September 28, 2006
Leveraging Total-Store Seasonal Events as a Growth Engine
By Gerald Friedler and Jon Hauptman, special to GMDC
Seasonal merchandising has emerged as a powerful source of growth for mass-market retailers, offering double-digit annual sales increases in many instances.
A recently released GMDC industry report titled, Seasonal Best Practices: A Plan for Seasonal Merchandising suggests that one way retailers can establish competitive advantage during a season is by developing a comprehensive total store seasonal offering in which all departments with seasonal products participate. Combining the strong seasonal offerings found in different departments across the store, retailers can create a unique environment that makes the store the best place to shop for that season. Such a coordinated approach will help retailers:
- Effectively differentiate their seasonal solutions in today’s competitive retail marketplace.
- Establish the store as a destination for all of a shopper’s seasonal needs.
- Improve the store’s competitive position without lowering prices.
- Drive seasonal sales growth and shopper satisfaction.
For example, some retailers have established their stores as preferred destinations for Valentine’s Day by combining appropriate products from general merchandise (greeting cards, plush toys), health & beauty care (fragrances), floral (roses), bakery (cakes), liquor (wine), and grocery (candy, etc.) into a single, dramatic solution-center. Some stores have even established dedicated checkouts adjacent to the solution-center display for the two-to-three days leading up to Valentine’s Day to make the shopping experience even more convenient.
However, leveraging the power of a retailer’s total store merchandising assets is easier said than done. Most department managers are used to designing their own seasonal programs and have not been encouraged nor rewarded for working with their counterparts across the store to develop total seasonal solutions.
Discussion Questions: What are the key barriers preventing
departments from working together more closely on seasonal programs? What can
be done to remove these barriers? What role can/should CPG suppliers play in
helping retailers develop and execute inter-department seasonal plans?
CLICK to download a copy of GMDC’s industry report, Seasonal
Best Practices: A Plan for Seasonal Merchandising
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At the just concluded GMA-MSM conference, suppliers were encouraged to provide aisle management versus category management advice to retailers, in order to give them a more complete picture. There would seem to be a great opportunity here for suppliers to do additional cross-category and total store research on seasonal and holiday opportunities that could be provided to retailers. First-movers would no doubt ingratiate themselves with retailers. For small retailers especially, this is probably not something they can take on easily themselves.
The growth numbers clearly point to the upside opportunities in making the most of seasonal sales, yet the barriers of doing so effectively continue to inhibit some suppliers and retailers to work collaboratively on this. The key is starting with a compelling plan well in advance, and signing up the leadership to make the plan work for the respective merchandising teams. The barriers are real, so without senior retail leadership leading the charge, departments will continue to work their own agendas independently, and the “splash” of having a destination in the store for that holiday will not likely happen.
A “hot” topic in most retail venues is branding. How would a seasonal store-within-a-store support, enhance or degrade branding efforts? Most stores target a number of consumer segments. Seasonal sets are seldom large enough to provide space for both a breadth of product and depth across multiple target segments. So choose one. And leave the offerings for the other segments in-line where they belong.
Executionally, once a strategic lifestyle positioning or brand statement is made to describe the seasonal outpost, have category buyers propose candidates for this area. The OTB for these candidates would be “extra,” but the performance would be included in the individual buyer metrics, as well as in the seasonal outpost merchant’s.
It is even possible, and viable, to execute several lifestyle statements in conjunction with the key lifestyle segment for each location. For example, WM might have an upscale urban seasonal outpost, an Hispanic seasonal outpost, and so forth…all in support of and in combination with the current assortment and branding segmentation. And yes, the software exists to execute this. It’s just a plan-o-gram.
Operationally, existing category buyers can be leveraged as the outpost merchant, with specific emphasis on a certain set. For example, an apparel buyer might be the merchant responsible for the Upscale Urban seasonal outpost assortment and planning.
As has been pointed out, this is a great thought, one that SHOULD be acted upon, and honestly, one where the technology exists and the process to execute isn’t rocket science.
Most retailers struggle with conflict within one category, such as the disconnect between buyers, merchandisers and category managers. Opening this up to multiple categories across departments will always lead to issues.
Retailers then have the difficulty of bringing all required data across multiple categories together, in order to make informed decisions. What would be the best product mix? What performance drivers can be used across all categories to provide the best insight? How do I understand seasonal demand in order plan inventory at a granular level? What affect will this seasonal offering have on the products that are dual sited within their existing aisle positions, such as candy, flowers etc…?
The only way a retailer can answer many of these questions is to plan early, work closely with vendor partners and then incentivize both the head office and store teams to collaborate and execute the agreed upon strategies.
Moving forward, we will see this type of merchandising occurring for many seasonal events, however, I also feel this strategy may be used for non-seasonal as well. Occasion merchandising has been discussed for a long time, with a number of retailer starting to make minor changes in line with this strategy. As these changes grow, this will become a common challenge for modern retailers.
General Merchandise retailers have done an excellent job of creating destination appeal by tying in all departments. One of the keys for them has been being able to present merchandising and options a full holiday cycle ahead. How many of us have already begun to see Christmas in some retailers? While direction and commitment from senior management is crucial, there is the reality of how do you tie in perishable offerings as well as address the advantages of a supermarket environment with its higher turn rate, without locking in critical real estate?
There can be more creativity in flyers, handouts and other media to communicate solutions to key holiday needs to the customers. Generic advertising with meal planning, gift giving; party solutions identifying a retailer as the destination of choice once the decision is being made, may be one way of approaching the opportunity.
It is clear by the amount of space that nearly every retail format has dedicated to seasonal products that the business is potentially very profitable.
I say potentially because it is by its very nature fraught with risk and, as we all know, the greater the risk, the greater the profit potential.
Some retail chains, such as Wal-Mart and Target, have honed their seasonal merchandising strategies and product mix to the point that they are among the very best at exploiting the events through ambience, signage, and more than anything, destination locations within the store.
It is acknowledged that cross merchandising across categories throughout the entire store is the ideal in terms of maximizing the potential for sales and profit. To achieve that, however, is very difficult and it seems to me that those who are best at seasonal marketing have taken the 80/20 rule approach. Focusing on what drives 80% of the potential volume and executing it very well, while intentionally ignoring the other 20% of the volume, as it would require far greater resources to achieve and would increase its risk of execution failure and loss of profitability.
This means that while whole store signage conveys the season, the seasonal product itself will more or less be contained within two or three MAJOR areas. Within Wal-Mart, for instance, a typical seasonal focus consists of three major sections;
1. seasonal candy or food (TDay)
2. Swing seasonal area near toys
3. Cards
This focus provides a manageable planning, purchasing and operational event that balances risk with reward, volume and profit.
The key to effective seasonal merchandising is business intelligence. The fact that the seasonal merchandise mix crosses category lines often challenges traditional reporting systems.
Merchants need to develop metrics that do a complete job measuring seasonal performance: % seasonal merchandise mix to total; velocity of seasonal mix; top performing categories within a seasonal mix. What % is left over after the season expires? How do individual stores respond to promotional offers? At what price points? Based on market basket analysis, which key items are most often present in the purchases of seasonal merchandise customers? What % of items go out of stock too early? By store? By region? By store characteristic? Each store should receive a seasonal merchandise profile and grade for next year’s campaign.
To analyze this information, you can’t use a traditional store or merchandise approach. The analyst must embrace all lines across all stores for the seasonal merchandise. This analyst should be required to produce at least 10 suggestions for improving performance for next year.
If your reporting provides the right kind of information, it will lead you to insight. Insight leads to action. Feedback on the action leads to knowledge. Knowledge is competitive advantage. And seasonal merchandising is fundamentally a quest for competitive advantage.
Inter-departmental cooperation was an issue when I was in retail in the mid-90s, and it’s still an issue today. It is more easily achieved at HQ, where category managers can collaborate thematically and leverage relationships with cross-category suppliers more effectively.
However, at the store level, the disconnect is two-fold: 1) Store folks/operations are often focused more on expense control than on sales; and 2) there is little incentive in place for cross-category merchandising. Silo thinking, often dictated merely by accounting lines that mean nothing to shoppers, dominates.
Unless there are real incentives toward cross-merchandising and total-store thinking, this will not change. Store managers have to take the lead, especially in food retailing, and it has to go beyond exhortations to stack lemons in seafood, A1 sauce in meat, and wine/cards in floral.
Great leaders forge alignment of competing entities. In comparison, many retail CEOs believe internal competition is better. If people are measured and rewarded based on how the store does overall, their behavior will reflect it. If the produce manager is measured and rewarded solely on produce sales within his square footage, why should any internal cooperation be expected? How many retailers measure and reward folks based on both criteria: the individual department success and the overall store’s success?
In my experience working at a large hard-goods retailer, it is difficult but not impossible to have interdepartmental cooperation on seasonal programs. In an ideal world, everyone acts for the common good but in reality, individuals have their own agendas. This is not meant to be construed as a negative — just something that we have to be aware of.
There are several barriers that should be understood:
Financial
If the department manager is compensated on department sales, then there will not be much support in executing an interdepartmental seasonal strategy.
The category manager or buyer knows how many linear feet they have allocated to their categories. They may be compensated on sales volume, margin, GMROI, returns/defects or other levers that could be impacted by a seasonal program.
Resources
The store manager will allocate resources to set up a seasonal area. Typically the department manager in the area where the seasonal section is set up will be responsible for that area. This may cause some grumbling as the merchandising work benefits other departments without those other departments contributing labor.
At the head office, someone will have to work with the various category managers/buyers to set up the planogram, run the numbers and gain management approval. Even if the category manager shows leadership by offering to drive the project, his/her manager may not appreciate their time being spent on broader initiatives.
Ownership
The head-office buyers will be interested in their own categories. As much as they may see the benefit of creating a destination in the store for seasonal items, they will likely be hesitant to give up control over the in-store merchandising. If this involves giving up some real estate to accommodate another buyer’s category, resistance can be expected.
Buyers with a few seasonal items may not invest the time required for a successful program.
Mindset
Department managers and associates are used to looking at their own sections. They may not see the store from the customer’s perspective and therefore will be unable to appreciate the importance of creating a customer-friendly shopping experience.
What can be done?
1. Understand the various needs and perspectives of the key stakeholders.
2. Demonstrate head office and store management commitment to the initiative.
3. Approve and fund the creation of interdepartmental groups at head office and store level to work on the initiative.
4. Create a compensation plan that takes cross-departmental sales into consideration. This can be extended to having part of the compensation based on overall store profitability.
5. Create lower risk options like incremental merchandising instead of taking shelf space from one category or department.
CPG suppliers can help facilitate this due to their knowledge of the field as well as head office activities. Many are designated category managers — they are already used to managing cross-supplier merchandising and evaluating results. They can also share benchmarking data or set up “test” sections to provide the information necessary for retailer support.
Suppliers that want to build or strengthen relationships with their customers can “do the work” and propose a seasonal program to a retailer. In addition to demonstrating leadership, they will benefit by being in the drivers seat!
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At the just concluded GMA-MSM conference, suppliers were encouraged to provide aisle management versus category management advice to retailers, in order to give them a more complete picture. There would seem to be a great opportunity here for suppliers to do additional cross-category and total store research on seasonal and holiday opportunities that could be provided to retailers. First-movers would no doubt ingratiate themselves with retailers. For small retailers especially, this is probably not something they can take on easily themselves.
The growth numbers clearly point to the upside opportunities in making the most of seasonal sales, yet the barriers of doing so effectively continue to inhibit some suppliers and retailers to work collaboratively on this. The key is starting with a compelling plan well in advance, and signing up the leadership to make the plan work for the respective merchandising teams. The barriers are real, so without senior retail leadership leading the charge, departments will continue to work their own agendas independently, and the “splash” of having a destination in the store for that holiday will not likely happen.
A “hot” topic in most retail venues is branding. How would a seasonal store-within-a-store support, enhance or degrade branding efforts? Most stores target a number of consumer segments. Seasonal sets are seldom large enough to provide space for both a breadth of product and depth across multiple target segments. So choose one. And leave the offerings for the other segments in-line where they belong.
Executionally, once a strategic lifestyle positioning or brand statement is made to describe the seasonal outpost, have category buyers propose candidates for this area. The OTB for these candidates would be “extra,” but the performance would be included in the individual buyer metrics, as well as in the seasonal outpost merchant’s.
It is even possible, and viable, to execute several lifestyle statements in conjunction with the key lifestyle segment for each location. For example, WM might have an upscale urban seasonal outpost, an Hispanic seasonal outpost, and so forth…all in support of and in combination with the current assortment and branding segmentation. And yes, the software exists to execute this. It’s just a plan-o-gram.
Operationally, existing category buyers can be leveraged as the outpost merchant, with specific emphasis on a certain set. For example, an apparel buyer might be the merchant responsible for the Upscale Urban seasonal outpost assortment and planning.
As has been pointed out, this is a great thought, one that SHOULD be acted upon, and honestly, one where the technology exists and the process to execute isn’t rocket science.
Most retailers struggle with conflict within one category, such as the disconnect between buyers, merchandisers and category managers. Opening this up to multiple categories across departments will always lead to issues.
Retailers then have the difficulty of bringing all required data across multiple categories together, in order to make informed decisions. What would be the best product mix? What performance drivers can be used across all categories to provide the best insight? How do I understand seasonal demand in order plan inventory at a granular level? What affect will this seasonal offering have on the products that are dual sited within their existing aisle positions, such as candy, flowers etc…?
The only way a retailer can answer many of these questions is to plan early, work closely with vendor partners and then incentivize both the head office and store teams to collaborate and execute the agreed upon strategies.
Moving forward, we will see this type of merchandising occurring for many seasonal events, however, I also feel this strategy may be used for non-seasonal as well. Occasion merchandising has been discussed for a long time, with a number of retailer starting to make minor changes in line with this strategy. As these changes grow, this will become a common challenge for modern retailers.
General Merchandise retailers have done an excellent job of creating destination appeal by tying in all departments. One of the keys for them has been being able to present merchandising and options a full holiday cycle ahead. How many of us have already begun to see Christmas in some retailers? While direction and commitment from senior management is crucial, there is the reality of how do you tie in perishable offerings as well as address the advantages of a supermarket environment with its higher turn rate, without locking in critical real estate?
There can be more creativity in flyers, handouts and other media to communicate solutions to key holiday needs to the customers. Generic advertising with meal planning, gift giving; party solutions identifying a retailer as the destination of choice once the decision is being made, may be one way of approaching the opportunity.
It is clear by the amount of space that nearly every retail format has dedicated to seasonal products that the business is potentially very profitable.
I say potentially because it is by its very nature fraught with risk and, as we all know, the greater the risk, the greater the profit potential.
Some retail chains, such as Wal-Mart and Target, have honed their seasonal merchandising strategies and product mix to the point that they are among the very best at exploiting the events through ambience, signage, and more than anything, destination locations within the store.
It is acknowledged that cross merchandising across categories throughout the entire store is the ideal in terms of maximizing the potential for sales and profit. To achieve that, however, is very difficult and it seems to me that those who are best at seasonal marketing have taken the 80/20 rule approach. Focusing on what drives 80% of the potential volume and executing it very well, while intentionally ignoring the other 20% of the volume, as it would require far greater resources to achieve and would increase its risk of execution failure and loss of profitability.
This means that while whole store signage conveys the season, the seasonal product itself will more or less be contained within two or three MAJOR areas. Within Wal-Mart, for instance, a typical seasonal focus consists of three major sections;
1. seasonal candy or food (TDay)
2. Swing seasonal area near toys
3. Cards
This focus provides a manageable planning, purchasing and operational event that balances risk with reward, volume and profit.
The key to effective seasonal merchandising is business intelligence. The fact that the seasonal merchandise mix crosses category lines often challenges traditional reporting systems.
Merchants need to develop metrics that do a complete job measuring seasonal performance: % seasonal merchandise mix to total; velocity of seasonal mix; top performing categories within a seasonal mix. What % is left over after the season expires? How do individual stores respond to promotional offers? At what price points? Based on market basket analysis, which key items are most often present in the purchases of seasonal merchandise customers? What % of items go out of stock too early? By store? By region? By store characteristic? Each store should receive a seasonal merchandise profile and grade for next year’s campaign.
To analyze this information, you can’t use a traditional store or merchandise approach. The analyst must embrace all lines across all stores for the seasonal merchandise. This analyst should be required to produce at least 10 suggestions for improving performance for next year.
If your reporting provides the right kind of information, it will lead you to insight. Insight leads to action. Feedback on the action leads to knowledge. Knowledge is competitive advantage. And seasonal merchandising is fundamentally a quest for competitive advantage.
Inter-departmental cooperation was an issue when I was in retail in the mid-90s, and it’s still an issue today. It is more easily achieved at HQ, where category managers can collaborate thematically and leverage relationships with cross-category suppliers more effectively.
However, at the store level, the disconnect is two-fold: 1) Store folks/operations are often focused more on expense control than on sales; and 2) there is little incentive in place for cross-category merchandising. Silo thinking, often dictated merely by accounting lines that mean nothing to shoppers, dominates.
Unless there are real incentives toward cross-merchandising and total-store thinking, this will not change. Store managers have to take the lead, especially in food retailing, and it has to go beyond exhortations to stack lemons in seafood, A1 sauce in meat, and wine/cards in floral.
Great leaders forge alignment of competing entities. In comparison, many retail CEOs believe internal competition is better. If people are measured and rewarded based on how the store does overall, their behavior will reflect it. If the produce manager is measured and rewarded solely on produce sales within his square footage, why should any internal cooperation be expected? How many retailers measure and reward folks based on both criteria: the individual department success and the overall store’s success?
In my experience working at a large hard-goods retailer, it is difficult but not impossible to have interdepartmental cooperation on seasonal programs. In an ideal world, everyone acts for the common good but in reality, individuals have their own agendas. This is not meant to be construed as a negative — just something that we have to be aware of.
There are several barriers that should be understood:
Financial
If the department manager is compensated on department sales, then there will not be much support in executing an interdepartmental seasonal strategy.
The category manager or buyer knows how many linear feet they have allocated to their categories. They may be compensated on sales volume, margin, GMROI, returns/defects or other levers that could be impacted by a seasonal program.
Resources
The store manager will allocate resources to set up a seasonal area. Typically the department manager in the area where the seasonal section is set up will be responsible for that area. This may cause some grumbling as the merchandising work benefits other departments without those other departments contributing labor.
At the head office, someone will have to work with the various category managers/buyers to set up the planogram, run the numbers and gain management approval. Even if the category manager shows leadership by offering to drive the project, his/her manager may not appreciate their time being spent on broader initiatives.
Ownership
The head-office buyers will be interested in their own categories. As much as they may see the benefit of creating a destination in the store for seasonal items, they will likely be hesitant to give up control over the in-store merchandising. If this involves giving up some real estate to accommodate another buyer’s category, resistance can be expected.
Buyers with a few seasonal items may not invest the time required for a successful program.
Mindset
Department managers and associates are used to looking at their own sections. They may not see the store from the customer’s perspective and therefore will be unable to appreciate the importance of creating a customer-friendly shopping experience.
What can be done?
1. Understand the various needs and perspectives of the key stakeholders.
2. Demonstrate head office and store management commitment to the initiative.
3. Approve and fund the creation of interdepartmental groups at head office and store level to work on the initiative.
4. Create a compensation plan that takes cross-departmental sales into consideration. This can be extended to having part of the compensation based on overall store profitability.
5. Create lower risk options like incremental merchandising instead of taking shelf space from one category or department.
CPG suppliers can help facilitate this due to their knowledge of the field as well as head office activities. Many are designated category managers — they are already used to managing cross-supplier merchandising and evaluating results. They can also share benchmarking data or set up “test” sections to provide the information necessary for retailer support.
Suppliers that want to build or strengthen relationships with their customers can “do the work” and propose a seasonal program to a retailer. In addition to demonstrating leadership, they will benefit by being in the drivers seat!