SHELF FULFILLMENT

JAMES TENSER

If you build it, they will buy.

But if you rely solely on your retail customers to erect in-store promotional displays for you, odds are the job won't get done half the time.

All your rhetoric, strategy, communications and investment in retail promotion stops cold at the shelf if the product isn't out there shining on deal day.

"If the display is not set up, or it is left sitting in the back room, it doesn't do us any good. Stores are so busy today that it is difficult for them to take on the responsibility of getting all the displays out there," says Todd First, vice president of sales at Sassaby Inc., Cardiff, Calif., a marketer of cosmetics and personal organizers to the mass market.

For a promotion involving in-store display, First says, "without service, you would typically figure that 40% to 50% execution is pretty good. If you could increase that to 75%, it would be worthwhile to send in a merchandising force."

If unaided in-store execution rates below 50% seem astonishingly low, other brand marketers and merchandising service companies confirm that in all too many instances, that level is indeed typical.

When it comes to in-store fulfillment performance, "three-quarters of the stores is probably high," says Mike Bevis, president of Service First, a merchandising service firm in Dayton, Ohio. "Half may be closer to the reality."

Numbers like these add up to a dirty truth about so-called efficient promotion, and it suggests a glaring weakness in many brand marketers' assumptions about account-specific programs. Manufacturers may be great at selling promotions to their accounts. Sometimes they may even target them impeccably to the right consumer groups. But when they leave execution in the hands of the retailers, they fail all too frequently to make sure the product is available in stores when the consumer is motivated to buy.

For executives of the new breed of third-party merchandising service firms like Ted Bohnen, executive vice president of National Retail Services, Danbury, Conn., the chasm between intention and reality in the promotion business is filled with business promise.

"A promotion cannot succeed if the product isn't on the shelf, or if the display unit is lost in the back room," he says.

Until now, Bohnen says, in-store merchandising has ranked "low on the lists" of product managers, whose global points of view have rarely taken in such details as in-store execution rates, preferring to focus on simpler measures such as promotion lift analyses, which can mask the in-store issue.

Adds Bevis, "In the past, a manufacturer could sell product to a retailer, wipe his hands and walk away. If you do that today it gets lost. Much of the product never makes it to the shelves.

"Look behind any large retail store and you may see dozens of discarded wire and plastic display racks," he adds. "Often those racks never came onto the floor. They arrived separately, with no purchase order, and never connected with the merchandise."

This merchandising disconnect is just as critical for shelf maintenance as it is for promotional situations, says Stuart Blades, president and chief executive officer of Powerforce, Chicago, the sales and merchandising division of Actmedia, Norwalk, Conn.

"Just because a product is listed doesn't mean it is in distribution," he says. "It may be in 80% of the universe of stores. The benefit of closing up those 20% can be substantial in terms of incremental sales. If a buyer is not aware of missing those 20%, he may conclude that sales are not as good."

While these remarks may sound like swipes at retailers' shortcomings in in-store execution, the same observers say it results more from the changes taking place in direct sales forces. Sales force reductions such as those reported at Procter & Gamble and Lever Bros. last fall are a primary cause. These are just recent instances of a broad trend among brand marketers who are streamlining their go-to-market systems.

Third-party merchandising firms are stepping in to fill the gap between plans and execution. While the in-store execution is sometimes referred to as a "pack-out," a better descriptive term might be "shelf-out," Bohnen suggests, since the missing link is often the simple placement of products on store shelves on a timely basis.

Whatever the terminology, merchandising firms are touting their services for promotion and new-product shelf-outs with claims that they can raise the bar on promotion performance standards. But they are not without their critics.

"It can have a very positive and profound impact, but it is not a slam dunk," says Walt Williams, executive vice president of Neo Inc., a sales consulting firm in Shelton, Conn.

"Merchandising resources have the potential to dramatically improve in-store execution," he says, "But to live up to their potential, brand marketers must view them as one component in their overall go-to-market strategy. All the components must be coordinated and managed together, not in a vacuum."

Despite his words of caution, Williams agrees that effective execution at just half the stores has never been a thing to be proud of. Now, with the ascendance of the merchandising service industry, it may become plain unacceptable.

"A whole industry has been born in the last six years," says Brian Travers, executive vice president of Premium Retail Services, Ballwin, Mo. "We are getting an audience at consumer goods companies by saying, 'Let us close the loop here for you.' "

Executives at merchandising service firms say that in some instances, they are becoming advisers to brand marketers about promotion structure before the fact. They also stress that failing to close the loop in-store can lead to embarrassing and costly merchandising slips in a brand's continuity business with a retailer.

Says Bevis of Service First, "In one project we did recently, a shower curtain manufacturer's sales had been declining inexplicably at a home center chain. When we sent our people into the stores in 1995, we found that the [merchandising] set in those stores was the 1992 set. The retailer had never got around to getting the new displays on the floor."

The fix was simple. Shower curtains are a fashion business. Once Service First updated the displays to show the latest, in-style product line, sales improved to their former healthy levels, Bevis says.

Heinz Pet Products, Newport, Ky., recently faced a situation in which a few of its stockkeeping units were at risk of being discontinued by a major customer. "We knew one of the underlying reasons for this was that only a limited number of stores actually had these products in distribution on their shelves," says Don Pellegrino, general manager of sales.

"We put together an integrated approach to resolving this issue," he says. Heinz secured a permanent price reduction on the items in question from this key account, and contracted National MegaForce to execute its objectives at retail.

Not only was the third party asked to handle cut-ins and merchandising in-store, but its people also made presentations to store department managers to convince them to bring the endangered SKUs into distribution.

The merchandising firm was also asked to report on shelf prices to ensure that the recommendations were properly reflected at store level. Upon conclusion of the program, it provided a final report on the incremental number of items cut in at store level.

"The net result for Heinz Pet Products was that we saved warehouse distribution on several key items at this important customer," said Pellegrino.

Merchandising service can be a critical advantage when timing is critical, as in a new-product introduction.

When Buena Vista Home Video released the movie "Aladdin" two years ago, its promotion at Wal-Mart called for 4- to 8-foot endcaps to be erected in 2000 stores during a three-week period, said Bevis of Service First. The timing in such a promotion was "critical," Bevis says.

Another critical seasonal window is late spring-early summer, when swimming pool owners have to work on their pools, Bevis says. "It falls about mid-May in most of country up to July in the North. During that brief period, you cannot keep enough pool chemicals on retail floors. Displays must expand from about two feet to 10 to 12 feet."

Service First does a significant amount of work in this category for its clients, he says. "Miss that and you miss the year."

The introduction of Orudis KT over-the-counter pain reliever by American Home Products' Whitehall-Robins division last fall was such a high-profile example that even The Wall Street Journal took notice in a Dec. 4 news story on the introductory "blitz."

For the Nov. 8 rollout, the company says it distributed shipments to 30,000 food, drug and mass stores using an overnight delivery service. Many of those deliveries were prepacked display shippers. The operation was tightly timed so the company could begin advertising "within two days of launch," says Terry Stecz, president of Whitehall-Robins Healthcare.

Although Whitehall-Robins has several hundred of its own full-time merchandising people, the scope and timing of the introduction was such that supplemental, third-party help was required. "They handled supermarkets themselves," says Bohnen of National Retail Services. "We covered national accounts."

Adds Bohnen, "The crux of the matter was that the manufacturer wanted to get distribution on-shelf or in-store as fast as possible. Whitehall-Robins wanted [all-commodities-volume] penetration to be high enough so that it could start advertising."

Timing of the introduction was critical and it was kept secret from trade and the manufacturer's own salespeople until the last minute, due to a concern that Actron, a competing pain-reliever subsequently released by Bayer, might get to market first.

"There was such a small time window prior to the holidays. We put people in stores on the Friday after Thanksgiving to get the displays up," says Bohnen.

After just a few weeks, the massive blitz has already been labeled a success by Whitehall-Robins. On Jan. 9 It released A.C. Nielsen data for the week ended Dec. 16, 1995, which indicated that Orudis KT had grabbed a 3.7% share of the fiercely competitive OTC pain-relief category.

"The results demonstrate the success of our agressive efforts to get Orudis KT on-shelf quickly," says Stecz.

First at Sassaby Inc. says he has relied on merchandising service to help put its popularly priced Jane Cosmetics line on the shelves at mass merchandise stores. Since the line was introduced in June 1994, it has grown to 189 SKUs, which poses a complex challenge when the display is cut in.

"We are moving the products into chains as basic stock items," says First, who adds that Sassaby also offers promotional prepacks like any cosmetics manufacturer, typically for the spring and back-to-school seasons. "The latter are in-and-out products, which are very important to the cosmetics category because they bring news and excitement to category," First says.

As a relatively small but rapidly growing company in the cosmetics business, outsourcing the detailed merchandising chores is essential, he says. The company uses National MegaForce to set new stores.

"We are now moving beyond mass merchandisers and adding drug chains," he says. Jane Cosmetics products are now sold in 3,500 stores, a number First says will double by the end of 1996 as drug chains are added.

Sassaby's headquarters sales team handles the headquarters contact with retailers.

"It is becoming more of a common practice to use third party service companies rather than company-owned sales force," says First, who notes that Jane doesn't want to assume the overhead of hiring full-time merchandisers. "In cosmetics, merchandising is a basic day-to-day part of the business, to service the brand and the retailer."

Even the largest brands in the business, such as Cover Girl, are moving toward part-time merchandisers, he adds.

"The retail environment is changing, becoming much more systems-driven, so we see it is more important to have good merchandisers who can maintain inventory integrity and return any damaged goods."

Because those systems are so intricate, Sassaby doesn't want anyone selling the line store-by-store. "It messes things up" by undermining continuity and reorders, First says.