, so much marketing gets away with selling us impossible ideals of beauty, happiness, and success, even in 2013.

Corporations and governments should be scared shitless of the day when we of the huddled masses figure out that we can use the Internet to change the things they offer us.

These words are going to prove prophetic indeed. And all people (not only early adopters) will eventually realise the power they have.

Whilst we recognise in principle that power is being returned to the people – the wildcard in all of this is technology.

It will amplify the trends and consequently the potential to do good and the potential to do harm.

Conclusion

People power (the new social era) has positive dimension and there are great business models like  KIVA  and  KICKSTARTER and not mention Wikpedia that capitalise on this.

On the negative side, there is a risk of mob-mentality and combine this with self-righteousness and half-truths, you have a cocktail for disaster.

And the mob will come for you at some stage. The little guys may only warrant little mobs, but don’t bank on that. The main thing is whether you are prepared for the inevitable; because the full force of these faceless masses unleashed on a business can be sufficient to spell the end of your business. You better have a social-savvy PR firm on your side to help you navigate.

Good marketing will slowly build your business. Bad PR will destroy it all instantly.

And finally, which is why I reckon: Long Live the Trolls. (Eventually they will help save the self-righteous mob from itself.)

Dennis Price

Future-proof your business with Ganador

How much money are you leaving on the shopfloor?

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Do yo know your Space Allocation Index?

One simple thing to do in a multi-category store (and it is even somewhat relevant when you have several sub-classes in a single category) is to balance your store in terms of merchandise allocation.

The core idea is that percentage contribution that a category/class makes to your overall gross margin should be proportionate to percentage of floor space that the product category occupies.

If product A contributes 10% of your GM$ then it should occupy 10% of your floor space.

You calculate the index as follows:

%Category Contribution to Margin 

%Category Allocation of Floor Space (sqm)

The idea is that if the resulting index < 1 then the category occupies more space than it should and if it scores > 1 then you have category that over-performs.

In theory you will increase the space allocation (and stock) when a category is productive and vice versa for low-scoring categories.

But the exceptions to this rule are many and varied of course:

  • Some products will have a physical advantage of simply requiring less space than other products by virtue of what it is (e.g. accessories/jewelry)
  • Some products will not increase its sales if you increase stock/allocate more space because you are already selling as much of it as possible.
  • Some products won’t require more space even if you increase the stock holding (e.g. you can simply stack it higher in the existing space like newspapers bundles)
  • Some product categories will be new/ experimental and have not reached their full sales potential yet.
  • Some categories will be stocked to manage competitive threats

But the key point remains valid:

You don’t want to be under or over represented in a merchandise category, and calculating your SAI is an excellent starting point. Once you have done the calculations, you can then make some rational decisions about whether the misalignment has nay merits – and if not take action.

In my experience, for example, a typical newsagent can increase sales by 15% by getting this right.

How much money are you leaving on the floor?

PS: Happy to discuss simple ways to calculate the floor space allocation for a category - because in practice that can prove to a lot harder than you may think at first.

Are you a Type Q or Type R Shopper?

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When I completed my own doctorate (waaaay back), one of the tangential observations made was the following shopping typology:

Type Q: The functional, utilitarian patron who shops of necessity, as quickly (hence: type Q) as possible because it is a chore. This type of behaviour is characterised by small but frequent purchases which are purely aimed at acquiring merchandise for consumption. Duration of the visit is usually short, and only a limited part of the centre (if it is a large centre) or a small (convenience) centre is patronised. Target stores are usually supermarkets for grocery shopping. 

Type R: The hedonic shopper who does not necessarily buy a lot but has fun and enjoys the shopping task. The visit to the centre is in a relaxed (hence: type R) manner. The aim is to enjoy the shopping experience and the actual purchase and consumption is secondary. That is the patronage behaviour does not necessarily extend to buying behaviour - or is limited to entertainment orientated consumption.

Type Q and Type R never took off, but the industry has subsequently adopted (none of my doing) the typical distinction of the Social and the Functional shopper. The reason why Q & R works for me is because it relates to two very different customer experiences and hence can be translated pragmatically into specific programs.

The Third Dog

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The retail supply chain is broken and I am sadly observing systemic failure in the retail supply chain,. The symptoms are as follows:

  1. Landlords may tell retailers that their stock is not what the market wants and the customers are simply responding to the fact that they can get what they really want somewhere else. They argue that the customer service levels are not good enough and that the presentation is not up to standard.
  2. Franchisors will berate Franchisees for not adhering to the Operations Manual and for failure to engage the customer in the right way; not serve the hot dog the way it was meant be served or that the form wasn’t completed on time. It’s a constant challenge to get people to buy into the ‘system’.
  3. Retailers (in shopping centres) on the other hand always blame centre management for lack of traffic and too much competition in their category.
  4. Franchisees always think their franchise is a little bit different and deserves to be the exception in a dozen little ways.

Who is right and who is wrong? The short answer is they are all wrong – about each other – and this is the cause of the systemic failures in the supply chain.

We often have to spend a great deal of time on facilitating discussions to help each party understand the other’s point of view.

  1. We have to help the landlord understand that the reason why the retailer is not engaging with centre management is that they rightfully don’t have respect for centre management. Just like customers punish the retailer with non-attendance when the retailer does not have what they want, similarly if centre management is not adding value to the retailers’ lives, they cannot expect any engagement from the retailer.
  2. We have to make sure the retailer understands the landlord is not a financial institution and that they cannot use them subsidise cashflow shortfalls. They must understand that the centre teams can drag customers to the centre but not into their store.
  3. We have to make sure the franchisee understands the Franchisor cannot guarantee success and that the ‘system’ is missing one important ingredient and that is the franchisees commitment and hard work. And of course that territories are not as different as they’d like to believe.
  4. We have to make sure the franchisor understands the franchisee will not buy into the consistency message if the Franchisor treats different franchisees differently because that undermines their own demand for consistency. (If you demand consistency, you have to live it yourself.)

‘While two dogs are fighting for a bone, a third runs away with it’; so the old saying goes. And it is true here too.

Whilst there is a tussle for power and control between landlord and retailer, between franchisor and franchisee, the customer (the third dog) runs away with it.

None of the business entities in the retail supply chain have much power anymore. And whatever power you exert over another party is tenuous and will fade anyway. The consumer is empowered. They have a little device in their pocket called a Smartphone, and that means they can any information and increasingly any product from anywhere in the world at any time they please.

A collaborative supply chain is a strong supply chain.

But, I am not optimistic:

  • How many Shopping Centre Landlords have an actual, active and successful Retailer Engagement Strategy?
  • How many Manufacturers have collaborative, transparent Trade Marketing Strategy that goes beyond mere promotion and equips and empowers their retail network?
  • How many Franchisors invest in the development of their network beyond the minimum compliance at the ‘system’ level?

Have fun.

Dennis Price

ganador.com.au: architects of high-performance retail environments.

Three persuasion techniques we can learn from babies

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On our very first day on the planet, the influence task that faced us was immense. We had to persuade those around us, without language, without consciousness, without anything like the oratorical prowess that we possess as adults, to take care of us—to subjugate their own interests at the expense of ours. 

Babies are equipped with three features, fitted as standard, calibrated to cut straight through our deliberation, which are:

1. An unignorable soundtrack that figures at the top of nearly everyone’s list of aversive acoustic stimuli;
2. Appallingly cute good looks, that prove pretty much irresistible to anyone caught in the spotlight;
3. A hard-wired propensity to make eye-contact, to attend to the eye-regions of faces.

In one study, a bunch of wallets were left on the streets of Edinburgh, each containing one of four photographs. A happy family. A cute puppy. An elderly couple. And a smiling baby. Which ones, the researchers wondered, would find their way back to their "owners" most often?

Of the 40 wallets of each type that were dropped, 28% of those containing the portrait of the elderly couple made it back successfully; 48%, the family snapshot; 53%, the photo of the cute puppy.

And a whopping 88%, the picture of the smiling baby!

HT: Via Kevin Dutton - Unfortunately no source was recorded at the time. Happy to rectify that if you can assist.

Retailers: help is on it's way

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 A friend of mine has put his hand up to help you.

Michael Ratner (owner of Compendium) is collecting some basic data that will assist retailers to understand where they are at - exactly - and how they compare.

He is braver than me, but it is a worthwhile exercise.

DOWNLOAD this simple spreadsheet and provide him with some basic percentages and you will get a huge benefit in return. It won't take long to do - JUST DO IT...

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