The Branded Pantry

RFIDWorld.ca  is predicting the extinction of the bar code and the end of waits in grocery cues because of new less expensive RFID tags.

A component of their aggressive prediction is the announcement of the adoption of tag equipped apparel (jeans mostly) by the world’s largest retailer.   After all whatever those big fellas want….

Another piece of the puzzle is a new technology born through a joint effort of the Suncheon National University and Rice University that can be directly printed onto a paper or plastic tags made of ink laced with carbon nanotubes.

Regardless of the promise of this new RFID development, I am a good deal more excited about the Advantage “Tunnel” Checkout introduced last week in a Hebron,  Kentucky Kroger store.    The objective of this multi-scanner, scale and image verification technology is to eliminate both the shortcomings in current self checkout systems caused by the potential of theft, but also the bottleneck caused by most current self checkout systems.

The Advantage Checkout offers significant plusses in terms of adaptability and control.  For retailers and consumers to benefit only the retailer need commit.  In the case of RFID tags, one of the biggest hurdles has always been that if not all suppliers tag their products, the RFID checkout promise will remain just that.

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.”

Add another retailer to the roughly 200,000 stores which have closed down since the beginning of the “downturn”. 

In January, at the FMI Midwinter Executive Conference, Tres Lund CEO of Byerly’s reported to a somber group that 200,000 stores had closed out of a market consisting of about 1.1 million “doors.”  While sobering in its own right, the number becomes a bit more meaningful when it is on your own street. 

The ShelfSnap offices are located in the bucolic suburb of Libertyville, 30 miles north of Chicago.  Our office is just north of downtown.  The downtown area has been quite vibrant traditionally, with lots of community activities, bustling traffic on Saturday mornings and Friday noon, summer concerts in the downtown park for business owners and town folk alike.  

Usually, there is one storefront or another that has gone dark at any given point, only to start up a few months later reincarnated as something else.  However over the last 18 months we have seen five shutter their businesses, the latest on this past Saturday.  Only one business has started anew in that time, in one of the empty storefronts.  Thankfully, it is a booming bakery with an impressive inventory.  Hopefully the crowds we see there are enough to keep them in cupcakes (we are certainly doing our part!) 

The store that announced its “final sale” was a women’s clothing store that I had not noticed much about.  Seemed to be high end inventory, and always had a nice display in the window.  A person was in the store the morning I saw their “final” banners so I wandered in and pretended to look at the sparse inventory.  I asked about the reasons for closure.  She teared up a bit, and then said “parties and banks.”  She said her store always had a loyal customer base due to the quality of her merchandise and the quality of the store’s service.  The downturn had affected the number of parties people were throwing which impacted her sales.  She said that has happened many times over the years, and on each occasion the owners buckled down, find new exciting clothes to entice their customers for other less formal needs and tap their credit to last out the recession.  This time their bank, of 20 years, said “no” and closed their line…..and their way of life. 

Clearly, there is much we do not know about this little store and the bank that refused to support it.  What we do know is that 4 more people are now in the job market from the store, the suppliers to that store have one less outlet to buy their goods and the customers will have less unique merchandise to select from when the parties return.  Oh, and there is one more darkened store, peering out from main street in Libertyville.  

You are the CEO.  Ten years ago a competitor emerged creating a new distribution channel.  You eventually followed that competitor into the channel, but not until they had claimed a very substantial chunk of business…a chunk that continues to nibble at your market share.

Now that competitor has opened yet one more channel.   Industry pundits discount the competitor’s self reported  

progress for the new channel, claiming that the product lines delivered through this new format are not full price product and therefore might not represent true impact.  Still, the delivery method has grown from 10% of sales in March of 2009 to 60% of sales in January 2010.  From whom do you take your advice?

Peter Drucker “the most important work fo the executive is to identify change that is already happening.  The challenge is to exploit these changes and to use them as opportunities.  Far too few businesses are willing to slough off yesterday and as a result have too few resources available for tomorrow. ”

The product line in question here are books, the statistics Amazon’s percentage of sales on books “kindle ready”.  The trend is real, rapid and irreversible.  The game is afoot, has been for some time.  Traditional book sellers have already lost with Borders reporting holiday sales off 14% from year ago.   Next year the book source brands people will be talking about for the holidays will be Apple, Google and of course Amazon.   Borders may well be a division of B&N and most probably there will be more empty retail space to add to the over 200,000 retail doors that have closed since the beginning of this downturn. 

I bought two Kindles for Christmas ‘08.  One for my very tech savvy eldest, who travels extensively and reads voriciously.  One for my tech-aphobe wife whose relaxation depends on books.  One week after my daughter left from her Christmas break and went back to work in Texas, my wife still had her head buried in the Kindle and had “improved” the design by adding a battery powered reading light.  The game was clearly well underway at that point. 

What change that has already happened am I failing to exploit?  What game is already afoot, in which I am not engaged?

Day after day, week after week category and shelf plans are made.  Plans are communicated to the store, brokers and reset teams.  Team supervisors lead the charge and changes are made at the shelf.  What does the space management team know about each store’s shelf set?  What decisions does the store manager override?  What decisions are the reset team leaders forced to make during the reset?  What unplanned changes occur to this carefully orchestrated plan in the weeks and months following the reset?  Do any of these changes work their way back up the line?  Or is the whole process more like a game of Telephone?Planning, implementing, maintaining and running the store’s business is expensive.  Money is spent creating and implementing the plans.  Hopefully, money is made when the plans are complete.   You are already spending the money, a lot of it.So, here is the question, “How do you know you are spending money effectively?”  Measuring the implementation and maintenance is hard, but critical in managing this money and the results of the investment.Recent research by ShelfSnap evolved the definition of out-of-stocks to include products that are in the PLAN but that are in fact missing from the shelf.  This includes:1.    Traditional Out of Stocks2.    Assortment Voids3.    Short facingsDistribution voids and short facings, have been found to be every bit as big a problem as traditional out of stocks.  While traditional out of stocks affect 8% of products on the store shelf forfeiting 3-4% of sales, assortment voids are at least another 8% or larger and more detrimental to sales because the voids are day in and day out.  

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We did a bit of work recently looking at a major retailer display program in a top 3 retailer across the stores in a top ten marketing area.  The retailer accounts for almost 50% of FMCG (Fast Moving Consumer Goods) sales in this market so, if the manufacturer is going to succeed in using display in this market, either standalone or in conjunction with other in-store media . . . they need to succeed with this retailer. 

Some interesting findings based on the ShelfSnap analysis.  The retailer took pictures of all of their displays, uploaded them to our service and we identified the products, facings, OOS, assortment etc. on the displays.  Some findings:

1.    All stores that had the display up.

2.    58% had the two brands included in the promotion that were specified . . . wow!

3.    All stores that had the display had an endcap.  Of those stores:

a.    20% had a 7 shelf endcap  (why do we care?, it affects assortment of flavors!)

b.    42% had a 6 shelf endcap

c.    38% had a 5 shelf endcap (more…)