A.T. Kearney’s Achieving Excellence in Retail Operations (AERO) study uncovers insights into how retailers worldwide can improve their operations.  With more than 100 questions, the survey probes the strategy, tactics and execution of retailers in more than 20 countries.  It covers multiple sectors, including apparel, health and personal care, mass-market and hypermarket, electronics, food and grocery, and cash and carry. The framework of the study provides the means by which to look at every aspect of operations – areas that enhance store value such as store technology, operating-expense control and real estate life-cycle management; aspects that drive store value such as store business planning, channel strategy and voice of the customer; and facets that deliver core store value such as merchandising, supply chain interfaces and field leadership.

As we were setting out to do research on our 2013 study, we were aware of the huge changes that had occurred just since our previous study, in 2010. Three years ago, we did not ask retailers anything about social networking. We covered far fewer options for deploying technologies to customers—and for getting information back from them. And although we asked about multiple channels, the notion of integrated channel retailing was at best a distant mirage. But look what happened with our results in 2013: Despite the changes, the AERO study demonstrates the importance of many traditional core principles of retailing. It confirms that running a successful retail operation is all about people: employees, customers, and the interactions between them. One of the biggest secrets to success is the simple notion of engagement: listening to your staff and your customers. Another is cutting back on administrative burdens to get managers out in the field. And although the new wealth of technologies and available data is a great boon, often the most productive uses of it are in addressing familiar challenges such as managing shrink and out-of-stocks.

Sure, it is both fun and important to look at new technologies and the insights you can gain from them. Yes, there is some value in the gee-whiz imaginings of a Jetsons-like retail future. But when you dig deep into what actually generates profits for today’s most successful retail companies, it turns out that they’re simply good at what great retailers have always been good at: the nuts and bolts of operations. They identify the right metrics, analyze them appropriately, and act intelligently (Measure, Analyze and Act). They support field leadership with tools and processes to improve their decision making. They rely on, and seek insights from, front-line staff. And they view technology as neither a threat nor a toy, but as a tool that better enables them to achieve ancient ambitions such as customer insight and engagement, operations efficiency, and customer service.

One critical area where the Measure, Analyze and Act approach plays a huge role is in out-of-stock performance.  We found that leading retailers used this principal to improve operational performance, for example reducing the percentage of out-of-stocks. Respondents who set in-stock goals at the stock-keeping unit (SKU) level, rather than by store, category, or subcategory, performed 47 percent better on this key operational issue.  Why? Because they know when an important SKU is out of stock. When you aggregate out-of-stocks to the store level, you may not know that you’re missing a particularly high-volume or high-margin SKU, so your overall out-of-stock performance will seem better than it really is.  By measuring in greater detail, leaders are better able to identify and address problems.

In a sense, then, the more things change, the more they stay the same. In an information-soaked environment, amid the emergence of multiple retail channels, it’s important to understand how to take advantage of the changes. But it’s equally important to keep a hand on the pulse of core principles: people, customers, and physical store layouts.

Fifty years ago, some of today’s retail technologies would have been inconceivable. To think that most homes would have a computer through which you could search for, examine, and purchase items without ever having to go to the store… and yet similar alternatives actually did exist. Substitute the word “catalog” for “computer.” And yet over all of these years, shoppers have preferred the in-person store experience.

We can’t predict what technologies will be available in 50 years—or even five years. As options proliferate, bricks-and-mortar stores may indeed play a smaller role. But at heart, retail is a people business, with traditional principles that center on maximizing the value of human interactions. As always, retailers should seek to improve analytics to drive better performance, support field leaders to reduce their administrative burdens, highlight the value of their front-line staff, and achieve meaningful goals. Despite the latest inventions—or even because of them—the funda­mental principles represent the soundest road to success.

The A.T. Kearney Achieving Excellence in Retail Operations (AERO) examines the insights from the A.T. Kearney 2013 AERO survey to show how retailers are turning great operations into profits. To download the full AERO report, go to www.atkearney.com/AERO.

Joel Alden is a partner with A.T. Kearney and is the co-leader of the AERO Study. He is based in Toronto and can be reached at joel.alden@atkearney.com. Adam Pressman is a principal with A.T. Kearney and is a co-leader of the AERO Study. He is based in Chicago and can be reached at adam.pressman@atkearney.com.

Retailers that leave out brick and mortar behavioral intelligence do so at their own peril. According to a Forrester Research analyst recently quoted in The New York Times, “well over 90 percent of sales still happen in physical stores.” Closing the “insight gap” that exists between their brick and mortar and digital sales channels is a business imperative, but where to start? First, retailers must identify what types of in-store data need to be captured so that they can ask (and answer) the kinds of questions that are already part of routine analysis in online and mobile environments. For example: How many people came into my store? What are they doing while they shop? What products do they look at? What products do they buy? Here are four data categories absolutely critical to gaining more detailed and accurate in-store intelligence:

• Transactional Data (Online parallel: Ecommerce Data) – In order to track sales, returns, and inventory levels, most brick and mortar retailers already have point of sale (POS) data capture systems installed at registers. These systems provide vital information about what items customers are buying, which stores are bringing in the most revenue, and more. POS data alone is not enough, however, as the picture that it delivers of a customer’s shopping experience is oftentimes incomplete. For example, POS data can tell a retailer that customer X purchased a specific style, size and brand of shoes using a credit card. It cannot reveal that the customer also looked at the Ralph Lauren display for 10 minutes and wanted to buy a pair of jeans, but didn’t because her size was out of stock. (Or that customer Y didn’t buy anything at all.)

• Traffic Data (Online parallel: Site visits) – Keeping an accurate, ongoing, real-time count of in store traffic, also known as people counting, is essential in brick and mortar environments, for several reasons: 1) Traffic counts help retailers measure sales conversions. How many store visitors turn into buyers? 20 percent? 30 percent? How much did they buy? This is valuable insight. For example, a low conversion rate could signal that a location’s product mix, service levels or pricing need to be adjusted. 2) People counts also help retailers manage their workforce more effectively in real time. Based on the number of visitors walking through the door and average shopping time, technology can predict how many checkouts will be needed. The store manager can then beef up staff at registers or send more associates to the sales floor. 3) Finally, by analyzing store traffic against conversions over time, retailers can begin to see important patterns both within and across locations. For example: Why is the conversion rate higher in some stores as opposed to others? How are seasonal events and marketing promotions changing the patterns? Why have conversion rates gone down instead of up over the last 12 months?

• Queue Data (Online parallel: Order Processing Data) – How many people are waiting in line at registers? How long are they waiting? How fast are sales staff processing transactions?  Today’s busy consumers hate to wait, and data related to queue times, as well as customer actions in the queue is critically important for retailers that want to optimize service (i.e., all retailers). Research studies have shown that the amount of time a customer waits in line has a lasting impact on their positive or negative perceptions of an in store shopping experience. By tracking queue data, stores can adjust staffing and speed wait times in real time, better forecast workforce needs over time, and even communicate wait time estimates to customers, who appreciate being told what to expect.

• In-Store Behavior Data (Online parallel: Clickstream Data) – Data about what customers actually do once they pass through the front door is the Holy Grail, but it’s also the trickiest to capture in a brick and mortar environment. Retailers want to know things like how shoppers move through their store, what displays they stop at, and what items they touch and try. Online channels have an advantage here, because in the digital world, retailers can track “clicks,” collecting highly granular data about what products consumers look at, put in and then discard from their shopping carts, check back on, etc. This kind of data enables highly personal targeting—as anyone who has had an online ad for a handbag that they recently viewed on a retail site “follow” them around the Web knows. While tracking behavior in real world locations is a bit more challenging, with new technologies, it can be done. There’s no excuse for being blind when it comes to the retail world’s biggest and most profitable channel.

Ralph Crabtree is CTO of Brickstream

You can’t win if you don’t play. You miss 100 percent of the shots you don’t take…

No matter how you phrase it, this adage reigns true in all aspects of marketing, especially when talking about the ever-changing social media sphere. Many companies today still feel like social content cannot be mapped to ROI, so they don’t take the risk. But companies who have a strong grasp on what drives social success have proven that this is simply not true. Expion analyzed the Facebook strategies of 10 retailers to find out which brands are winning when it comes to the Facebook marketing game and which are sitting on the sidelines.

In the analysis we looked at a few key metrics including:

• Total Fan Actions: This represents the total number of fan actions (the sum of comments, likes and shares) generated by each brand in Q1 to show which retailers were creating the most fan engagement in terms of sheer volume.
• Fan Actions per Post: This shows the average number of fan actions generated by each Facebook post that the retail brands published in Q1. It demonstrates how effective each individual post.

A Quantity Approach – Walmart and Victoria’s Secret

While Burberry may have generated the most fan actions per post, it’s really Victoria’s Secret and Walmart that are winning amongst the brands measured. Each brand generated over 5 million fan actions on Facebook during Q1, which is more than double what Burberry produced,  and they won by repeating what works – over and over again. Both brands publish content on a frequent basis, and while it may seem like they are choosing quantity over quality, it’s a strategy that proves to be effective in terms of overall reach and engagement.

Victoria’s Secret published 220 posts in Q1 and found that “showing skin,” or posting pictures of their models, and featuring promotional items centered around Valentine’s Day generated the greatest engagement with their fans. Walmart published 413 posts and over 70 percent of them were timely, focusing on holidays and current events such as Dr. Seuss’s birthday, Easter, Game Day, St. Patrick’s Day and Valentine’s Day. The remainder of Walmart’s content included humorous photos of cats and dogs, a proven social winner, with engaging captions that sparked social conversations.

A Quality Approach – Zara and Burberry

Burberry and Zara have a completely different approach to Facebook engagement. They are focused on quality over quantity, and while each post is highly effective, there is a huge missed opportunity in terms of increasing their reach and frequency of engagement.

Zara posted a mere 11 times in Q1 so even though it’s individual posts are effective, and producing a healthy amount of fan actions per post, when looking at the total engagement it created on Facebook, it’s falling far behind. If Zara stepped up to bat more often and published content more frequently it could potentially capture a much higher share of voice on Facebook.

Burberry posted 54 times in Q1, which is a huge step up from Zara, but not enough to take on retail giants like Walmart and Victoria’s Secret. It has the highest number of fan actions per post, showing that the content its publishing is highly effective, but if it were to increase the frequency of posts by just a relatively small margin, it could create an incredibly powerful social voice and reach a much larger percentage of Facebook users.

Finding the Perfect Balance

While quality control is huge, as no one wants to be spammed by a brand, there is something to be said about creating a strong and impactful brand voice in the social media sphere. After analyzing these 10 different retailers we found that the brands who are taking a more subtle approach are missing the opportunity to capture the attention of Facebook users. Retail brands that want to implement a sound Facebook strategy need to find a balance between quality and quantity.  Victoria’s Secret is closest to this as they’ve created a balance between frequency and fan actions per post.

You don’t want to strike out, but you’ll never hit a home run unless you step up to the plate.

Mike Heffring is CMO at Expion

No business can afford system downtime. One minute lost can equal loss of revenue, customers and more. For retailers, downtime is particularly troublesome – especially considering the importance of e-commerce, which requires round-the-clock uptime in today’s global economy.

Global management consulting firm A.T. Kearney estimates global e-commerce has grown 13 percent annually over the past five years. According to a new report from the Interactive Media in Retail Group (IMRG), a U.K. online retail trade organization, global business-to-consumer e-commerce sales will top $1.25 trillion in 2013. On 2012’s Cyber Monday alone, online shoppers spent $1.465 billion. Mobile commerce, and the proliferation of smartphones and tablets adds new pressures to retailers’ need for an always-on business. Many smartphones are able to scan barcodes and QR codes, adding another feature to multi-channel shopping. In a study on the U.S. smartphone shopping behavior, ComScore found that 4 in every 5 smartphone users – 85.9 million in total – accessed retail content on their device during July 2012.

Perhaps the most obvious and damaging, cost of downtime to retailers is lost revenue associated with customer’s inability to transact during an outage. Target for example, has experienced multiple outages. The first crash was related to a huge surge in traffic when introducing the Missoni for Target apparel line. There were also at least two outages during last year’s holiday season, one of which (according to Rigor) lasted for about two and a half hours. The company used its Uptime Percentage Calculator (located on the Rigor homepage) to determine the outage represented a loss to Target of about $464,000.

It’s not just sales lost. While existing customers might be forgiving and wait for an outage to sort itself out, new customers are less patient. Outages impact brand perception as well, and retailers need all the help they can get to build and sustain their brands in competitive online space.

Today’s IT environments leverage virtualized infrastructures and cloud computing via private, public and hybrid models, making business continuity more complex, because applications and compute power are more fluid and dynamic. Any cloud model that’s not managed within a retailer’s own four walls is susceptible to the practices of a third party, lessening a retailer’s control over IT operations. This leads to missed opportunities in design, planning, testing and deployment of IT initiatives.

Another common misstep is implementing unique infrastructure for each application. This undermines efficiencies and increases the risk of failure and outage. Instead, companies need to take advantage of opportunities for repeatable infrastructure to drive economies of scale. Another point of failure is that for many organizations, planning and execution is non-iterative. IT must engage all stakeholders throughout the process and not just at the beginning, because requirements and expectations change. Retailers can minimize the impact of an outage through a solid disaster recovery plan. Too often, disaster recovery is an afterthought. Any time an application is built, IT departments should plan and build for that app’s disaster recovery by anticipating scenarios and defining requirements.

Many outages could be prevented with the adoption of an Always-On Design Framework, which improves availability and reliability. This framework is premised on three key tenets: reusable components that are easy to deploy and support, interactivity with stakeholders to significantly reduce the risk of project failure, and architecting application infrastructure assuming a failure will occur. It closes the gap between application design and users’ needs. With an Always-On architecture, retailers can take advantage of reusable IT components in a service catalog that can be quickly provisioned. With faster delivery of services, enterprises can focus on other business strategies. They save weeks of time in development, provisioning and training, which boosts agility, cuts operational costs and achieves greater ROI.  The framework also promotes regular evaluation, validation and prioritization of applications and services. That, in turn, aligns expectations and capabilities early in the design process.

This framework will help retailers reduce outages and mitigate damage. The Always On Design Framework is detailed in HOSTING’s publication, the  “essential Guide to Disaster Recovery & Business Continuity.” The free publication can be downloaded from the Website: www.hosting.com. There is no question that retailers should be investing in online channels as eCommerce and mobile commerce continues its exponential growth. But these channels require highly-available, reliable IT systems. Outages of any length immediately affect the bottom line. Architecting with this proven framework can help plan and deliver an IT foundation that keeps retail always on.

Matt Ferrari, CTO at HOSTING

On May 1, 2013, the Wall Street Journal published an article titled “Retailers Seek Plan to Prevent Disasters,” following the collapse of the Rana Plaza building in Bangladesh that killed more than 400 inside. The article described a meeting in Eschborn, Germany that drew representatives from Wal-Mart, Gap, H&M and 30 other retailers and government agencies to develop a plan to prevent a repeat of the Bangladesh disaster. Separately, the European Union is also discussing bringing forth a trade action against Bangladesh and installing new measures to pressure local authorities to enforce stricter labor standards.

Another article in the Wall Street Journal showed protesters marching in the Bangladesh streets to demand the death sentence of the owner of the collapsed garment factory. Two very different worlds – the West and East – are reacting to the same challenge and although their perspectives may be diametrically different, the culprit in both instances may be the same.

In the West, brands and retailers race to meet consumer demand for fashionable yet inexpensive clothing. They turn to countries like Bangladesh that can provide them with low cost labor and a fast- growing garment workforce to fulfill orders rapidly. The goods are sufficient quality, the cost is low, and the speed of delivery works. The downside to sourcing here is the sometimes questionable workplace conditions and factory standards. Thousands of miles and the inability to walk the factory floor clouds the view of production.

In the East, in Bangladesh specifically, the garment industry has blossomed in recent years to become the number two worldwide exporter only trailing China. Because of the availability of jobs and the growing economy, Bangladesh has become a global supply chain hot spot. But with Bangladesh’s high ranking comes intense pressure to meet tight deadlines and keep cost levels down. In turn, safety and other standards can sometimes become secondary concerns. The view from the West is clouded: a brand places an order and after a number of weeks, the goods are shipped and arrive on store shelves, giving brands little insight into the reality of how the goods passed through in the production lifecycle.

However, factory workers expect more — they expect safe working conditions and standards to be upheld. At the same time, retailers share these expectations. The problem is the lack of visibility or accountability in the production lifecycle. Without visibility, no one can be held accountable to the sub-par safety and standards and enforcement cannot take place. Years ago, a retail executive could walk the floors of its factories to ensure practices were up to par, but this is no longer practical as factories are typically thousands of miles away, separating the retail executive by an ocean. With no eyes or ears on the ground, both ends of the supply chain suffer.

The culprit here is the lack of visibility and perhaps that’s where the solution begins. In today’s connected world where we can view satellite images or live streams of local highway traffic by logging onto the web, we should be able to turn the lights on in the global supply chain. Picture a retailer placing an order in an electronic portal that requires the supplier to include images of the fire escapes in all factories. Or a consumer goods company that uses an online platform to electronically monitor every party in the supply chain against denied party lists or unsafe factory databases to prevent unethical production. While today’s complex supply chains create challenges for ensuring safe and responsible production, technology can be the equalizer.

Cloud technology can put every factory anywhere on the planet on the grid. This means the retail executive can gain real-time visibility into the cutting, dying, sewing, packing and shipping processes happening at their factory across the ocean. This knowledge can prevent disasters like the Rana Plaza building collapse from happening. For trading partners in Bangladesh, this exposes their workplaces and holds them to higher standards. Cloud can allow everyone visibility into the working conditions taking place across the supply chain and nobody is kept in the dark.

Bryan Nella is Director of Corporate Communications at GT Nexus

Once upon a time the U.S. Consumer Product Safety Commission (CPSC) was a rather quiet federal regulatory agency, tucked away in the Washington suburb of Bethesda, Maryland.  Then came 2007, dubbed “The Year of the Recall,” with lead-contaminated toys from China grabbing weekly headlines.  Congress reacted by passing the most sweeping reforms to the laws governing the safety of children’s products since the inception of the agency—the Consumer Product Safety Improvement Act of 2008 (CPSIA).

In addition to imposing strict new limits for lead, phthalates and durable nursery products, among others, the CPSIA culminated on February 8, 2013 into what has been called “The Mother of all CPSC Regulations”— the Testing and Certification Rule (or “1107 Rule,” codified at 16 CFR 1107).  This rule sets forth very specific testing, record keeping and other requirements for U.S. importers and domestic manufacturers of children’s products – any product “primarily intended” for children 12 years old and younger.  In a nutshell, this rule requires that U.S. importers and domestic manufacturers of children’s products:

• Order CPSC-approved lab testing and certify that those products meet all applicable CPSC standards, including documenting and appropriately responding to any sample failure;
• Undertake additional testing of the product after certification and during manufacture of the product (how frequently is unspecified but must impart a “high degree of assurance” that all products meet all CPSC standards);
• Monitor and document any “material change” to the product that could affect compliance with standards; and
• Implement company policies and employee training to prevent any attempts at “undue influence” over test labs (effectively, any attempts to skew test results).

The 1107 Rule presents a unique challenge for U.S. retailers who direct-import children’s products:  they just buy and import the products; they don’t make them.  Short of opening an office in every overseas factory from which they source, how are direct-import retailers in the U.S. supposed to ensure that all these requirements are met?

The answer lies in two additional CPSC-regulations recently passed:

1.              Component Part Testing (“1109”) Rule.  This regulation allows the U.S. importer to rely on a certificate from an overseas supplier to, in turn, issue the CPSC-mandated product certificate prior to importation, so long as “due care” is exercised to ensure that the supplier did what is required of them under the 1107 Rule.  Cutting through the regulatory jargon, this means that the U.S. importer should require the overseas supplier provide proof that they undertook all the necessary activities and obtained all the necessary documentation under the 1107 Rule.

2.              HDXRF and Other “Alternative” Test Methods.  As stated, the 1107 Rule requires some testing during actual manufacture of children’s products, in addition to that for certification.  That testing, however, can be either via a third-party lab (“periodic testing”) or on-site factory (“production”) testing.   Regardless of which avenue the U.S. retailer  or supplier may choose, on February 20, 2013, the CPSC for the first time allowed High Definition X-ray Fluorescence (HDXRF) to be used for both lead paint AND substrate (content) testing.  Unlike traditional “wet chemistry,” HDXRF technology is non-destructive and available for use in both portable and benchtop instruments, making it easy to use in either a lab or factory setting. Since lead is the number one source of seizures at U.S. ports,  HDXRF represents a major cost-saving opportunity for either periodic or production testing under the 1107 Rule for both suppliers and U.S. importer-retailers.

The 1107 Rule, while complex and not necessarily a fun read, is manageable.  Just make sure you deal with it now, before the CPSC asks you why, as an importer of record, you failed to do so.

Quin Dodd is a Washington, DC attorney practicing exclusively in the area of product safety law, and formerly served as Chief of Staff of the CPSC from 2006 to 2008.  He may be reached at:  quin@quindoddlaw.com. 

The Wall Street Journal recently reported on the low employee morale inherited by J.C. Penney’s returning CEO, Myron “Mike” Ullman, after the chain slashed its workforce by tens of thousands over the past year. Retail is not just a business of merchandising and discounts, as it has been portrayed by the media in the last week since the department-store chain ousted its former chief executive Ron Johnson.  Retail is a people business as well, which Mr. Johnson clearly did not understand.

Creating a new retail platform, as was attempted with the “JCP” branding platform, requires the organization to lean on its brand ambassadors.  If the transformation from J.C. Penney to JCP was executed as I’ve seen so many in the past, regardless of executive’s intentions, it probably sounded to employees as “Everything you have done so far was wrong, this is the new right.”  Or perhaps, “Even our name is old an outdated, so we’re changing it.” Even without thousands of layoffs, a poorly planned and executed transformation will quickly create low employee morale. Now imagine the thousands and thousands of employees who face customers every day. What expression do you think they have on their face? How keen are they to help their customers? What is their attitude towards confused customers who are looking for a discount?

J.C. Penney must focus on its people first.  Every day, its 116,000 employees are making decisions that will amount to its brand equity.  Every organization’s brand equity is equal to the sum total of their employees’ decisions both in front of the customer and behind the scenes on behalf of the customer. If employees are enthusiastic, passionate and caring, customers will make purchases.  People do not buy from cynical uncaring employees. (Check out www.cyncismkills.com.)

The human factor is the most elusive and challenging in every corporate strategy.  The good news is, if you unlock your workforce’s energy, they will not only meet, but exceed, your customer’s expectations. Here are my best, most heartfelt ideas for Mr. Ullman:

1. Start thinking in terms of employee engagement. Measure your workforce’s state of mind, the true pulse of the organization. Involve your employees in valuable discussions and lean on them to help strategize and design your next moves.
2. Create a cause to which people can connect. Stop designing transformations around stockholders and stakeholders. Instead, focus on fulfilling your customer’s needs and positively impacting their lives.
3. Give employees a reason to have pride in the brand. Yes, brand pride is key to your future success. Connect your people to J.C. Penney’s heritage and develop a clear program to disseminate that emotional bond throughout the organization and beyond.
4. Embrace empowerment. Equip every manager with the tools and authority to engage their employees.
5. Innovate and then innovate some more. Establish small teams across all levels of the organization and provide them a forum for generating new ideas and leading initiatives to delight customers.
6. Give employees the power to delight. Provide employees the opportunity to deliver great experiences that will increase loyalty and customer profitability.
7. Celebrate the customer heroes. Establish a sustainable culture that is committed to recognizing and rewarding its customer heroes.
8. Repeatedly connect back to the cause. Make sure employees can see the progress made on the goals to reach the organization’s vision and fulfill its higher cause.

As we all know, history often repeats itself. The now defunct Circuit City fired its top sales people because they were too costly and just two years later filed for bankruptcy. Any company strategy that does not embrace fully the role of the organization’s employees, fails to understand a very simple truth.  In the moment of truth, when a customer and employee connect, the brand is created. How the employee chooses to engage the customer at that moment of truth, will determine if the corporate strategy will succeed or fail.

Apple’s retail success was highly dependent on the spirit of its employees. There was no evidence that a similar spirit was developed at the JCP brand.  Whatever spirit the J.C. Penney workforce had a year ago has been most likely destroyed a strategy that undermined them and not only by the job cuts. Although it’s easy to rely heavily on merchandising, store design and slick advertising, take heed that employee morale is a force that cannot be ignored.

The opportunity that Mr. Ullman is inheriting is quite significant; if he can take the 116,000 J.C. Penney employees and inspire them to be brand ambassadors, he will create a tsunami of positive brand loyalty and profits.  The good news is that with the right approach, morale can be turned and cynicism can be transformed to passion. I wish Mr. Ullman good luck on his journey.

Lior Arussy is CEO of Strativity

Conventional wisdom in retailers and FMCG manufacturers focuses on growing the business by maximizing market share and increasing conversion among existing shoppers /consumers.  By targeting this population, it is assumed to be more efficient and productive than trying to convince those do not currently shop at a store or in a category to become shoppers at that outlet or in that aisle.

However, for REAL growth to occur, we have to actually leverage the marketplace where we have been hesitant to go – at NON-CONSUMPTION. Historically and conventionally, we have believed that it is harder to convert a NON-BUYER into a BUYER than it is to get someone to switch. And, while there is both intuitive logic to that and plenty of proof to lean on; that does not grow the market in total. For that to occur, the shopper has to make incremental purchases and not just swap from one to another.

Looking at the matrix below, labeled Four Types of Shopping, you see in the lower-left quadrant  how the shopper makes routinized purchases that are not impacted by the information currently available from the store or manufacturer, nor does the shopper particularly seek additional information.  Moving to the right; the lower right-hand quadrant shows the shopper seeking a solution or to meet a job, but being stymied by the lack of news or communication from the store or brand on how to accomplish that job with the products currently available.  Moving up to the upper-left quadrant; the manufacturer and store focus on switching behaviors between existing options – and while it may re-allocate the shares, profits, and sales dollars among competitors, it is not creating growth or incremental sales of any substantial amount.  The only way to grow the TOTAL business in a sustained way is to provide context, information, decision-support, and assistance to the shopper through an improved Ecosystem that aligns with the shopper’s desire to accomplish a new job or an existing job in a more successful way. Therefore, what is required is a better understanding of the jobs the shopper wishes to master and what requirements must be in place for that to lead to a purchase of a product (or combination of products purchased in concert).  Simply relying on so-called “causal data” or studying “panel data” will be helpful; but insufficient in that it is not tracking and seeking to understand the decision-making process of the shopper.  It is attempting to link correlational data (a sale occurred under this condition) and assumes it is directly responsible for the purchase.  In fact, that is rarely accurate.  The missing piece is an understanding what the purchase is designed to provide – and not simply the occurrence of a purchase.  By better understanding what the shopper is attempting to accomplish, and participating in that vision, the retailer and manufacturer can better position their offerings to accomplish that outcome.

As an example, review the following example of a “typical shopper’s experience.”Now, imagine if Mary were able to engage in her pursuit in a way that resembled a mutual effort.

If the store and brand understood what she was seeking to do and helped her think through it and make a more confident choice, they could provide the right resources and tools to aid her (and build their own businesses at the same time!).

The process is a nine-step process as defined below that begins with identifying the shopper’s job(s) and then working to identify how to best provide that within the context of the business’ capabilities, strategies, resources, and commitment.

 The technology/process depicted above contains a tool that focuses insights and prospective actions through a “QFD-Like” technique (QFD = Quality Function Deployment – a process used by progressive innovators to design quality into products to meet user demand) that allows for easy identification of successful initiatives and gap analysis hampering success from occurring.  This technique allows for quicker, less expensive, and more accurate decisions regarding: new item introductions, category management initiatives, shopper marketing activities, and in-store activities.

For more information on the process, please contact David Zahn, of ZAHN Consulting, LLC at davidzahn@zahnconsulting.com.

Many retailers still rely on fairly simple rules to target merchandising offers to customers. Historically, the bulk of targeted customers are those who have either made purchases in the product category or within a specific brand in the category. Makes sense, right? It’s a tried and true formula that works because such customers are likely to repurchase in the same category or brand. Yet, this approach does little grow the category share; The traditionally targeted customers are already spending in the category and new customers aren’t being enticed to expand their spending habits within the category.

Recently, retailers have found success looking at “winnable share” at the product category level. With this approach, the potential of each customer to spend in a category is estimated and the more potential a customer has, the better the target.

For example, let’s say we have two customers: “Bob” who spends $60 per month on bread and “Mary” who spends $10 per month. The traditional approach would favor Bob for promotional offers, but that $60 might mean that his spending potential is maxed out. In other words, targeting Bob with a promotion will not increase his spending in the category because $60 represents the most that he would ever spend. By contrast, Mary might have the same $60 potential, but $50 is being spent at another store. She has a much higher winnable share than Bob. Naturally, this approach will also uncover some high-spending customers that have still more potential.

Here’s a quick chart of what we might see:

Customer             Current Spending                                Estimated Potential                         Winnable Share

Bob                          $60.00                                                        $60.00                                                $0.00

Mary                        $10.00                                                        $60.00                                                $50.00

Sharon                    $50.00                                                        $80.00                                                $30.00

An immediate question that we face is whether those customers with a higher winnable share will respond to promotions. In most cases, they do, which means that a category manager can both generate near-term sales and build higher share.

Having an understanding of customer potential at the category level also enables two additional merchandising activities.

First, it provides managers with an overall potential for the customer base by category. This allows them to work with vendors on designing merchandising programs that achieve the best sales outcomes, both for the vendor and for the store. On a macro level, it allows management to estimate whether their potential category share is growing or shrinking and why. For instance, perhaps winnable share is stable, but sales are struggling due to ineffective promotions. Management teams can use this information to fix the fundamental efficiency issues.

A second use is in designing cross-category promotions. Let’s say that a retailer is thinking about promoting denim to sweater buyers. We would want to use our intelligence about customers’ winnable share in denim to select customers. If we’re actually making an offer in both categories — “buy a sweater and jeans together and get 20% off both” — then winnable share in both categories is useful.

In short, retailers and merchandisers are accomplishing two primary objectives as a result of moving toward understanding each customer’s winnable share by category: driving sales for current promotions by selecting the customers that will respond; and building gains in category share by pulling in new customers that would be ignored by traditional targeting efforts.

David King is executive vice president at Fulcrum

Guest Blog by Saeed Sikiru

With the increase usage of mobile gadgets with built-in web browsers in them, there’s no better time to go digital than this era. Your products catalog may no longer be as effective as it used to.

According to studies gleaned by eMarketer, mobile shopping apps may have some influence in your relationship with your customers. Additionally, mobile device users revealed that utilizing a shopping app enhanced their relationship with their favorite brands. And most of them liked the brand even more after using a shopping app.

In another research by Flurry, consumers spend more time on retailers’ mobile apps comparing prices, discovering new products, daily deals, and making purchases. Furthermore, one out of five mobile users confirmed they would download a shopping app on their mobile device in order to get acquainted with a brand.

This indicates that mobile device users utilize apps for discovering products. Instead of visiting a brand’s website or a nearby store, they prefer to download a brand’s mobile shopping app to examine its products or offers. In a nutshell, mobile shopping apps now serve as catalogs.

The Benefit of Developing a Mobile Shopping App for Your Business

Companies that have developed mobile shopping apps have been able to retain lots of their customers. This is because they keep their clients updated with new and relevant offers via their mobile apps. And customers have demonstrated their loyalty through purchases made directly from their shopping apps.

Factors to consider before developing mobile shopping apps

Now that you’re aware of the power of mobile shopping apps in retail business, it’s about time you consider developing one for your business.

The first step to developing mobile shopping apps is to understand your target audience, what they want, and the technologies that they like, and how best you can offer them a good user experience.

One way to achieve this is by identifying the outlets that your customers are likely using, and taking the time to explore these platforms to gain an understanding of each user experience.

Another simple but effective way is to emulate your competitors. You can download their mobile shopping apps on your mobile gadget and familiarize yourself with it. Based on that, you’ll be able to come up with ideas for your own shopping apps, and even improve some areas that you think your competitors have flaws.

Additionally, discussing your goal with mobile application developers will help you gain lots of insights from them. Being professionals in application development, app developers are idea for offering valuable advice to achieve your overall goal.

How to promote your shopping apps after creation

With millions of apps available for download out there, it can be extremely difficult for new mobile apps to gain footing after development. Fortunately, there are some strategies that you can use to make your new mobile app spread like wildfire. The following are a few ways you can promote your new mobile apps.

Make your apps available on apps stores, promote them on your social media outlets, and encourage referrals through your clients. According to a survey of mobile apps users, 42% said they usually discover new shopping apps at their favorite apps stores. 37% also said that they hear about new apps from friends who have utilized the apps before. Furthermore, social media outlets such as Facebook and Twitter are proven to be powerful tools for promoting new mobile shopping apps.

In this technology driven era, relying so much on traditional product catalogs for promoting your products and new offers may affect your sales tremendously. With the increase usage of mobile gadgets for doing almost everything in our lives these days, mobile shopping apps are the new tools for promoting products and new offers. And retailers who are using shopping apps are already reaping the benefits.

Saeed Sikiru is a prolific freelance blogger. He’s the editor of a content marketing blog where he offers his freelance blogging service. If you have a blog that needs regular content, hire Saeed to write quality and persuasive articles for you.