In-Store Marketing And Presentation
The manner in which products and services are displayed and promoted within a store is highly influential on the customer's buying behavior. The author suggests some of the parameters related to this: the location of merchandise within a store, the way that the product is displayed in its location, and the way in which the price is communicated.
The author doesn't list all the different store designs and formats, but indicates there are many of them: convenience stores, supermarkets, supercenters, boutiques, clothing shops, department stores, etc.
Many of the designs are merely adopted without much though, they are traditional or industry standard, and where thought is applied, it often has more to do with the way in which employees stock the merchandise rather than the way customers purchase. Where consumer behavior is considered at all, it is often managed in the manner of traffic.
Numerous studies have been carried out, with only marginal impact: merchants are willing to accept slight modifications to the way in which they present their goods, but very few are willing to make dramatic changes to the way in which their stores are laid out to accommodate buying behavior.
Manufacturers have also attempted to extend their influence to the sale floor, as they are interested in having customers purchase their products, which feeds their own demand. In most instances, they have little power, and are at the mercy of retailers to stock and merchandise their products.
Traditionally, high-frequency products are located at the back of the store (to draw shoppers through the aisles and minimize effort to move inventory from stockroom to floor), low-margin merchandise is on the perimeter, high-margin are nearest the center where they get maximum attention, and featured merchandise is near the front. There is some science to all of this, but traditional methods seem to prevail.
For example, virtually every supermarket (not just in the US, but worldwide) is laid out the same way: eggs and dairy are in the very back, perishables are grouped by temperature requirements, dry grocery is in the center, and other "departments" (such as cosmetics, detergents, pet food, etc.) are on the perimeter.
The theory that has dominated the format is that making the customer walk past more merchandise leas then to purchase more items. This began in the 1940s, during a time of single-income households in which the housewife had considerable time to shop - grocery shopping was a leisurely afternoon trip, not the exercise in time-management it has become today.
As such, products were located to make the shopper go to the back of the store for highly perishable staples (dairy) and the most frequently purchased items were dispersed to different locations, and there is no simple path from one place to another. The intent to make customers wander through the store and spend as much time as possible.
While it's not scientific, evidence shows that it works: people do buy more grocery items if they are made to spend more time in the store. And while alternatives that make it convenient to get the needed items quickly please customers, it harms revenue, making supermarket managers reluctant to experiment.
For the past few decades, and more intensely since the 1990s, convenience has become a value to customers who are increasingly pressed for time. This is largely an effect of culture: the "housewife" is largely extinct. In the present day, both partners work, and work increasingly long hours.
As a result "shopping" is a necessity rather than an enjoyable pastime, and yet another demand on an increasingly limited amount of time. The emphasis is on convenience.
Neighborhood markets and convenience stores have arise, and nearly every gas station offers a selection of items traditionally offered by supermarkets and drug stores. Customers pay a high price for these items, making them highly profitable operations.
In a broader context, convenience stores whittle away at the revenue of supermarkets and drug stores by taking the opposite strategy: to make shopping convenient for the time-stressed customers.
Convenience and Sales
The author refers to the (now dead) Kmart brand, a highly successful mass merchandiser that, beginning in the mid-1990s, saw a steady decline in the frequency of shopping trips. This was most pronounced in the decrease in the sale of commodity products (paper goods, snacks, and beverages) and as the discounts offered on those commodities were a primary draw, the drop affected all other areas of the store.
His department did a great deal of research, which all pointed to the same basic issue: "We don't have the time to shop around. We can budget our expenses easier than our time."
He notes doing "many types of experience" to regain frequency: everyday low prices, store within a store, rearranging the floor, using smaller store formats, and the like. In the end, it was a losing battle - there simply was no substitute for convenience.
(EN: the author doesn't consider the Wal-Mart phenomenon, as this chain experienced tremendous growth during the same time period. Kmart and Wal-Mart had virtually identical formats before the mid-nineties, when Wal-Mart began adding supermarket goods to its dime store merchandise, and it could well be that "one store for all your needs" suited the demand for convenience - though the in-store experience is thoroughly unpleasant, making one stop rather than several is a massive time-saver.)
There are many different pricing strategies that largely depend on the retail format and the nature of the merchandise. For example, grocery stores make a low-margin and sell repeatedly to the same customers (and customers remember what they paid from one trip to the next), whereas department stores sell merchandise at a higher margin and interact with customers
Competition is another major factor: a customer shops where it is most convenient, and only if there are extreme deficiencies in price and quality will they make a trip to another location. Where many retailers compete in a given area, quality and price are critical.
In the sections that follow, the author intends to discuss a myriad of topics related to pricing - the basic types along with ancillary issues.
A maxim in retail is "price it right the first time," because customers are sensitive to changes, particularly when the price goes up.
Most retailers follow a strategy of placing a higher mark-up on goods and regularly offering discounts through weekly or fortnightly advertising campaigns.
Operationally, a high mark-up gives the retailer the ability to absorb changes in cost of merchandise without having to adjust their prices, to stockpile (nonperishable) merchandise for future sale, to have sufficient margin to cover unsold product, etc. It is simply easier to manage the operation to ensure profitability.
There is some efficiency and cost-savings to being able to manage inventory in a more moderate fashion - to buy cheap and warehouse until the item can be sold, to conveniently manage inventory across an entire chain of stores because demand is not constantly fluctuating and, in fact, can be predicted more accurately.
The high-low strategy also requires a constant stream of advertising. The advertised items compete with discount merchants, and customers drawn into the store for sale merchandise also purchase other items at regular prices. The advertisement itself has promotional value - customers become "trained" to look for the weekly newspaper insert and rush to the store to buy "while supplies last" (or at least before the sale ends).
Advertising is also a barrier to entry. Once customers have been trained to respond to ads, they can be counted on for regular visits - but until that has been achieved, it can be difficult for a retailer to get customers to look for and respond to their messages.
Everyday Low Price
"Everyday Low Price" (EDLP) is most closely associated to Wal-Mart, whose low prices were considered to be critical to their success. The basic idea is to set the price of merchandise as low as you can while still making sufficient margin to cover overhead and provide a profit.
The goal of EDLP is to instill in customers the firm belief that they cannot get a consistently lower price anywhere else, and thus give the EDLP retailer their loyalty as a default choice.
Traditional "sales" events and promotions are counterproductive to EDLP: if merchandise can be further discounted, it undermines consumer's confidence that the normal price is really a good value.
EDLP does not work for every store. Some customers value quality (both product and shopping experience) or convenience above price, or identify with a retail brand. There is the perception that low-cost means low quality, even when the very same good is offered.
There is also the issue of price: EDLP provides a razor-thin margin and in order to offer a consistently low price to customers, retailers must get the same consistently low price to suppliers. Even a minor change can be financially disastrous.
It also requires a retailer to manage inventory costs very cautiously. Ideally it orders no more than it can sell, and sells it quickly. A stockpile of unsold goods or goods that cannot be sold are both variances that it cannot sustain on such a thin margin.
The author relates to Kmart, whose experiment with EDLP. Customers perceived Kmart as marginally better than Wal-Mart, and their regular advertising (newspaper adverts) offering special deals was key to getting customers to come to their stores. In spite of evidence and customer feedback, they experimented with EDLP, cutting prices and stopping the weekly ad. The results were "disastrous" and Kmart immediately abandoned the idea.
There is much interest and concern over EDLP, specifically that assertion that it is the new way of things, and that it will become ubiquitous for all retailers and all items. Some retailers (such as Tesco in the UK) are presently phasing out EDLP initiatives, stating a lack of consumer acceptance as the predominant reason.
Research suggests that consumer preference for pricing has much to do with the elasticity of demand and the price-sensitivity toward specific products categories. This has led to a tiered approach to pricing, which assigns a given product to one of three or four distinct groups. The tier system is based on the attitudes of the "prime customers" who contribute the majority of store income through frequent or large purchases (30% of customers whose purchases represent 70% to 80% of revenue).
The first tier of products are those for whom pricing is elastic: customers buy these items frequently, can recall the price, and will quickly take their business elsewhere if the price is increased. The retailer must set and maintain a price that is at or near what competitors charge. Typical tier-one items are things such as dish soap, detergents, coffee, bread, milk, soda, and diapers - low-end items where there is not much brand loyalty (or where a brand is available from many retailers). Some call these products "loyalty builders" as a consistently low price brings shoppers back to a given retailer to purchase them frequently.
The second tier of items have mild price-sensitivity: customers buy these items if the price seems "about right" but do not have a solid idea of what they normally cost. This tier includes items such as mops and brooms, glass cleaners, light bulbs, and other items that are infrequently purchased, to which there is less brand loyalty, and which customers don't shop around for (they are bought on impulse or when the need arises). Generic and store-brand products fare well in this category.
The third tier of items have little price sensitivity, and customers often do not consider their price as a motivating factor - if it is not shockingly high, they will pay it. Sample items are charcoal, roasting pans, furnace filters, and batteries. These products are needed very infrequently, often driven by a pressing need, and are often ancillary to other products. For example, a shopper who purchases a turkey also needs a roasting pan to prepare it, doesn't have a favorite brand of roasting pan, and will not be dissuaded if the price of the pan is a bit higher than they would like.
Recognizing how customers perceive specific items is very important to tiered pricing: a retailer who gets it wrong is at a disadvantage to any retailer who gets it right. The author specifically cites basket-dollar competitive advertising, in which a competitor demonstrates that their prices on specific items are lower. (EN: This was popular at one time, but customers have become jaded to it, knowing the advertiser has hand-picked specific items in which his pricing is better, and suspecting the cost of any other item is jacked up to compensate).
Tiered pricing is exercised in instances where stores have very rigorous category management processes. It's very popular with grocers and mass merchandisers, whose stores are organized into departments, and at which customers often purchase many individual items in a single session.
Types And Sizes
The author asserts that there are many types and sizes of retail stores today, from small boutiques to massive stores that have over 200,000 square feet of floor space. Each design serves a specific purpose, and customer behavior is highly idiosyncratic - of primary importance is separating research by store type/size to avoid muddling the results. A few of the formats are discussed here to provide a sense of the issues.
Store in a Store
The "store in a store" concept is common among major retailers: while most merchandise is organized into departments, stores will organize a single space in the shop to serve specific needs.
Most often, this is a temporary arrangement for a specific event. "Back to School" may involve creating an aisle that brings together a variety of goods from different departments that will likely be purchased together: stationery, clothing, backpacks, individually packaged snack items. In other instances, it may be less temporary and the theme less pronounced, such as setting up a section of the store that carries all items that are frequently purchased (sodas, paper towels, and the like) based on basket data.
The author mentions success in this approach for Kmart: placing common items together in a store-in-store section got positive customer feedback, increased sales, and increased frequency. Sales of other items decreased, but the net effect was an increased spend per customer.
At "another" retailer (not named), a more extensive rework was done: the store completely rearranged its floor from a stock-keeping approach to a product affinity approach. The store eliminated over 20% of its merchandise offering, increased the space allotted to high-volume products, and placed affinity items proximate to one another. The results were a 25-30% sales gain in the first quarter.
Convenience Stores to Hypermarts
Convenience stores have become increasingly popular in recent decades: a neighborhood shop (often attached to a gas station) where customers buy single-use items (one can of soda, one pack of cigarettes, a pocket-sized packet of aspirin, enough detergent to wash one load of laundry).
Between the pressing need for an item and an unwillingness to spend the time to go to a regular store, customers have little price sensitivity and will pay mark-ups of around 80%, but also tend to buy only what they need. Extremely few individuals see the neighborhood convenience store as their regular shopping destination for most items, but will still visit fairly often for the convenience.
In the middle are traditional stores, often named for the merchandise they supply: a grocery store, a drug store, a dress shop, and the like. The size and selection of merchandise is driven by the nature of the inventory and the habits of customers, and their format and inventory is highly standardized - it would be highly unusual to find grocery items in a clothing store.
Hypermarts and supercenters represent the larger end, where a wide variety of merchandise is sold. The distinction is that a hypermart combines the merchandise offerings of a grocery store and a mass-merchandiser and a clothing store. So does a supercenter, but it goes well beyond: a supercenter might have an auto repair facility, an optometrist, a bank, a beauty parlor, or any of a variety of categories under a single roof.
These are massive retail operations, with at least 100,000 square feet of floor space (some twice as much) and massive annual sales. They generally support a population of around 300,000 households within a 25 mile radius.
A curious and somewhat oblique observation: the further a customer lives from a supercenter, the more likely they will purchase multiple items and use credit cards to make purchases at it; and those customers who live within two miles of the store make more single-item trips and more often pay in cash. (EN: The author doesn't connect the dots, but if the store is within two miles, it likely serves as the customer's convenience store as well.)
When is Big Too Big?
The craze for supercenters has cooled since the mid-1990s: it is still a popular format, but it has settled down quite a bit from the era in which it seemed that they would engulf every other retail format.
The main problem cited is that they became too large to shop. A customer can not traverse every aisle of a 250,000 square foot facility and even getting from one end to the other is a long walk. They can not push a single cart with all the items they might want to buy from every department. And it is not convenient to purchase some items at once: your milk will curdle by the time you've finished clothers shopping, or if you buy the clothes first, the grocery items will be stacked on top of them, condensation dripping into the fabric.
Ultimately, the enormity of the stores maid the shopping experience "painful" and analytics found that customers might make multiple trips to a supercenters: they would shop general merchandise and grocery in different trips to the store. "Might" is because this is unusual behavior - most often, a given customer will use a supercenter as a grocery store or as a general merchandiser, but rarely for both.
There was also the matter of overexpansion and conflict: the stores required a revenue in excess of $120M to cover their costs and overhead, and expanded into areas that did not provide that level of support. To build a store required several acres of contiguous land, which is difficult to find in established towns in the US (and especially in Europe).
In the United States, Wal-Mart still does a thriving business in many communities, but most of its competitors have been vanquished. The situation is similar in Europe, where Tesco (UK) and Carrefour (France) have survived but most others have failed.
Warehouse clubs began in the 1950s (when retail customers could visit a wholesale facility on certain days to buy case-lots) but did not blossom until the late 1980s.
The defining characteristics of a warehouse club are its warehouse atmosphere (no-frills), merchandise bulking (purchase in large quantities at a significant discount) and its club structure (shoppers pay an annual fee to become a member).
The two big players in the US are Sam's Club (a division of Wal-Mart that bought out a number of competitors in the late 1990s) and Costco (a west-coast chain that has expanded considerably) - the difference being that Costco initially focused on higher-end merchandise than Sams.
(EN: Also worth noting that the warehouse model is becoming a bit watered-down. Instead of buying a case of a retail product, customers might simply buy a single large package, or a two-pack of supermarket-size product, and manufacturers are accommodating the need for bulk, but not full-case, quantities.)
Shopping By Design: Traffic Patterns
The author provides a few diagrams of typical store layout, which generally combine wide aisles meant for shoppers travelling to a specific destination with narrower aisles where the shopper is browsing specific merchandise.
Most stores have a main aisle, called a runway that leads directly from the entrance to the back of the store. Others add a wide perimeter aisle, called a racetrack, that enable the shoppers to move in a circuit around the store. These main thoroughfares are often lined with promotional displays to capture the attention of passers-by on the high traffic aisles.
Departments within a sore are arranged in a grid-like fashion along the main aisles, managed similar to individual shops, with featured items at the very front (near the high-traffic aisle) and frequently purchased items at the back to draw shoppers through the items in-between.
(EN: The author considers only the traffic of shoppers, but the width and configuration of major aisles are also configured to support stock-keeping, so that large containers of goods can be moved from the storage and receiving area in the back to specific departments for shelving.)
The author mentions a "fishbone" design that has not caught on in the US yet, but has been popular in other countries, in which smaller merchandise aisles run off at a 45-degree angle from the main runway, rather than a 90-degree angle.
In businesses that stock multiple lines of products, category management (CM) is used to determine the mix of goods. On the macro level, CM is used to determine how much floor space is to be devoted to each category of goods, and how the departments in the store are arranged. On the micro level, it is used to determine which specific manufacturers' goods to stock in a given category.
There's a great deal of data behind CM, generally aggregated from a wider range of retailers. Individual retailers leverage CM tools from a central firm (such as AC Nielsen) to manage data pertaining to their own store, and has access to aggregated information (but not specific details) about other stores (including competitors) - meanwhile manufacturers can gather detailed information about all retailers.
CM is complex because of the vast number of options available to the retailer. For example, there are more than 1,000 types of milk, accounting only for brand and variety (and not container size). A store cannot stock every type, but must make intelligent decisions on which to carry. Given the vastness of data an the critical nature of the decision, large retailers can not depend on a gut-feel approach.
Factors used to select merchandise options are largely based on the draw of specific brands, desired price-points (offering a cheap, medium, and expensive version of each item), basket data that shows which brands are purchased together (even of unrelated items), the profit margin on individual items, and many other factors that consider not just an individual good, but its interplay with all other items in the same category.
One of the worst mistakes in CM is eliminating a slow-moving or low-margin product only to discover it was a preferred item of high-revenue customers or had a corresponding impact on other high-margin products.
Many companies can earn a significant revenue by providing their basket data to an aggregator, who sells the data to other companies. It's notable that Wal-Mart decided to stop selling tis data, based on the notion that its own volume is so much larger than any other retailer that it was getting little in return and giving away valuable insight.
Placement is an eve more granular decision: the location of an individual product on a shelf with other products influences shopping behavior at the last critical moment when a customer decides to take a particular item off the shelf and add it to their basket.
Much research has been done into determining the best location to place a product, though there is no universal agreement (though "eye level" and "even with the top of the cart" seem to be the top two choices) and the studies seem to be generic in terms of the product itself.
As such, retailers wish to have more specific insight as to how a specific product can best be placed in the context of other specific products, and this requires sophisticated analysis that accounts for the confluence of all products in the context of a specific store and buying situation.
As such, it becomes a highly complex task and computers are leveraged to assist in the analysis of the data. There are many different versions of this software, with the industry leaders being SpaceMan (AC Nielsen) and Intactix (JDA), which do statistical analyses on basket data (actual purchases), experimental data (A:B tests), which include parameters pertaining to placement.
The author relates experience doing similar analyses on sales fliers - which is a bit oblique because it considers the way products are placed in an advertisement rather than on the shelves, but the tasks are similar. Over the course of six months, he analyzed how the placement of specific products within inserts influenced the sales volume, and arrived at a predictive algorithm that had 80% accuracy.
While it was successful, the project was ultimately abandoned: the cost of the analysis for even a few items was significant due to processing and data requirements, and there were political issues with the buying office, who feared that the software was intended to replace human judgment and put the buyers out of their jobs.
But the concept remains: being able to predict the sales impact of placing a product on a given location in an advertisement or on the shelf (or the two combined) would be amazingly useful and highly beneficial.
Specialty Departments: Food Service
The author notes the trend for stores to provide in-store food service: a coffee shop in a bookstore, a sandwich counter or small cafeteria in a drug store. Such conveniences serve to keep shoppers in the store for a longer period of time, with the result being that they will often spend more.
The cause for this is reckoned to be that the refreshment area is a place where a customer can take a break from shopping (rather than check out and go home, they can relax and continue shopping) and, in rare instances, they can serve as social gathering places, where people go to meet and end up shopping before or after socializing.
(EN: This is not a new concept, but a revival of an older one. It hails back to drug stores, which mixed soda for immediate consumption - when soda was a medicine or tonic rather than a refreshment - this evolved into lunch counters. It was very common until the 1980s, when drug stores moved out of the downtown area and into malls or stand-alone buildings in the suburbs and eliminated the lunch counters. Now, it seems to be making a comeback.)
The author mentions that many mass merchandisers are experimenting with brining back their cafes - some offering their own food service, others inviting chain restaurants (such as MacDonald's or Subway) to open a restaurant inside the store.
(EN: Thinking on a larger scale, most shopping malls have a "food court" within them, even from the very beginning. The 1980s "mall culture" involved teens who hung out at the mall as a social destination. And it's likely even the forum markets of classical Greece and Rome had concession vendors. It really is a much older and larger phenomenon than is implied here, and likely merits much more detailed scrutiny.)
Specialty Departments: Garden Shops
The author gives a brief mention to garden shops, a place within a store that may contain an outdoor section (in places where the climate permits) and stocks assortments of gardening goods such as seeds, bulbs, potting soil, fertilizer gardening tools, lawn mowers, patio bricks, outdoor furniture, and the like.
(EN: He doesn't seem to do anything but describe them in terms of their merchandise selection, and I'm finding that the concepts of "specialty department" and "store in a store" are blurred.)
Specialty Departments: Home Electronics
There's another description of electronics departments in major retailers: another specialized department where devices such as video players, stereos, televisions, computers, and similar goods are merchandised, along with their media (recorded music and video) and related accessories.
The items sold in this department are often high-cost and small enough to be concealed, hence prime targets for shoplifters. For security reasons, these items are often kept in "bull pen" areas of a store, with a single entrance/exit near a register, and customers are required to pay for the items before leaving the area (not at the main store checkout). This "can be an annoyance to some customers."
(EN: I've recently noticed stores abandoning the bullpen and designing this department as part of the main floor, with checkout done at the main register. However, it's also notable that the same practice is true for other high-risk items: customers are corralled and must pay immediately at jewelry counters and pharmacies inside a store.)
The use of RFID tags on certain merchandise has been used to reduce the need for bullpens, and has been applied to merchandise in regular departments as well. The author describes this in detail, but it is presently well-known (the product has a tag that will trigger an alarm at the door, which is removed or deactivated at the register).
On the topic of RFID tags, they're being more widely used:
- RFID monitors throughout the store can track the movement of goods, hence customers
- RFID tags can also be used as price tags to facilitate checkout
- A loyalty card can contain an RFID tag so that it can easily be scanned to identify a customer at the register or at kiosks where members can access shopping lists, print coupons, etc.
- RFID tags can be used for inventory control and monitoring
The receiving dock, where goods are delivered to the store, is generally in the back of the house, hidden away from the customers. This area includes a loading dock and often an area where surplus is stored until it can be moved to the sales floor.
Ideally, the amount of merchandise in storage is minimized because it represents a sunk cost to the retailer. For decades, retailers have pursued the ideal of just-in-time (JIT) inventory management, such that merchandise moves directly from the delivery vehicle to the sales floor (and hopefully, out the door in the hands of customers).
In reality, merchandise does not go from truck to floor immediately - it would be disruptive to customers to have employees constantly moving freight through the aisles while they are attempting to shop - but instead the merchandise is stocked during low-traffic times or when the store is closed for the evening.
Also, because deliveries are infrequent and demand fluctuates, having more product on-site to restock shelves is necessary. Only so much can fit on the shelves and the rest must be stored until needed. The author briefly mentions the shops that stack merchandise on overhead shelves on the sales floor to reduce storage needs, but this is unattractive to customers.
Storage is also unavoidable for certain categories of products, particularly large ones, in which there may be a display model on the sales floor and the actual items sold are kept in the back. An appliance store is a good example: it is not feasible to have twenty refrigerators in boxes on the sales floor.
Inventory storage is also necessary to amass surplus goods for a promotional event or advertisement. A store that runs a sale on paper towels will sell many cases and cannot stock them all on the sales floor - so they have to be amassed in the warehouse area in advance so the store is prepared for the event.
There's a brief mention of computerized logistics - where inventory management of routine goods is monitored at the register: the system knows how many are in store, how many have been sold, and how many need to be ordered at any given time, rather than relying on human observation and judgment.
Another brief mention of shipping: distribution centers pick orders to ship to the store and load the trucks with merchandise in a manner that is planned out (items that go furthest from the receiving dock are nearest the back of the truck so that there is no traffic-jam when it is moved from the dock to the shelves), which facilitates stocking and reduces damage.
Another brief mention of tagging, but this is a bit of a throwback to the days when grocers put stickers on items to show the price rather than scanning the UPC code at registers. Pre-pricing, where the price is added to the product by the manufacturer or distribution center, creates some conflict - as it is convenient for the retailer to stock without tagging, but takes away their ability to set their own price. But again, the age of "price tags" is largely over for most product lines (clothing being a notable exception).
Stocking the Counters
The author returns to the notion of stocking - moving merchandise from the truck or storeroom onto the sales floor. It was traditionally a task that was done after the store closed for the evening, often by a "night crew", and rarely done during shopping hours when customers are clamoring for an item when the shelf is bare.
Now that many retailers are open around-the-clock, stocking is done during low volume times, and employees are prohibited from rolling flatbed carts onto the sales floor outside of certain hours. Stocking while the store is open for business also involves more labor: all inventory cannot be dumped on the floor at once, but employees must make repeated trips to deliver stock so that it does not accumulate on the sales floor, blocking customers.
A brief mention that stocking has become specialized: the task of unloading the truck, moving the merchandise to the appropriate department, and shelving the items are handled by different employees in larger operations.
A common practice is stock rotation. Most customers pull from the front of the shelf, so stockers load newer items in back so that the old stock moves first - which is especially important with perishable items that become a loss if not sold by a certain date. This is also more labor-intensive, to remove all product from the shelf, place new inventory in the back, and replace the older inventory in front.
(EN: The author doesn't mention that customers have become savvy to this practice, and fussy customers will reach to the back of the shelf to get something a little "fresher" - which damages goods and creates disarray that must be manually straightened.)
(EN: The author doesn't define this concept, but it generally pertains to anything done by a store to promote merchandise. That is, the sales floor at base is a storage area where customers can find merchandise they desire. Anything more, even a sign on a shelf, that is intended to cause the shopper to consider an item he did not already have the intention of buying is promotional.)
Promotion begins even before shoppers enter a building. Window displays and signage, such as "specials of the day" promote specific products even before the customer walks through the door. (EN: in some instances, these may be to get the attention of passers-by and lure them into the store, but this is a bit different: getting someone to come inside versus getting someone who already intends to enter to purchase something additional.)
Point-of-purchase displays are generally free-standing racks of merchandise that draw attention. In their simplest form, they can be case-stacks of shipping cartons placed in the aisles. Some manufacturers design shipping cartons to function as promotional displays.
Floor graphics are relatively new: they involve placing a sticker on the floor of the store (which has seldom been used) and is primarily being explored by manufacturers to promote new products, usually without discounting price. The author indicates "these work very well." (EN: likely because they are unusual - if the idea catches on and floors become a patchwork of ads, the novelty will wear off and customers will ignore them.) However, designing them is tricky: they have to stand up to foot traffic (they will be walked on), cannot be slippery (safety hazard), the adhesive must be strong enough to hold them in place yet enable them to be removed without damaging the flooring, etc.
The author mentions shelf signage - called "shelf talkers" or "wobblers" when mounted on a wire or string - as a method of promotion that draws attention to a specific item. These are primarily targeted to customers who are considering the merchandise on the shelf, but also catch the attention of passers-by. These are generally used to advertise temporary price reductions. Some variations have been attempted, such as using decks of coupons instead of a sign, or shelf talkers that literally talk (a motion sensor triggers an audio message), though the latter are expensive and extremely irritating.
In-store video is also being used - stationing television screens in specific locations to play a recorded message. A common use is in a deli or meat counter area with brief cooking demonstrations (featuring specific ingredients the store wishes to promote). They've also been used at the register, where people waiting in line will give them attention. Some experimentation has been done with affixing screens to carts. The cost is high, drawbacks are obvious, and the success rather is a matter of debate, so it remains experimental and, in many cases, vendors rather than retailers pay for the devices.
End-cap displays are also common Rather than abruptly ending shelves (gondolas) where they meet a high-traffic aisle, retailers add shelves that face the aisles to promote specific products. These are generally products that are selected from the merchandise in that aisle - the end-cap of the detergent aisle features one of the detergents - as a kind of advertisement not just for the product, but the category. The exception is the end-caps that face the front of the store, which are prime real estate for any item.
Display tables are also used to promote bundles of merchandise. Rather than having an array of shirts on a display table, the retailer will pick a few shirts, ties, belts, handkerchiefs, and other items that would go well together. This can also be used in non-clothing departments, such as collecting some fishing poles, tackle boxes, and lures on a table in sporting goods; a portable CD player might be tabled with headphones, adapters, and CDs. This is most effective when one of the items on the table is the destination item and the rest are accessories or accompaniments. A special caution for display tables is they are often used, and often perceived, for discount and close-out items. Customers may get the instant impression that the table is filled with cheap and undesirable goods.
There are also door advertisements - stickers or signs placed on the (sliding glass) doors through which customers enter a store. The logic being that when customers pause for a moment, waiting for the door to slide open, they might notice the advertisement.
Advertisements are also placed on shopping carts and carry baskets. The handle generally identifies the merchant, but the sides of a basket or toddler seat flap of a trolley may carry product advertisements that are often in view of the shopper or others. Some retailers experiment with video displays on carts (mentioned before) which are signaled to display ads based on the customer's location within the store, or which trigger advertisements in the environment (the cart signals a coupon dispenser on the shelf nearby)
Speaker systems were installed in stores to provide background music, to avoid having a tomb-like silence and muffle irregular natural noises, but much attention has been paid to whether the kind of music played affects shopping behavior. The same systems are used for pre-recorded promotions or spontaneous announcements (though the "attention shoppers" announcement has been overdone to the point it is cheesy, such that only the lowest-end retailers do so anymore). Though since the author worked with Kmart, infamous for the blue-light specials, he found that shoppers in that store feel the announcements are part of the experience, give attention to them, and respond favorably.
Retailers also attempt to promote to customers at the register, after the present sale is completed, to seed the next sale. This can be done with messages on their receipts or coupons and fliers provided at the checkout counter. The author mentions experiments using surveys on the back of receipts, but does not remark on the outcome of this tactic.
(EN: The author mentioned a number of side topics in the course of the chapter, which I've separated back out.)
There is a brief mention of psychological content in messaging. Phrases such as "while supplies last" are intended to create a sense of anxiety to motivate the customer to make an immediate decision to buy for fear of missing out. (EN: Much more can be said on this, but a constant issue is customers recognize and are jaded to these tactics.)
Another psychological tactic the author has used is displaying merchandise with gaps that visually suggest other people are buying the product, rather than having the shelf appear to be completely full. No statistics, but the author claims to have tested the theory "over many months" and found it to be true.
Another side-topic: sensory promotion - using smells to attract attention. Scent is a very powerful sense, but one that is not often leveraged. The smell of baked goods is detectable long before the bakery itself is in range of site, and even non-food retailers are using food or simulated food scents to draw attention.
Another side-topic: in-store advertising is often the choice of the store manager, to draw attention to the merchandise he wishes to move. But it's also common for manufacturers to pay retailers for in-store advertising of their brands
Holiday promotions are a major event for promotions, to the degree that many retailers operate at a loss for the entire year and make enough profit during the Christmas shopping season to carry them. The Friday after Thanksgiving is called "Black Friday" because for many retailers it marks the turn from running at a loss to making a profit only after this day, and 35% of annual sales occur between Thanksgiving and Christmas.
Back-to-School shopping is another critical event in many stores, as a wide range of goods are purchased for schoolchildren: school supplies, clothing, and other items are purchased in significant quantities. Other stores attempt to invent their own events, such as an annual white sale on Memorial Day, or even creating an event of their own, such as an annual "Dollar Days" event.
The amount of floor space in stores is said to be growing incrementally each year, from a few aisles of event-specific merchandise to sizable store-in-store sections of floor space to capitalize on holidays and events.
Analytics: Moving Targets
Since promotion is used so heavily and through so many different tactics, it is difficult to distinguish promotional sales from normal sales levels, or to distinguish the effect of a specific tactic among the many in simultaneous use.
An analyst cannot turn a store into a laboratory, carefully orchestrating and controlling the various factors for the purpose of experimentation and discovery, as store managers are motivated to sell, and will not generally jeopardize their revenue for scientific inquiry.
As such, the analyst must work with moving targets, attempting to account for the various factors that influence buying behavior at any given time. The author suggests that this is often done by making changes and monitoring performance on the hour and minute level - to make a subtle and short-term alteration in the environment and observe immediate results so as to minimize the potential harm to store operations.
These experiments turned into the concept of having a "one hour" sales event and. When done correctly, had "very profitable" results in addition to providing general insight that could be applied more broadly.
Marketing Outside Of The Store
There have been some efforts to capture revenue on the premises, but outside of the store environment.
The author cites the use of vending machines near exits to catch a little extra revenue from selling candy, soda, and other small items. The mechanical horses that were once ubiquitous had, in their time, a 90% profit margin.
The author also mentions things such as propane tanks, bags of ice, firewood, and other merchandise that is placed outside of the store to build additional sales, but does not comment on their effectiveness. (EN: This seems fairly awkward to me - to purchase the item, the customer must go back inside the store, or remember it while shopping and mention it at the checkout, which seems rather inconvenient.)
Stores will also have "sidewalk sales" outside of their doors, or even create parking-lot sales events to draw customers to the premises.