Every 7 Days

Lines Between Online and B&M Stores Continue to Blur

Mobile technologies increasingly blend the online and brick-and-mortar (B&M) shopping experience. B&M stores that adapt — for example, clothing retailers who offer virtual dressing room experiences — will most likely fare well. But it’s not only B&M retailers who are looking to adapt.

Recent rumors posit that Amazon and Google will be launching pilot B&M stores — Amazon in Seattle and Google in Dublin. Apparently, these two online retailers are looking to broaden their sales base and — as one industry insider notes — to build greater brand awareness. B&M stores can provide online retailers with greater opportunities to demonstrate their branded products, to help consumers use those products and to grow awareness around the services they offer relevant to those products. Insiders note that plenty of consumers aren’t aware that online retailer branded products, like the Kindle for example, are the product of Amazon. B&M stores could change that.

Experts question the move from online to B&M noting that online retailers will have to deal with issues that are new to them, such as low retail wages, location and in-person customer service.

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Will Walmart’s 4Q Sales Meet Industry Expectations?

After six quarters of declines in the number of visits to Walmart stores, industry insiders think Walmart’s 4Q stats may put an end to that trend. Why the decline?

Some put the blame at the feet of Bill SImon and Walmart’s attempt to attract more affluent shoppers by offering fewer SKUs and promotional sales, rather than the oft-expected lower prices. When that happened, businesses like the Dollar Store and Family Dollar gained business, particularly in the household goods market.

So far, analysts predict a 1.8% increase in 4Q sales. And they credit a lot of that success to the layout program Walmart put into place during the holidays. That move generated great traffic to Walmart stores. The return of Walmart’s everyday low prices mantra is also credited for the rise in sales. As part of that move, Walmart stores have offered to match the prices of their competitors.

Will sales figures match industry expectations? Come February 21st, we’ll see.

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Price Versus Value

One of the hottest topics today is what to do in an era of greater price transparency? While initial retailer and supplier reactions seemed to lean toward lower prices at the beginning of the recession, today the trend lends itself to determining what consumers “value” and providing that perceived value for them.

A recent article in CPG Matters entitled, “Focus on Value Proposition, Not Price, to Win Shoppers” offers interesting insights into the value versus price debate, as well as a summary of the recent SymphonyIRI Group report, “Merchandising Trends: Driving Consumption Through Shopper Marketing.”

Following are key points from the CPG Matters article:

The report defines merchandising as displays, feature ads, feature and display together, or price reduction only, and urges these actions by CPG to maximize promotional lift opportunities:

Identify new growth opportunities and threats. Understand price elasticity of demand. Evaluate merchandising activity and lift across brands. Monitor consumer shifts to build trial and repeat purchase through cross-merchandising activities. Collaborate with key retail partners to identify and test new tactics inside and outside stores, and across traditional and new media—to be sure they conform to the goals of the manufacturer and retailers.

Develop key account strategies that address market- and store-level shopping patterns and needs. Continually re-evaluate pricing and merchandising to be sure they reinforce brand equity and convey the brand’s value proposition.

Measure and monitor pricing and merchandising execution and impact.

Further, the report detailed that:

Merchandising support rose sharply in 2009, and continues to grow, though at a decelerating rate in 47% of categories across CPG channels in 2011. Rising fastest: price-only tactics, which became more prevalent in 55% of CPG categories.

Since 50% of consumers use the store circular to make their shopping lists, 42% use coupons, and 8% use the Internet to do so, CPG should market to consumers across multiple platforms with consistent messaging.

The Top 10 categories at food, drug and mass (FDM) stores (excluding Walmart) for any kind of merchandising activity relate to home-based food and health care rituals, including: carbonated beverages, chocolate candy, sports drinks, salty snacks, batteries, crackers, bottled water, vitamins, frozen pizza and ice cream/sherbet.

Since 39% of consumers practice more self-care in an effort to contain medical expenses, health care categories are becoming merchandising hotspots. In the grocery channel, 30% of healthcare categories had promotional support; in the drug channel, 34%. The CPG categories posting the largest gains in merchandising support in FDM (except Walmart) in 2011 were: first aid accessories, frozen breakfast foods, energy drinks, internal analgesics, tomato products, gastrointestinal tablets, vitamins, cold/allergy/sinus tablets, gum and deodorant.

Across FDM channels, 53% of categories experienced sales lift from merchandising in 2011, up from the 46% level in 2010. The Top CPG lifters in FDM (excluding Walmart) in 2011 were: paper towels, 237%; toilet tissuse, 217%; shelf-stable seafood, 200%%; frankfurters, 169%; breakfast meats, 166%; shortening and oil, 164% cold cereal, 159%; laundry detergent, 155%; spaghetti/Italian sauce, 154%; and chocolate candy, 150%. In common is their suitability to major stock-up trips.

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In a Transparent World, Is Low Pricing Enough?

Yes, a shopper's ability to pull up price comparisons from virtually anywhere have led to retailer price wars. But that level has also created other challenges for retailers — there's only so low (in price) you can go.

So how does a retailer differentiate itself? What, beyond price, does a consumer value? And how does what they value differ? Can you form new customer personas based on price + perceived value?

In an interesting piece in STORES ezine, the author looks at the challenges of pricing and promotions in a transparent world. Following is a synopsis of highlights from the article.

Consumers increasingly expect price parity between in-store and online offerings. Gartner research indicates that 67% of consumers expect price parity across channels. Yet, realistically, in-store prices should be higher because of overhead and shipping costs. Insiders suggest multi-channel shopping and pricing options with prices determined by demand in that channel.
More POS data means retailers have more insights to work with. Macy's is cited as an example. Each week they receive "new pricing for all 270 million SKU-by-store combinations," including "how long it’s going to take that merchandise to move."
Pricing needs to be as dynamic as the market. Think of Amazon.com. When you put an item in your shopping cart, chances are that each time you log on you'll see higher or lower prices for the goods in your cart.
Individualized pricing is being adopted by retailers to reward their loyal customers with deals that other shoppers don't receive.
Retailers are looking to store associates and service for differentiation. They're also looking to have dynamic offerings on their shelves — the need to get "slow moving" items off the shelf and offer up "value" with new products is even more important today.
Also worth noting — customers don't know the price of every item on the shelf. Retail teams need to partner with retailers to determine what items customers look at to determine value and price those accordingly.

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Men Predicted to be Big Spenders this Valentine's Day

According to a recent NRF survey, Valentine's Day spending is predicted to reach $17.6 billion. The average consumer is expected to spend $126.03, an 8.5% jump over 2011.

Who's expected to spend the most? Men. They're expected to spend $168.74 on cards, jewelry or clothing; in comparison, women are predicted to spend $85.76.

What gifts are expected to be most popular? Candy (50.5%), flowers (36%), an evening out (35.6%), jewelry (18.9% for a total of $4.1 billion) and gift cards (13.3%).

And whom are they spending their money on? The majority of the spend is for a significant other, followed by children, parents/family and pets (an average of $4.52 for Fido).

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