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It takes more than a price promotion to be successful in grocery retailing, according to experts familiar with the challenges of in-store merchandising. The right product has to be in the right place on the shelf. New products sometimes must be cut in quickly to coincide with a media schedule because shoppers expect to find the product. Above all, stock-outs must be prevented.
Welcome to the world of merchandising services where delivering products to the shelf quickly and accurately can mean the difference between a sale and a disappointed shopper. Closely related is insuring that in-store marketing programs occur without a hitch.
These activities require gathering and delivering retail intelligence by the retailer, or by a third party -- a merchandising service organization, a sales agency, or a marketing management company. All of these companies use the latest technology to elevate their performance, resulting in increased sales and profits.
"I don't think any of these groups is necessarily ahead of the others," said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill. "What counts is the leadership of the company, their willingness to invest and their ability to envision where technology can help. I think you're going to find companies in every one of these groups that have stepped out in front of the pack."
Gary Ebben, executive director of the National Association of Retail Merchandising Services (NARMS), Plover, Wis., said there is a trend toward more retailers doing in-store work themselves. About 10% of the work is done by retailers today, he said, although other estimates put this figure as high as 25%.
A&P, Montvale, N.J., does not outsource work to merchandising service organizations, according to Victor Alessandro, senior vice president and category management officer. For example, the retailer handled the merchandising for Procter & Gamble's Crest White Strips.
"We did a very good job of getting it into distribution quickly," he said. "As a result, we increased market share for that item. Frankly, we've challenged our category management team to really push speed-to-shelf because we feel it's something that consumers increasingly value.
"There's no question that [technology] has made everything more efficient," he went on to say. "The ability to quickly get scan data, analyze it and make decisions clearly improves the experience for the shopper. It allows us to get the right product in the right place at the right time."
That's also the primary objective of third-party service providers. Here's a closer look how one company representing each type of provider is improving its service by using technology:
Merchandising Service Organization
The SPAR Group has focused on putting all of its applications on the Internet to deploy people faster and more efficiently. The company's 4,500 merchandising specialists conduct over 2 million client-store calls a year, so keeping track of them is challenging. The company uses proprietary logistical deployment software that assigns merchandising specialists, gives them instructions and specific planograms for each store, and schedules materials. When the specialists arrive, they set up displays, load the inventory, report the work, upload that information to corporate databases in real time, and sometimes even take and upload a digital photo of the finished section.
Speed-to-shelf is the goal at retail, stressed Bill Bartels, vice chairman of the firm based in Tarrytown, N.Y. This maximizes the manufacturer's return on its merchandising investment.
"In our industry, faster is better -- whether you're doing new-store sets, conversions, or cut-ins of new products," he said. "If you can get it on the shelf with speed, manufacturers and retailers are going to have more incremental sales and profit."
For the last year, a major wholesaler has relied on SPAR to coordinate all of the resets in the health and beauty care category in over 300 supermarkets in the Northeast. The resets allow merchandisers to cut in new items and pull out the deleted ones. Sometimes, the rep would contact sales agents and vendors to coordinate the schedules for a category blitz.
At the end of the day, retail merchandisers report the completed work using an Interactive Voice Response system. The next morning, the computer screen indicates what work has been completed by showing highlighted dots on a map.
"As the schedule moves forward, you're able to see the progress right on the screen," said the wholesaler's director of sales and business development, who asked to remain anonymous. "More importantly, you're able to identify problems that occurred the previous day. So, you're able to react quicker in getting someone back to the store."
Crossmark Sales Co. equips its field force with computer notebooks and handhelds. These reps pull down stockkeeping units and store-level data daily to be well-informed when they go to the retail shelf. They receive priorities to work on, whether it's to cut in new items or to confirm that promotional displays are in place.
"The information they get is fresh, and the information we get back that night when they synchronize again is fresh," said Joe Crafton, senior vice president of retail operations for the national sales agency based in Plano, Texas.
"Everything we do is designed to provide feedback to the manufacturer and maximize the hours in the store. The way you do that is to deliver good data to retail reps. If they're in the store with bad information, they're not able to do their job properly," he said.
Marketing Management Company
The technology employed by Mass Connections allows manufacturers and retailers to monitor in-store events and related marketing and merchandising activities. "It's real-time integration that is always on -- 24-7," explained Caroline Nakken, principal of the national in-store marketing company based in Cerritos, Calif.
Its "enterprise solution" consists of four parts:
Hyperlink to Stores. Store managers click on a hyperlink to the MC Web site, where they can see all of the sampling events and merchandising activities scheduled that week
MC Card. The "smart card" provides accountability of personnel checking in and out of stores for sampling events, and serves as a debit card for them to buy sample products and supplies. The information is monitored on the Internet in real time by the local staffing agency and MC's corporate office
Interactive Voice Response. After an event, personnel use a touch-tone phone to report the details of execution, including whether signage was installed, POP displays were up, and so forth
POS Data. Scan data is pulled before, during and after the event to determine the impact on sales.
This process is used in all of Wal-Mart Stores and is rolling out to 17 other supermarket retailers serviced by Mass Connections.
"It's going to increase the productivity and, therefore, the cost-effectiveness of in-store events, which will make them more attractive. That's good for the manufacturer, and also for the retailer, who needs more excitement and interest in the store," said Bishop.
"I think that technology for an event plays well and also helps in assessing the results," agreed Steve Michaelson, who until January was vice president of marketing at Wegmans Food Markets, based in Rochester, N.Y. "There's also the technology of a retailer's card program as a way to read truly incremental sales," said Michaelson, now a principal of TM Branding, a new consultancy.
How will technology change in-store execution in the future and who will take the lead? "What I see happening is more sophisticated cross-category analysis, which is taking related categories or substitutable categories and using technology to analyze those dependencies and interrelationships," said A&P's Alessandro. "You'll also see an increase of tying retail scan data to space management systems such as Apollo or Spaceman, and -- almost real time -- looking at the impact on profitability at the shelf." Bishop didn't pick any favorites among the third-party providers, but was enthusiastic about their potential.
"The vision is different players performing these functions more efficiently with store conditions improving," he said. "There will be more in-store merchandising services provided. Who does it and how it's done will be different. But technology will be the linchpin."