When Marvin Imus formally introduced category management to his single-store operation in Paw Paw, Mich., a year ago, he was merely catching up to what larger operators have been doing for years.
In using shopper data to customize his wholesaler's shelf sets, however, the president and chief executive of Paw Paw Shopping Center leaves his bigger industry peers in the rearview mirror. Imus believes applying that shopper knowledge is how this family-owned store in southwest Michigan, halfway between Detroit and Chicago, will survive in a market marked by economic hardship and revved-up competition.
"Not only is the economy pretty sad because we rely on autos [and related businesses] -- and they're having hard times -- we've got an increase in supercenters that are battling each other," Imus said.
Using store sets from Paw Paw's wholesaler, Grand Rapids, Mich.-based Spartan Stores, was an important step, even if sales are still struggling. In the past, Paw Paw relied on brokers and manufacturers to reset its shelves, a process that didn't make room for local market subtleties. Spartan's recommendations, since they consider warehouse movement to its supplied stores, are more relevant to Paw Paw.
Spartan has particularly helped Paw Paw keep up with categories where new products are continuously introduced.
"It's been wonderful for me," Imus said. "The biggest positive I get is, we have a better set for new products that come in. I don't have to do the grunt work."
When Spartan discontinues or omits from a set an item Paw Paw normally carries, Imus analyzes his shopper database using S4 software from Data Systems, Omaha, Neb., to see how often and how much of the product is bought. Special attention is paid to those customers who represent 10% of sales.
"The ones that are most important to me are the biggest spenders in our store," Imus explained, "because I really want to take care of them. It's really easy for them to move on to other stores."
Household cleaners, where Paw Paw updated the aisle as part of a rolling reset of Center Store and refrigerated aisles, illustrate his approach. Procter & Gamble's Swiffer line of mops and dusters was new, and Paw Paw had been putting them on end aisles and in floor displays because the large-sized boxes they and their refills and accessories come in were hard to fit on shelves.
"The problem is, endcaps are highly changeable," Imus said. "So that's not really a home for a product like that."
Imus took Spartan's recommendation to cut back other, older cleaning products to make room for the new lines after finding his sales data supported it.
"We were stocking items in our shelves that the customer, especially the better customer, just weren't buying anymore," he said.
Happily, the higher price tag of the Swiffers "wasn't a barrier to our top shoppers. Our volume on those items picked up dramatically once we found a home for them on the shelf."
Favoring the highest ticket item isn't always the end goal, though.
Take the dry pasta and sauces aisle, another dynamic category. Before implementing the new set, Imus again consulted his customer base, this time with an unexpected outcome. The questionable item was Hunt's tomato sauce, which Spartan included in the set.
"I saw there was a low-end pasta sauce that basically we only sold at deep-discount prices," Imus recalled. "We decided, looking at the database, our top shoppers weren't buying that product. So we decided to trim that back dramatically."
Before he did, though, he talked to shoppers. What they told him surprised him.
"I would spend some time in the pasta section, just straightening shelves, and a customer would come up, and I would have a conversation with them," he said. "We came to find out that because it was a low-price item, it made the whole category look more expensive."
The sauce example illustrates the narrow line Imus has to walk as he seeks to carve out a niche for Paw Paw amid nearby giants Wal-Mart Stores, Meijer and Sav-A-Lot, Supervalu's limited-assortment banner.
It turns out that niche is 45- to 55-year-old consumers with above-average income who "really don't want to take the time" to walk through an enormous supercenter parking lot, he said. It's those people he had in mind when he expanded his wine section last fall for the second time in two years, and built up the selection of gourmet, organic and specialty products, like olives and pastas.
"They all support each other," he said. He's been adding gluten-free products while integrating slower-moving, low-carb products. "I'm seeing more attention to gluten than to Atkins. Within the next month or so, we probably will have a four-foot section of gluten-free products."
At the same time, Imus realized he can't go too far in adding specialty products, lest he become too upscale and "migrate ourselves out of our customer base."
Imus tries to find a secondary supplier if Spartan discontinues an item that's popular with his top shoppers. If he can't find it, then he uses his database to identify who's buying the item the most, and tell him or her the item will be discontinued. He contacts top shoppers by e-mail and snail mail. He even calls them at home and intercepts them at the checkout.
Imus enjoys the customer contact, but in fact, the folksy touch is matter of survival.
"The overall economy of our area is pretty poor, so our sales are down some compared to last year," he said. "We seem to be hanging on, but we seem to be getting squeezed with all our costs going up. So we need to be very careful of the items we carry and the margins we carry."
Using technology comes naturally to Imus. He was an early adopter of a frequent-shopper program, launching the Super 1 card in 1989. Today, some 80% of Paw Paw shoppers are in the program.
"I remember we did a front-end system upgrade, and it gave us the ability to give people a shopper ID number," he recalled. "It took me six to eight months to figure out what it was, and I had to build a shopper base card."
A light went off a few years later, when his father and store founder, James Sr., questioned the wisdom of carrying caviar, given its slow movement. Imus delved into his data to analyze the product's movement and discovered a high-spending shopper he calls Carol who bought it year-round. He realized that if he lost the caviar, he might also lose a valuable shopper.
"It really showed me the power of going to the customer," he said.
Along with using the shopping data to create direct-mail, e-mail and in-store offers, he's also used software to analyze buying patterns and produce likely customer targets, as well as predict promotions results based on price point and response. One day, he'd like to group shoppers by life stage and target them accordingly.
Carlene Thissen, president of Retail Systems Consulting, Naples, Fla., and founder of the annual Global Electronics Marketing Conference, which last month recognized Paw Paw for electronic marketing excellence over time, called Imus a "sharp business operator" who's eager to use and understand new technology while staying close to his customers.
"He kept the program interesting. He uses data to identify his best shoppers and make them feel comfortable by carrying products they want to buy," she said. "He keeps the program fresh with new offers and targeted mailings. He linked the Internet to the customer database in 1997, so his customers could self-select targeted offers."
Time and money, however, limit his ambitions. Category management was unaffordable until Spartan offered it to its supplied stores. With AdPilot predictive software, Imus had dramatically improved results of targeted offers, but he stopped using it after it became cost-prohibitive.
Time is a factor, too. Imus estimated he spends at least one-fifth of his time working with data. It takes him two to three days to manipulate shopper data to decide whether to keep a discontinued item.
"Now we're swimming in data, and it's just a matter of being able to get your hands on it," he said. "Data mining tools are out there, but they're so expensive."
Indeed, the investment in technology has helped Paw Paw hone its Center Store selections like never before; but it also removes Imus from the front lines and limits the time he'd like to spend with shoppers in the store, like his father did, learning their buying habits, their preferences.
"Part of our success and ability to survive is that closeness to our customer," he said.
Setting an Example
When it comes to applying customer data to category management, single-store Paw Paw Shopping Center is leading the way for large operators.
"Without a doubt, all of our retail partners are focused on customization, understanding they have to offer something that's different from the big-box stores and bigger retailers," said Katie Casavant, a senior consultant in charge of the retail partner program at Cannondale Associates, a Wilton, Conn.-based marketing consulting company. "A one-size-fits-all solution does not work."
Fundamental change isn't easy at big organizations, though. For independents and big chains alike, cost is a factor. Most frequent-shopper database software is designed to help marketers create targeted offers to customers -- not address category managers' needs. This has led firms like Cannondale to develop their own software that packages data with buyers in mind.
"Definitely, retailers who have been successful implementing frequent-shopper data into category management, that's still a minority," Casavant said.
Imus is "atypical in his cross correlation of customer data with category management," said Carlene Thissen, president of Retail Systems Consulting, Naples, Fla. "It's even more rare among chains. But it is definitely the future of merchandising with top shoppers in mind."