Monthly Archives: September 2007

Woolworths set to roll out store clustering: what it means for suppliers

Topics: Channel / Retail, E-Bulletins / Newsletters, FMCG, Segmentation / Clustering

At an industry conference last Wednesday, Woolworths’ James Aylen announced the January 2008 rollout of store clustering, or ‘consumer-led ranging’, whereby product range and other elements of the offer will change according to who shops each local store.

Manufacturers and suppliers need to proactively lead the process in their categories, or risk losing space and share, according to Norrelle Goldring, Principle of ShopAbility, who has worked with major FMCGs including Coke and Nestle for the past 10 years.

Why clustering?

Norrelle says Woolworths is following the lead of international giants such as Tesco and Safeway who pioneered the practice in grocery, responding to how diverse the grocery shopper has now become,

‘In mature markets such as America, the UK and Australia, there is no longer a homogenous mass of grocery shoppers with similar needs like there was 20 years ago.

‘In fact there is no longer an “average Australian”, as borne out by the 2006 Census. There is an enormous diversity of incomes, attitudes, family and household types, religious beliefs and day to day habits,’ Norrelle says.

‘What that means for retailers is that the one size fits all approach no longer works, and the key to driving sales and profits in the future is to understand your local shopper.’

How does it work and what does it look like?

Norrelle says the strategy involves looking at shopper data and profiles to determine how your shopper base is segmented. Then clustering store types to cater to their dominant shopper, with importance placed on one or more elements such as geo-demographics, ethnicity, price orientation, values, behaviours and other factors.

‘For example, Tesco has mastered this in the UK. If you visit a Tesco in the inner city, it’s a smallish store, somewhat like a convenience store here, and the offer is all about grab and go ready to eat meal solutions for shoppers on the run who want to eat healthy meals at home but have no time.

‘Then, once you get out in to the suburbs the Tesco looks more like a supermarket would here. Then you’ve got the regional centres that are more like a mass store.

‘That’s one example where the entire store offer changes quite dramatically. Another is the retailers who are starting to focus mainly on range clustering. That’s what Woolworths is doing, based on knowing who their local shopper is, what their category preferences are, and within each category where they sit on the premium to value scale.

What do suppliers need to do about it?

According to Norrelle, suppliers need to act now. ‘Woolworths is rolling out in January, so suppliers need to have a segmented ranging and in store execution strategy bedded down within the next three months. But the hurry doesn’t mean you can’t be strategic about it and follow a logical segmentation process.’

This process is outlined below as a guideline for suppliers.

There are four major steps to take:

  1. Map the shoppers for your categories
  2. Develop a segmentation for each of your major categories
  3. Apply the insights: what needs to be done differently?
  4. Marry your segmented strategy with the retailer store clusters(ideally this last point would be done in partnership with the retailer from the outset, but this will be dependent on where they are up to – you may need to lead).

Each step in more detail:

Map the shoppers for your categories

  • Who shops, when, where, how and most importantly, WHY? What is the shopper mission or occasion, and the key sales drivers?

Develop a segmentation for each of your major categories

  • Category segmentation is often based around the function the category performs for the consumer – e.g. if you are in health, does it make you feel healthier or look healthier? Is it applied in the body or on the body?
  • Link your segmentation to your shopper profiles from point 1 (and remember that consumer and shopper are not always the same thing)

Apply the insights: what needs to be done differently?

The major areas that are impacted on by a retailer segmentation are:

  1. Range and Space within your category. Upweights and downweights, packs and formats – where and why?
  2. Visibility and Merchandising – how does this need to change to be more relevant to your identified shopper types within the category?
  3. Pricing – while you may not be able to influence retailer pricing, it is helpful to be clear on where are you on the premium to value scale versus competitors. If you are at the extreme of either end, there may be opportunities for you to upweight your range, space and promotional opportunities in certain store clusters.
  4. Ambience, Theatre, Destination – how emotionally involved is your category? If you are in high emotional involvement categories like health, beauty, pet etc, again there may be opportunities to lead the creation of ‘destination’ areas in particular store clusters that are more exciting for the shopper.
  5. Marketing and Promotion – What’s in the catalogue? Why? Should there be different catalogues with different offers for the different clusters? Which products should be on price promotion and which should not? What other in store promotions (such as sampling and in store media) should be used based on shopper behaviour?
  6. Format, Size, Layout – are you a category brand leader? If so, it’s you the retailer will be looking to for change leadership – trials of new category layouts – now is your opportunity!
  7. Staffing and Service – this one may not be applicable in grocery, but it’s one to remember when segmenting for other channels such as pharmacy or specialty retailers. Who should the staff be? What degree of personalization? In Europe, Loreal is providing health and beauty advisers in certain store clusters to help drive sales. In the US, staffing is changed according to ethnicity, age and lifestage.

Norrelle says there is an opportunity for suppliers to partner with Woolworths for the benefit of both parties.

‘This is an enormous thing Woolworths is undertaking. You can imagine – some stores with 30-40,000 skus – that is a lot for them to consider and if suppliers can be proactive about the process it will actually help them.’

‘They may not yet have arrived at what clustering means for your category and brands, in fact they probably haven’t.

‘You don’t need them to tell you every detail of their clustering strategy, they’re still working it out. So you can be proactive and determine your own segmentation and clustering strategy, and work with them in the longer term to marry the two together.

‘It’s fantastic to see this happening in Australia, and there will be big opportunities for both suppliers and Woolworths to drive sales and profits, and increase their shopper satisfaction at the same time.’

Download the full Retail World article published October 2007,  here:

Woolworths set to roll out store clustering: what it means for suppliers

No More Mr and Mrs Average

Topics: Channel / Retail, E-Bulletins / Newsletters, FMCG, Segmentation / Clustering, Shopper

The release of the 2006 Census at the end of June highlighted the fact that Australia is now a vastly different nation to what it was 20 years ago. The key take out: ‘there is no longer an average Australian’. What does this mean for the retail environment? In the USA, the word on the tip of every tongue is SEGMENTATION.

ShopAbility attended the largest Consumer Packaged Goods conference in the Western World – ‘Consumer 360’ in Florida during May. The US is faced with the same trends:

  • There is no longer a mass of homogenous shoppers with the same needs
  • No more average family unit – the ‘middle’ has dropped out of the market
  • Vast differences in ethnicity, religious belief, age, income amongst groups and areas
  • Polarisation – the rich continue to get richer, the poor poorer – and products are polarizing too (growth of super premium products right alongside the burgeoning of private label at the value end)
  • Mature market where consumers and shoppers are weary of marketing messages and are spoilt for choice
  • In the USA media fragmentation is even more pronounced than in Australia – the average household has 90 television channels, for instance (there are 600 television stations in the US). This means the importance of instore marketing is increasing.

Retailers and suppliers alike are starting to recognize that the way forward is through ‘segmentation’ and ‘clustering’ . Essentially, it’s about understanding your local shoppers and their needs, and changing your execution accordingly. One size no longer fits most.

The trend is just beginning to become mainstream in the US, with major retail chains such as Safeway, Wal-Mart and Tesco leading the way with custom offers. On the supplier side in the US, Kimberly-Clark, Coca Cola and P&G are all implementing tailored shopper marketing strategies.

At ShopAblity, this is one of our core service areas and we believe the way of the future in Australian retail – we’re at the beginning of a bell curve where segmentation or ‘clustering’ will be used as a key driver to generate sales uplifts and create savings (through minimizing wastage) in a market where most other traditional levers have already been pulled.

So how does segmentation work? The first step is to look at localised shopper insights: who they are, how they shop, when, where and why (key drivers/ needs).

  • From this information, the next step is to divide the market into segments. This can be done by store type (retailer segmentation) to find store segments (and later, ‘clusters’) and/or by category.
  • On the retailer side, a ‘cluster’ is a group of stores, consumer types, or segments with similar aspects. For example, a retailer may cluster stores in to different price zones based on the demographics of the shoppers in their area: price zone A at the premium end, through to price zone C at the value end, and change the offer accordingly (we are not ‘there yet’ in Australia yet with this).

Once the market has been segmented, this follows on to the implications for:

  • occasion
  • brand
  • pack
  • price
  • range
  • space and layout
  • visibility and merchandising
  • promotion
  • persuasion and service

So does it really work? Well, one of our clients saved more than $3million through customizing their point of sale material in the foodservice channel. Another new pack initiative based on liquor channel segmentation resulted in a $9million addition to a supplier’s bottom line in the first year of implementation.

In a market where there is no longer a Mr & Mrs Average, it pays – literally – to understand difference.

What Men Want

Topics: Channel / Retail, E-Bulletins / Newsletters, Point of Purchase, Shopper

Men are the ‘forgotten shoppers’. With single person households in Australia now 23%, a recent US study points to a trend that is also happening here: men are shopping more than ever before. So what do men want?

According to the US ‘Men in Grocery Stores’ report, 71% of men in the US said they had shopped in a grocery store in the past three months – up from 61% in 2004 and only 41% in 2002. Some 56% said they had shopped in the past seven days.*

The report also showed that retailers were losing sales because men were having trouble finding what they wanted and were reluctant to ask for help. Which brings us to what men want!

Of course, one size does not fit all as with any group, but in general the three key drivers for the choices male shoppers make are (in order of priority):

  1. Category – what they need to buy and why (the shopping ‘mission’ e.g. stock up or top up shop in grocery, or ‘need to buy new shoes’ etc.)
  2. Channel – the quickest, easiest place to find it that is nearest to where they live or work
  3. Ease in store – finding the item they are looking for, fast. Men tend not to browse. Convenience is more important to most men shopping than price is. Ease will also generally outrank brand. Which means opportunities for suppliers that know how to keep it simple, stupid.

Let’s look at grocery. Have you EVER tried to find a male grooming product like deodorant or shaving products in the female-oriented, extremely dense and cluttered personal care aisle? Yet, despite this, male personal care turned out to be one of the fastest-growing grocery categories in 2006 – because men are taking better care of themselves.

Imagine how big this opportunity could be if supermarkets created a ‘FOR MEN’ section in this aisle, where all the male products could be found, that looks and feels masculine, where everything is simple, easy to find and tells you exactly what it is for (instead of the female approach – sanitary napkins that promise to take you surfing and shavers that instantly turn you into a goddess).

Given the growth of male single person households, supermarkets could create such havens for men throughout the store. Like meal solutions. Easy, healthy meal solutions for one. Make a chilled gondola end out of it (Coles has done this to some extent). ‘Easy eating’ brochures to take from the display – simple eating plans for the week – the ‘this goes with that’ variety, mostly pictures – with all the items displayed on the gondola end. Fresh basics packs. A selection of the basic fruit & veg items you need for one week (the kind that go with the easy meals like ready made salads or quick-steam vegies), all in one handy pack. Just pick it up and throw it in your basket. You could even display them with the ready to eat meals on that same magic gondola end. And then be nice and help them find it with good, clear directional signage.

What about outside grocery? One thing male shoppers often hate is clothes shopping (particularly the 40+ men). Once upon a time ‘wives’ did it. Now single men – particularly divorced single men – must do it themselves. We know that men are reluctant to ask for help, but some don’t actually know what their correct size is, in the same way that women often get their bra size wrong. Some of it is wishful thinking (!), some just a lack of knowledge about what a good fit looks and feels like. So how about a private dressing room with a tool that allows men to measure themselves for best fit without being hassled by a sales person? Something like the ’30 second good fit test’. With references to it throughout the store. And sizing that is obvious on the hanger instead of having to rummage around the neck or waist to find it. Clear ‘this goes with that’ displays and package deals. And a store promise of ‘deck yourself out in quality attire in under ten minutes’. Surely it’s an oasis in a desert of too hard baskets?

Another dreaded task is the ‘buying for her’ gift mission. Can we make this easier? ESPECIALLY lingerie. Have you ever been witness to an incredibly uncomfortable man fidgeting around in a lingerie store among the women staring at him accusingly? How about a ‘Gents: buying for her’ section, clearly signed, with the ‘top 10 lingerie gifts’ displayed, a ‘this goes with that’ display, a ‘how to know her size’ ready reference and a ‘great gift ideas’ display with all the other add-ons he might want to put in the box. A gift wrapping service, and men-friendly staff who direct men to the section when they enter the store (without pouncing on them the minute their foot crosses the threshold, that is).

Suddenly men in these stores might feel like nice blokes trying to do the right thing instead of sickos poring over underwear in the presence of complete strangers….

But what can you do as a SUPPLIER to help the male shopper? Some handy hints:

  1. Shout out loudly that your brand / product is especially FOR MEN
  2. Keep your packaging clear and simple
  3. Make the function / uses of the product obvious on the pack
  4. Use point of sale to your advantage – be the brand that is the easiest to see and the quickest to find. This will get you more sales from men than a price promotion ever will.
  5. When planning your promotional mix, consider POP and in store media (where available) as a high priority – it’s in store that you will lose them
  6. Where possible, work with the retailer to make recommendations about directional signage and layout in store. Back it up with shopper research. Trial it to show them it works. Retailers rely on suppliers for shopper insights, particularly in relation to specific categories. So you may have an opportunity to lead rather than be led if you can show value to the retailer.
  7. What is the role of price in your category? Is there an opportunity to charge a price premium if you’re in a male shopper dominant category and it’s the convenience and ease of service/supply that’s important?

So to recap – what men want? Quick, easy, hassle-free shopping!! And the dividends will be there for retailers and suppliers who can make that happen.

* source: Inside Retailing Weekly

A Convenient Truth

Topics: Channel / Retail, E-Bulletins / Newsletters, FMCG, Segmentation / Clustering

The convenience & petroleum channel is one of the fastest-growing channels in the nation. As more and more suppliers get squeezed in grocery, convenience is being seen as the new knight in shining armour. But what does it take to get on the white horse?

More than anything, an understanding of horses for courses, so to speak. With more than 4000 outlets in the total petroleum and convenience channel, it looks like one big, shiny, golden egg. But it’s important to understand that the convenience channel has segments, and different shoppers shop the different types of stores – differently.

Anyone who has read the 2007 Australasian Association of Convenience Stores report would note that there is now a shift in how the industry is talking about itself. Once upon a time, stores were split into ‘Tier 1, 2 or 3’ based on footprint and other factors. Now the industry is categorizing its stores more in terms of their function: Dual (petrol station plus large mini-mart), Petrol only (petrol station with small shop attached, stocking only the basics) and Convenience only (no petrol).

How each type is shopped varies. In general, observations from the school of the bleeding obvious apply: shoppers in Dual format may be there for auto or for non-auto reasons, petrol only shoppers are there for petrol (duh) and convenience store shoppers are there for quick-fix food, beverage and emergency household items. Not rocket science – but what it does mean is that often your category will not be appropriate for the whole P&C channel, it may only be appropriate for one segment. So 4000 stores may turn into 1400, for example, for your particular window of opportunity.

We have also found that there are variations in the age and gender of shoppers in each of the segments, along with variations in how shoppers move around each kind of store. For example, if your product is in the fridge in a petrol only store, you will have to work pretty hard to get people out of the petrol queue to even shop that part of the store. And doing that needs to be your POP focus, because the vast majority of shoppers there won’t even make it past the first four feet of the store. Understanding channel segment dynamics affect every decision you make about how to execute in store.

Often suppliers don’t necessarily make the adjustments that are required to enter the channel successfully, and try to repeat what they have done in grocery. This can have a disappointing outcome – the goose fails to lay the golden egg.

So what does it take to capitalize on the growth of the convenience channel?

Here is a checklist of thought-starters:

  • Are your competitors there? If so, what with, and how are they executing?
  • What are the shopper occasions for your category or product?
  • Can they be found in the convenience channel?
  • If so, do those occasions apply to the whole channel or to specific segments?
  • How many stores / $ in the relevant segments, and what percentage penetration do you think you can realistically get – what is the size of the prize?
  • Who is shopping the segments, and how (what are their key drivers and behaviour)? How can you appeal to this?
  • What kind of category are you? Could you be an impulse purchase (like CDs and DVDs in petrol stations are)?
  • What does your brand, pack, format look like? Is it appropriate for the channel, knowing that the majority of convenience shoppers are male and buying single serve formats?
  • What would be the most effective Route to Market strategy? Sometimes suppliers rely wholly on distributors without having a strategy for key account management – chains like 7ELEVEN make their decisions at head office.

These are starter questions – there are many more that need to be answered in developing an effective entry strategy for the P&C channel.

It definitely IS possible to get on that white horse if your strategy is well informed and thought out – otherwise it’s more likely to be ‘the horse you rode in on’.