Supermarkets are increasingly outsourcing in-store merchandising activities such as planogram maintenance and new item cut-ins, according to a study from the National Association for Retail Marketing Services.
Supermarkets accounted for 27% of MSO work in 2004, up from 21% in 2003, according to NARMS' Merchandising Service Organization (MSO) National Benchmarks survey.
"This is a trend that we are going to see more and more of," said Daniel Borschke, executive director, NARMS, Plover, Wis. NARMS is a trade association for retail merchandising and marketing companies. Along with supermarkets, MSOs service home-improvement, mass-merchandiser, drug and office-supply stores.
By outsourcing, supermarkets can reduce costs typically associated with in-house personnel, such as full-time salary and benefits.
"Our members are only at the grocery store for a limited time -- which results in an obvious savings for the retailer," he said. Borschke couldn't quantify the savings, saying they vary depending on the type of job and retailer.
Supermarket work has increased between 10% and 15% at Prism Retail Services, said Tom Dennis, senior vice president, national accounts. Prism is an MSO based in Itasca, Ill. Dennis attributes this to a number of factors, including more new item cut-ins due to retailer emphasis on speed-to-shelf.
"Retailers want to be the first to market," said Dennis, who also serves as chairman of the NARMS board.
Kit Moss, president and chief executive officer, Kit Moss Productions, Northbrook, Ill., said her food-retailing clients, including big-box retailers, have increased 25% in the last year. Kit Moss Productions specializes in event marketing and in-store merchandising.
Outsourcing is more efficient for retailers because MSOs do in-store work on a daily basis, so they're more experienced, fast and efficient, Moss said.
- Planogram maintenance/merchandising accounts for 25% of MSO in-store activities, up from 14% in 2003.
- Other in-store activities include planogram set-ups, resets and new item cut-ins (19%); assembly of merchandise/displays (8%); data collection and reporting (7%); inventory and order responsibility (5%); and point-of-purchase support/maintenance (5%).
"Whether it's restocking, a cleanup or moving product from one aisle to another -- you name it, MSOs are doing it in grocery chains," Borschke said.
Supermarkets account for a larger percentage of "project" vs. "continuity" work (57% vs. 43%). Continuity is defined as consistent scheduled calls that can include a contract of one year or more. Project work typically entails "one time" calls with a specified end, such as a new-store opening.
Meanwhile, the speed at which information is relayed from MSOs to supermarkets is increasing. One-third (33%) of MSOs report back to their customers the same day; nearly one-half (49%) in one to three days; and 11% in four to five days.
Technology is a big factor in the quick turnaround of information. Forty-three percent of MSOs use laptops, while 38% rely on interactive voice response. Handheld computing devices, however, are predicted to replace IVR.
More than one-third of MSOs (36%) use handheld equipment. Many MSOs find such devices to be more efficient because they provide better data processing and programming capabilities.
MSOs use handhelds largely for surveys, audits and out-of-stock information. A growing number also use them for photography. Other functions include payroll, in-store hours and price checking.