sense & perform isi 2011-09-09

‘SENSE & PERFORM’

VISUALIZE BEST PRACTICESFOR IN-STORE

IMPLEMENTATION

V 1.0 2011 VSN strategies Sept. 19, 2011

Pre-Conference Workshop

About Today’s Workshop

Agenda/IntroductionsISI Performance Management

Conceptual FrameworkVisualize Best Practices

© Copyright 2011 VSN StrategiesSense & Perform 2

Thanks to Our Workshop Sponsor


Agenda


• Situation Review• DIMES: The Five Senses of In-Store• The Habits of Highly Successful Store Managers• Compliance in Action – Space Management• What Constitutes Compliance? [Lunch]• Planogram Integrity Best Practice• Culture of Performance [Roundtable]

Workshop

An ISI Conceptual Framework

Situation Review

The Retail Performance ChallengeOpportunity for New Practices


Dis-Economies of Scale?


Sources: Monthly Retail Trade Survey, Census Bureau; Company annual reportsNote: Sales based on North American Industry Classification System (NAICS) From: Economic Research Service/USDA, http://www.ers.usda.gov/Briefing/FoodMarketingSystem/foodretailing.htm

199219931994199519961997199819992000200120022003200420052006200720082009

0

10

20

30

40

50

60

70

80

Top 4 Top 8 Top 20

U.S. Grocery Retailing Concentration, 1992-2009Grocery retail consolidation has concentrated 64% of U.S. grocery sales within the top 20 chains; 37% within the top four chains.

Along with scale economies and buying clout, however, comes intensified store operational complexity and remoteness from HQ.

How has this combination affected profits?

%

Situation

Profit Picture Post-ECR


1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Industry Net Profits (% of Sales)

Source: “Supermarket Facts,” Food Marketing Institute, 2011

“The historical mean annual change in return on investment has been insignificant for both retailers and manufacturers since the early 1990s.”

Source: Bjornson, B. and Kaufman, P. (2004), “Change and

Firm Valuation in U.S. Food Retailing and Manufacturing,”

Journal of Food Distribution Research 35(2).

Situation

Performance Gaps in Grocery

© Copyright 2011 VSN Strategies8

56% Items sell <1 unit/wk.

78% Items sell <3 units/wk.

58% Unprofitable SKUs

Out-of-stocks continue to run at 8.2% - unchanged in 15 years,Yet, within the assortments:

Sense & Perform

Situation

Source: Willard Bishop Consulting (May 2011) Competitive Edge

Global Challenge at Retail


Overstock$343.1B

44%Out-of-Stock

$435.4B56%

Total Inventory Distortion 2010 - $778.5B Worldwide

Source: Holman, L. and Buzek, G. (2011), “Inventory Distortion – Retail’s $800 Billion Global Problem,” IHL Group

Inability to maintain consistent in-stock levels plagues retailers in every category and every country.Hypothesis: The problem may be rooted in the huge differentials in item turn rates?

Situation

Taking Off The Blinders


• Despite retail industry consolidation…– Industry earnings and ROI remain flat– Operating complexity is increasing

• Despite notable progress in supply chain effectiveness since 1996…– Store-level inventory performance is unimproved

• Store-level performance may be slipping…– But we can’t really be certain, because we don’t yet have

the tools or practices in place to assert control over In-Store Implementation

Situation

Industry Demands Improvement

© Copyright 2011 VSN Strategies11

38% Plan-O-Grams

27% Promotions

15% Displays

ISI 30-Sec Polls: 35% indicated no process to track compliance, the remainder rely on spot-checks and manager sign-offs

Which of the following In-Store Implementation practice areas is of highest importance within your organization today?

Sense & Perform

Source: ISI Network

Situation

How Well Do You Implement?


Less than half the time

50% - 74% of the time

75% - 99% of the time

All the time

0% 10% 20% 30% 40%

38%

33%

23%

4%

How often would you estimate that your in-store promo-tions, resets and other merchandising activities are

completely and accurately implemented?

n=176

Source: Supermarket News (2009)

Situation

24%64%

12%

Yes and it's very effectiveYes and it isn't very effectiveNo

Q. Do you have an internal process that is used for execution of

shopper marketing programs?

Shopper Marketing Challenge


Situation

One of the reasons why some retail marketers may struggle with converting insights into effective programs is a lack of internal processes for execution.

76% of shopper marketers report that a process does not exist or is not very effective.

Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010

How Well Do You Measure?

Other

Rely on program vendors' "self audits"

Use an independent 3rd party firm

Do not measure in-store execution

Make assumption that the job got done

0% 10% 20% 30%

13%

17%

21%

23%

28%

Four out of five respondents to a prior poll said they expect 90-100% execution of their in-store programs.

How do you measure execution in-store?


Source: CPGmatters.com

(2008)

Situation

Shopper Marketing Limitations


Situation

9%

13%

10%

20%9%

15%

4%

10%

10%Upper level buy inMerchandising alignmentVendor collaborationExecutionComplianceMeasurementVendor sell inConcept developmentObtaining actionable insights

Q. What are the hurdles in getting a program launched within your organization?

What is limiting shopper marketing success? Take your pick. Execution, compliance and measurement account for 44% of responses.

Source: “Retailer-Activated Shopper Marketing Program Survey,” Marketing Lab 2010

Top Store Business Challenges

Need for more con-sistent store execu-

tionNeed to improve customer service while holding the

line on payroll costs

Store managers lack information they need

on the selling floor - too much time spent in

the back room

0%5%

10%15%20%25%30%35%40%45%50%

37%43%

19%

45% 49%

22%

20112010


Source: “The 21st Century Store: the Search for Relevance” RSR Research 2011

Situation


“The ISI Sharegroup estimates that the total cost to the U.S. RCP industry of sub-optimal merchandising performance (actual and opportunity costs) is approximately 1% of gross product sales, or $10 - $15 billion of the $1.5 trillion total annual sales across the food, drug and mass channels.”

Source: “In-Store Implementation: Current Status and Future Solutions” (2008)

Situation

Industry Opportunity

Agenda


• Situation Review• DIMES: The Five Senses of In-Store• The Habits of Highly Successful Store Managers• Compliance in Action – Space Management• What Constitutes Compliance? [Lunch]• Planogram Integrity Best Practice• Culture of Performance [Roundtable]

Workshop

An ISI Conceptual Framework

DIMES: The Five Senses of In-Store

“Active Sensing”A New Metrics Framework

Storecards


Sensing = “Ability to Listen”

ExecutionShopper/ Consumer

Insights Ability to Listen

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

73%

58%

71%

68%

88%81%

What Category Management activities will differen-tiate companies in the future?

RetailersManufacturers

Source: 2011 Category Leadership Benchmarking Study, Kantar Retail


The Five Senses of In-Store

What is “Active Sensing”?

• Plan – Put measures and methods in place with specific intent to monitor the voice and behaviors of the shopper and the store

• Do – Methodically capture and track data on the desired dimensions

• Measure – Use embedded analytics and collaborative tools to extract insights and distribute them to relevant decision makers



Source: In-Store Implementation – Current Status and Future Solutions, In-

Store Implementation Sharegroup (2008)

DIMES: The Five Senses of In-Store


DEMAND: Detailed understanding of POS transactions by basket, shopper and segment and correlation with the other in-store senses

ITEMS: Status, condition and in-stock position of product on display throughout the store, including planogram compliance

MESSAGES: Delivery, views and responses to digital and traditional shopper media, signage, promotions and compliance

EMPLOYEES: Direction and task performance of store associates, brokers, DSD reps, jobbers and third-party merchandisers

SHOPPERS: Detect, track and analyze what shoppers do, including who, what, where, when, why they shop and buy

Effective management of retail performance requires continuous intelligence about implementation, compliance and conditions. Sensing is needed in five key areas:


DIMES: Five Senses Gap Analysis


Demand

Items

MessagesEmployees

Shoppers

-4

1

6

4.01

4.58

3.603.90

3.93

3.29

3.66

3.023.22

3.14

How Important?How Well?

Source: In-Store Implementation Network “30-Sec Poll” 2011

N=103


Why We Need Better Sensing• At best, most present tools measure outcomes (sales data)

without an understanding of causality• Time lag on most reports makes them un-actionable;

most/many issues detected are also un-correctable.• Wild misinterpretations are also possible (i.e. was a non-

selling item out of stock, or out of date?)• Correlation with demand model (POS T-log) allows for some

useful inference (i.e. promotional lift, ROI)



Perilous CrossingOperating a chain of retail stores based only on sensory information derived from the POS is a bit like trying to cross a street safely based solely on yesterday’s traffic reports.



DIMES: Demand SensingSolutions Providers

Price Optimization and Demand Modeling KSS Retail, Demandtec, Revionics, SAP, Oracle, etc.

T-Log and Basket Analytics JDA, Teradata, various others

Frequent Shopper Data Analytics dunnhumby, various others

Syndicated Data Nielsen; SymphonyIRI

Coupon Redemptions Processors and Manufacturer Agents



DIMES: Items SensingSolutions Providers

Digital Image Audits ShelfSnap, NeuralID

POS Demand Signal Monitoring KSS Retail; Standard Analytics; IRI

Manual Audits Multiple vendors, Brokers and MSOs

Shelf Sensors & Product Pushers BVI-RockTenn “Shopper Gauge”

DSD Store Visits Hand-held scanners from various vendors



DIMES: Messages SensingSolutions Providers

Manual Audits Various custom market research firms

Digital Signage Screens that watch the watchers

Coupon Downloads/ Redemption Data Processors/ Manufacturer agents

Kiosk Interactions Various

In-Store Coupon deliveries Catalina; Acuity AisleCaster; SmartSource

In-store media NewsAmerica /SmartSource



DIMES: Employees SensingSolutions Providers

WFM/SEM/MPM Reflexis, RedPrairie (StorePerform); Natural Insight; Dayforce; Infor (Workbrain)

Store Check-In/Out Systems Synergy Systems, StorePort

Online Reporting Portals RetailTactics, Driveline, Acosta, Crossmark, various retailers

Store Manager Systems RedPrairie (StorePerform)

Mobile Devices Quofore, Airwatch, Honeywell,



DIMES: Shoppers SensingSolutions Providers

People Counters Shopper Gauge, PRISM’s concept

Loyalty Card Programs dunnhumby, Circular Logic, Brick Meets Click, and many others

Video Videomining; Lighthaus

Path-Tracking TNS Sorenson; 3GTV; Cabco USA

Mobile Media google; comscore

Conversions, shopper movement Euclid elements; T-log analysis



DIMES Solution Portfolios• Each firm will require a set of in-store sensing tools

and associated practices to support its performance goals – a solution portfolio

• That adds up to a good many players and moving parts

• How can you keep them straight without a scorecard?



ISI “Storecards”• Industry-wide there are no acknowledged scorecards

for In-Store Implementation• Scorecard: A tool that defines, records and monitors

performance versus plan• Storecards drive retail performance dashboards and

benchmarking• An ISI solution portfolio must develop and

incorporate these to support routine measurement and evaluation




SAMPLE CATEGORY RESET PERFORMANCE STORECARD Week 23, 2012 Target Actual Gap

Number of Projects# Store Visits% On-Time CompletionsTotal Linear FeetTotal Labor HoursLabor Hours Per Linear FootReset Accuracy Index% Issue-Free CompletionsAverage # Issues/ResetRe-work Hours

An ISI Sample StorecardRESETS

This high-level storecard

is designed for tracking performance across common center-store reset projects.

Versions might be created for each major project, for each reset provider, etc., to permit post-hoc performance comparisons, goal-setting and benchmarking.


Better Stores Sell More StuffPersistent disconnect between operations and merchandising

goals continues to plague chain retailers; it limits their merchandising performance and financial success.

Best practice leaders will incorporate store-to-HQ alignment:• End-of-day conditions• Start-of-day conditions• Marketing/merchandising plan• Supply chain monitoring• Strategic financial plan



Source: Dawson Thoughtware


SAMPLE SHOPPER MEDIA PERFORMANCE STORECARD Promotion Week 23, 2012 Target Actual Gap

Messages delivered/hour% system downtimeRedemptions/store# Stores ImplementedTotal weekly store trafficWeekly category/aisle trafficWeekly Category Sales UnitsWeekly Brand Sales UnitsWeekly Category BasketsWeekly Brand Sales $$

A DIMES Sample Storecard

MESSAGES

This high-level storecard

developed to track an in-store Shopper Media implementation.

In a Web Service-based system, the storecard cycle may be as rapid as every 15 minutes, with updates reported via dashboards and automated alerts


Proposed DIMES Index


Demand

Items

MessagesEmployees

Shoppers

0

5

10Chain A

Chain B


37Sense & Perform © Copyright 2011 VSN Strategies

Thank You!

James Tenser, Executive Director

http://instoreimplementation.com

[email protected]

520-797-4314

http://instoreimplementation.com/

mailto:[email protected]