A blog for all things retail and licensing.

Keeping up with the Dollar Channel

Guest Blog By Pat Conroy

Driven by changing consumer preferences, the U.S. retail landscape appears to be shifting.  The market share of the grocery and mass merchandise channels, while still dominant in CPG, has eroded as market shares of dollar, club, and convenience stores increased in recent years. CPG companies looking to stay on top of these shifts should not ignore the potential for the dollar channel, especially multi-price-point dollar stores, to play a growing role in national brands’ future performance.

In a recent Deloitte survey, CPG executives acknowledged consumers’ growing affinity for today’s new and improved dollar stores, and the shift in their views on the importance of different channels over the last three years is testimony to the significance of this trend. Sixty-two percent of the CPG executive respondents expected sales at dollar channel to increase over the next three years. These executives also expected dollar stores, in the same timeframe, to increase product choice by increasing the number of SKUs (85 percent), expand their geographic presence (75 percent), allocate more shelf space to private labels (58 percent), and improve in-store product presentation through means such as lighting and in-store displays (57 percent).

Looking ahead, CPG companies seeking to capitalize on the dollar channel’s growth should consider ways to appeal to the dollar channel’s increasingly diverse customer base while guarding against channel conflict and cannibalization. Core dollar-store consumers are being joined by new dollar consumers who shop at dollar stores less out of sheer financial necessity, but because they appreciate the dollar store’s national brand offerings and the improved in-store experience. For many CPG executives, the attraction of the dollar channel’s growing customer base is mitigated by the specter of rising channel conflict with mass merchandisers and grocery stores.

Our research shows that dollar stores are an important and profitable channel for some CPG companies that have tailored their businesses to suit the channel’s distinctive nature. These CPG companies appear to have cracked the code for selling through the dollar channel in five distinct areas:

  • CPG companies begin with a channel- and often retailer-specific approach to brand, product strategy, and innovation.
  • They pursue tailored merchandising and assortment strategies for the dollar channel at the store level.
  • Their pricing and trade promotion strategy acknowledges the potential for channel conflict by providing unique product-price value propositions in each channel.
  • They partner with dollar retailers to adapt their supply chain, distribution, and operations to the dollar channel’s unique logistics and warehousing environment.
  • CPG companies serious about succeeding in the dollar channel create channel focus by resourcing dollar stores with strong account and support teams that include marketing, product packaging, and supply chain expertise.

One would think that the dollar channel should be an important and strategic channel for most national brands, yet 42 percent of the consumer product executives surveyed do not view the dollar stores as a strategic channel. The CPG executives surveyed and interviewed seem, albeit gradually, to be coming to grips with this new reality.

Pat Conroy is vice chairman and U.S. Consumer Products leader at Deloitte LLP, a national practice that provides audit, tax, financial advisory and consulting services to consumer product manufacturers.  The national Consumer Products practice comprises more than 2,400 professionals, and is one of the largest industry practices at Deloitte.  Pat has more than 20 years of experience leading both domestic and international consulting engagements within the consumer products industry.  He has been a long-time advisor to many of the consumer packaged goods (CPG) industry’s leading chief executive officers and senior executives. His experiences range from strategic business planning to detailed implementation of operations and technology initiatives.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.


Retail showroomers aren’t all cherry-picking deal-hounds– they’re potentially your best customers. Here’s how to leverage the tools of loyalty management to win them over.

Guest Blog By Rick Ferguson and Bill Hanifin

Before the advent of mobile devices, shoppers had to take pricing promises on faith. Today, it takes 30 seconds on an iPhone to figure out that the 52-inch flatscreen TV in your store is 14 percent cheaper online. As smart phone penetration increases, consumers are relying ever more on mobile devices to navigate their lives, and they will only grow more adept at finding the lowest price online.

Showrooming — the use of mobile devices while in a store to find and buy a product at a lower price online — has sparked a retail war. On one side we find the big-box retailers, who have become the global poster children for those afflicted with terminal showroom-itis; on the other side we find online retailers, the go-to villains for those looking for a scapegoat to blame for their sliding sales and disengaged shoppers. And in the middle of the war we find consumers themselves, who are guilty only of pursuing their own self-interests.

However, as we’ve seen from the recording industry, which responded to a permanent change in consumer behavior wrought by disruptive technology by declaring war on its own customers, fighting showroomers will not win the battle against showrooming. It will only serve to alienate retailers’ customer bases.

So how can brick-and-mortar retailers keep their sales in store? One way is by embracing showroomers by leveraging the tools of loyalty management. A recent study conducted by Aimia reveals a great deal of information about retail showroomers that hasn’t been reported in the press — particularly in regard to their attitudes and opinions about brand loyalty and reward programs. We learned that showrooming behavior indexes higher among younger consumers — three-quarters of US showroomers come from the Millennial generation. And Millennials also over-index on loyalty programs: 77 percent of Millennial consumers claim participation in loyalty and reward programs.

And as all veteran car salespeople know, a customer doesn’t come onto the lot unless he’s ready to buy. So how can retailers deploy the tools of loyalty management to convert showroomers into paying customers?

  • Use hard benefits to reward desired behavior: The value of hard benefit rewards such as loyalty currency lies in the currency’s function as a lever to influence customer behavior. When you find a showroomer looking up the price of that 52-inch flat screen, invite him to join your reward program—perhaps with a rich bonus offer on his first purchase. The cost of the bonus points is far less than the gross margin contribution you’re losing on showroomed products.
  • Link soft benefits to upper-tier smart phone users: By lavishing showroomers with exclusive access and experiential rewards based on customer data, you’ll enjoy the opportunity to provide a truly unique customer service experience.
  • Steal the online thunder: Offer your own showrooming app that combines price transparency with product reviews. An app that is available only to your loyalty program members ensures that every action conducted through it results in proprietary data that goes to you – which is far more valuable than a lost sale.
  • Deploy an aggressive partner strategy: Work with and share opt-in data with partners and suppliers to combat showrooming together. By offering exclusive products, you’ll draw more people to your store to buy, which benefits retailers and suppliers.

Retailers have an unparalleled opportunity to adopt current technology to create new value propositions that reward customers for physical visits, promote personal service, and deliver both relevance and value. Success will require you to embrace this technology, rather than abdicate to your online competitors.  So when you wake up in the middle of the night in a cold sweat, worried about showrooming, take heart—the tools to build profitable relationships with showroomers are already at your disposal.

Bill Hanifin is Consulting Practice Leader for Aimia, while Rick Ferguson is Aimia’s Vice President of Knowledge Development (www.aimia.com).

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at eric.slack@phoenixmediacorp.com.

Waiting for Great Deals, Celebrating at Home: Holiday Outlook 2012

Guest Blog by Thom Blischok

The 2012 holiday season is going to be one of change. The old pattern of rushing out for the impulse buy is giving way to a growing trend of patient, cautious shopping, with more options for getting great deals enabled by technology, according to a recent Booz & Company 1,600-person survey.

The one constant in 2012 is the “lens of affordability.” Every shopper Booz & Co. talked to or surveyed indicated that his or her buying decisions will be determined by affordability. Shoppers will be buying gifts they need more than gifts they want. Across income levels, shoppers say that their 2012 holiday spending will be almost the same as last year’s: between $675 and $725 per family. The historical precedent of a huge gift haul is transitioning to a smaller – yet more meaningful – gift-giving experience. At the same time, holiday celebrations are “in” this year, as the uncertainty of today’s economy continues in the minds and wallets of the 2012 holiday shopper.

Here are three key trends to watch from Booz & Co.’s holiday 2012 research:

  1. The search for deals will drive purchase behaviors. Seventy-three percent of all shoppers expect to find great deals this holiday season – an 18 percent increase over 2011. Almost 25 million shoppers will wait until Christmas Eve to fill their shopping carts, a number also up from last year. Retailers already are beginning the “deal dance” with consumers as they position themselves with great offers. Shoppers will let their keyboards do the walking to find these deals, using smartphones to snap pictures in stores and then going online to compare prices and find the best one. This “showrooming” trend will lead to future holiday seasons that are driven by global price and value transparency.
  2. Shoppers will be planning more holiday celebrations. Sixty-one percent of shoppers are planning a holiday celebration as a way to give thanks for living through a very tough economic period (up 12 percent from last year). Almost 53 percent of shoppers report that they are planning more than one celebration this year, a 17 percent increase over 2011. All families who responded, regardless of income, want to celebrate as affordably as possible – and making a fine dinner is at the top of their holiday list. There will also be significant entertaining; consumers are seeking intriguing hors d’oeuvres, snacks and treats to feature at holiday festivities. To tap into this, retailers must become creative in offering the tastes, smells and delights of the holiday season. They can help home cooks create innovative, large family meals with interesting new side dishes and desserts as well as labor-saving ideas, such as ready-washed and precut meal assembly ingredients.
  3. Gift-giving will be reshaped by affordability, “light” indulgences, and family categories. Seventy-six percent of shoppers indicate that they will “pause before purchase” to ensure they make the right gift decision. Impulse purchases appear to be on the decline as shoppers stretch every holiday dollar. However, 52 percent of shoppers plan to splurge a little with a luxury gift that their budget can handle. For some it will be that special handbag, for others a home appliance, and for others a true holiday meal celebration. Re-gifting will also be on the rise this season: Presenting last year’s gifts with a little value-add (like a small accessory) will become a gift-giving strategy embraced by 32 percent of American shoppers. Expect categories such as home entertainment, basic apparel, exotic kitchen appliances (like next-generation coffeemakers and food processors), smartphones and tablets, interactive toys and downloadable gifts like e-books to top wish lists.

It would be fair to say that the 2012 holiday season will be one of careful and controlled spending, lots of celebrations for surviving another economically tough year and purchases that are determined largely by the search for the deal.

Thom Blischok is the chief retail strategist and a senior executive advisor at Booz & Co. For more information, visit www.booz.com.

Retail Merchandiser magazine is pleased to present the points of view of many different industry stakeholders. If you would like to contribute your own guest blog to our site, please contact the editor at russ.gager@phoenixmediacorp.com.