The Branded Pantry

We have been looking at ShelfSnap Snapogram compliance with Planograms.    We have been working on a project for the Grocery Manufacturer’s Association and Bill Bishop and I wanted to review results from other studies in order to put into context my interpretation the GMA study.

That general review shows that the plan lags the shelf by a margin more significant than common prevailing wisdom.  A much larger margin, and much more often.  

For a moment it might entertain to fast forward beyond the explaination and excuses about why today’s approach produces such paltry results.  Let’s go instead to three avenues that might turn out to be the most logical responses to this new news.

1. Cost of doing business.  As stated in the last blog, a Midwest company V.P. of sales told us that “we pay for compliance” and somehow making that statement translates words into fact for his company.    We heard another West Coast based V.P. of Sales indicate that he really did not want people in his company to know how far from perfect his broker execution was.    In a third case, a Bentonville based Director of Category Management pointed out that making his client and his company aware of the performance gap would simply generate the demand that he fix the problem.    In short, some view and more importantly accept the performance gap as the reality in doing business today.
2. A few companies will recognize the opportunity represented by these study results and lead the industry in level setting the store back to their plan.  They understand how big the sales gains will be for them and their trading partners.  The understand that learning how to put new tools such as ShelfSnap to work and then continuously refining to their use of the tool and the tools themselves will lead to a sustainable advantage over the companies that will come to this realization later.  These leader firms recognize that the shelf will drift again, and that the shelf unchecked will return to the wild.  They also recognize that they spend hundreds of millions of dollars planning promotions, new products, new category sets and new shopper marketing efforts.  They spend additional hundreds of millions with their sales force, their brokers and their MSO.  They understand that spending those dollars to a different result is now, just as easy as spending them the way they are being spent today, and it generates a great deal better ROI.
3. Finally there are a few firms that will look at these findings and re-examine the way they are spending dollars today, looking for a new go-to-shelf strategy that might advantage them more holistically.  They will ask themselves:
   • Why are we spending so many dollars planning if the results at shelf are so different from the plan?
   • Why are we spending so many dollars implementing plans at shelf, if what we implement and what we maintain is so far from the plan itself?
   • Why are we spending so much on shopper insights, segmentation, eye-tracking research, and on creating promotions and marketing around the findings of that research if we are not going to implement the derived plans at shelf.
   • Why don’t we spend less, and differently creating  a business model that deals more effectively with modifying results we find at the shelf in our ShelfSnap measurements.  In this new mode, making modest but real modifications at the shelf, based on prioritized opportunities found at store level may have more of an impact, with far less waste than the model in place today.

We were in the office of a client a year and a half ago discussing some rack designs they had released in a prior quarter on which their product was stocked.  They were proud of some eye-tracking research they had done to figure out exactly where on the rack they should place their most impactful cards to create the greatest profit.  That night we re-examined our Snapogram to planograms comparisons we were to present to them the next morning in order to quantify how often the correct product was stocked in the position specified by the $3 million dollar research study.  We found no single case where the product was stocked closer than a foot from the optimal spot.  Not one case.  That particular client appeared none too concerned about those results as “implementation is someone else’s responsibility.” 

More on the general results in a future blog.  We have released those generalized study results at a webinar for CPG CatNet, and at a talk given this week for the C-Store distributor members of WAM.    The GMA DSD study results have not been compiled in final form and will not be released until their Supply Chain conference in early February.  

Bloomberg seized some movement by the world’s largest retailer to add back some SKU’s pared in year old Win-Place-Show program as a sign that the pendulum was swinging back from SKU rationalization.  They quote one head-hunter as indicating that manufacturer’s are stepping up efforts to staff now that they have a seat back at the Bentonville table.  I can hear the cheers from a half dozen CPG sales executives as they hope this will reverse the SKU-Rat programs not only at Wal-Mart, but at Safeway, Kroger, Walgreens, Supervalu and even 7-eleven.   

Logistics Viewpoint’s Adrian Gonzalez gives a little more guarded view in his March 11 post quoting the retailer’s COO Bill Simon.  Mr. Simon acknowledged at the BOA Merrill Lynch Conference that they were adding back some items to avoid disappointing some consumers.  He indicated that these were anticipated course corrections and that the real reason for Wal-Mart’s traffic declines in the fourth quarter, were much more connected to the severity of shopper disruption from the Project Impact remodels which started in ’09 and will not be complete until 2014.  Major remodels on 15-19% of the fleet each year is bound to have some impact on traffic.  

All of that cheering reported earlier might well end with Morgan Stanley’s Mark Wiltamuth announcing on the 19^th that the world’s largest retailer will dramatically increase grocery promotions over the next six weeks.  He called it a “major setback for U.S. grocers.  Shares of grocers stocks reacted immediately, dropping about 2% in aggregate. 

Wiltamuth indicated this action was built to address Wal-Mart’s traffic slippage in the fourth quarter.  The pricing will affect 10,000 items primarily Grocery, and it will hit stores by April 1 supported by strong media.  This should impact the Easter traffic.     

The SKU-Rat programs are not going away, for any of the players.  In Wal-Mart’s case this is simply one leg of a much bigger plan which has been unfolding in bits and pieces for a couple of years.  This promotion focus over the next six weeks will hammer back at the competition which will have a tough time affording to follow along.   

This is just another example of a lead player willing to lead radical change in the shape of retail.  As Drucker tells us: “to be sure change is painful and risky and above all it requires a great deal of very hard work.  In a period of rapid structural change the only ones who survive are the change leaders.  A goodly proportion of those attempting to make the future will surely not succeed.  But predictably, no one else will.”