SHELF SERVICE

CHRISTINE BLANK

In an era of tight labor, supermarkets are relying more on third-party merchandising services.

As a result, the nature of the relationship between retailers and the companies is changing.

"With retailers experiencing turnover of 60%, it's very difficult to train and re-train everybody," said Jim Hall, president of Advanced Retail Merchandisers in Lakeland, Fla. "They are going to rely on service merchandisers to come into their stores and form a sales-driving relationship."

Some retailers are even willing to pay for a portion of merchandising services, an investment typically made by manufacturers. These include services like resets and remodels, which retailers handled in-house when labor was more available. "We're seeing a shift in a company or retailer," said Hall, "from saying, 'It's a brand thing, and we need to get the lowest cost,' to 'I want to make an investment in brand and sales-driving initiatives."'

Ralph Bartolotta, senior vice president of sales and marketing at Gage Merchandising Services, Minneapolis, has also noticed change. "We're seeing more organizations moving towards a fair-share program, so all participants are supported equally," he said. Driving this is a desire by retailers to become more involved. Executives at chains such as Food Lion, Salisbury, N.C., and Publix Super Markets, Lakeland, Fla., sources said, are more interested in tracking sales activity of products or sets, rather than letting the manufacturers track movement of their products.

In addition, the sales and marketing companies are torn between tasks that the manufacturers would like them to do, and what the retailers want them to do. Manufacturers want the companies to focus on new product cut-ins, planograms and displays, while retailers want the store resets and remodels, in addition to other projects.

"We're not opposed to be doing remodels and resets, but there has to be a balance," said Richard Abraham, vice president of the Association of Sales and Marketing Companies, Reston, Va. "It's gotten to the point that, even with the largest companies, demands placed by retailers far exceed the resources available."

This demand is driven by the impact these services have at retail. Willard Bishop, president, Willard Bishop Consulting, Barrington, Ill., said that 75% of the time, merchandising services are more beneficial to the retailer than to the manufacturers.

According to a study released recently by the ASMC, retailers and sales agents must take control of retail implementation of product sets. Retailers and sales companies should coordinate operational needs, such as new stores, with seasonal programs and category updates, the study reported. They should also agree that a minimum 50/50 split of routine and non-routine work is required to properly maintain the shelf. Also, retail chains should designate someone at headquarters to coordinate all available labor resources, according to the study.

Retail merchandisers are a necessity, especially for new product implementation, according to the National Association for Retail Merchandising Services, Plover, Wis. These companies can quickly deploy teams when needed, with a majority requiring only a two- or four-week notice to set up a major project.

Additionally, sales and marketing companies are providing many more services than in the past. For example, 60% of sales and marketing agents' total retail labor budget is allocated to support "non-routine" store coverage such as category resets and setting new stores and remodels at a cost of $975 million annually. In comparison, only 45% of resources were spent on these "non-routine" services 10 years ago, according to the ASMC study.

The ASMC called for collaboration among the entire grocery industry -- retailers, manufacturers and sales agencies -- saying all must take bold steps to address the situation.

Meanwhile, technology is playing a small but growing role in the industry.

For example, the Kroger Co., Cincinnati, as well as other retailers and manufacturers, use "Items Not Scanned" reports generated by merchandisers. These reports reduce out-of-stocks. "We can identify the items not scanned, put tags on the shelf and get rid of out-of-stocks," Hall said.

Handheld device manufacturers also say their technology can help retailers, manufacturers and merchandisers communicate in the future. Retailers could use the handheld information to gauge and communicate out-of-stocks, shelf condition and other factors, according an industry source.