Localize Your Merchandising Assortment

Posted by Loren Heinzeroth

July 1, 2011 at 2:35 PM

Localize Your Merchandising Assortment

8 Ways to Improve the Relevance of Your Mix

With fewer new store openings to bolster sales, many retailers today are going back to the basics to increase comp store performance. One common strategy appears to be a renewed, extreme focus on the customer. To that end, one of the best partnership opportunities for individual retailers and manufacturers will be to structure assortments and in-store messaging more appropriately for the buying patterns of particular store areas.

Call it “neighborhood thinking,” or at least a recognition that what sells in most markets isn’t always representative of what customers demand in your community, this reshaping of assortments will take some extra care in item selection as well as in the timing, placement and presentation. Key benefits can include higher incidence of sell-through at regular prices, reduced need for markdowns and better overall utilization of space throughout the year.

Following are some tips for optimizing assortments and merchandising. These suggestions may be applied to any category, possibly offering particular lift for those that are underperforming. For consumers with mobile applications that allow instant product comparisons right in the aisle, the strategies here may help you tune up your mix to reach even the most discriminating and aware shoppers. The goal for retailers and manufacturers alike is to create a compelling argument to buy now, enhancing SKU productivity and creating a loyal following of repeat customers.

1. Update your market intel using the latest 2010 census data.

There is much written about the continuing changes nationwide in the profile and composition of the population. Have you thought about how those shifts, or more specifically the changing makeup of an individual store’s customer base, may represent opportunity to add or emphasize different types of merchandise? Perhaps the degree of change in recent years is more significant than you thought. Aging population (Think: convenience products of all types, security items, safety grab bars, drip irrigation devices and canning products for gardeners, to name a few). Aging homes (Feature products such as exterior paint, other repair and maintenance items). More children of elementary age (End caps: soccer balls, sporting goods). The implications are many.

To compare 2010 to past data for specific areas and begin thinking about how this may affect merchandising strategies, visit the U.S. Census Bureau website (http://www.uscensus.gov). There are some quick summary reports for 2010 available now by state and county, with finer metrics by zip code to follow in coming months as the latest census findings become public record. Some helpful reports include:

2. Dig into sales reports.

Most retailers naturally have a sense of what sells and what doesn’t from their own receipts and personal knowledge. But to go outside that existing picture will take some additional homework. Begin by asking for any available reports from wholesale sources. There may be regional insights there that will shed new light on missed opportunities. Explore seasonal as well as staple categories, comparing sales rates with your experience.

Some wholesalers also offer guidance with custom selected merchandise planned for individual markets. They may utilize robust software for assortment allocation, allowing you to chart performance by category and by individual item over time and by retail area. What-if scenarios and other capabilities of that software can be very helpful in developing an assortment strategy.

Other excellent resources include local sales representatives. In their travels they see firsthand how subtle changes in assortments can influence item velocity. Their take on the regional pulse can make all the difference in how a new program or assortment update will do.

3. Redefine your category position.

With some background on the local market and product trends assembled, store managers can be in better position to rethink strategies for various departments. Decisions at a category level come first. Does the local market represent upside potential for a strategy designed to “dominate“” or merely “participate in” a category?

A dominant strategy suggests greater space, assortment depth, advertising and other emphasis. A participant strategy points to more of a service role, with less space and selection, possibly supplemented with a special order or even a rental program if appropriate.

A rationale for more specific decisions on individual item stocking levels might follow naturally from those top line category allocations. Once again, spending some time with sales reports and seeking any advice you can obtain by networking will help in this determination.

4. Localize your in-store merchandising.

Delivering a consistent customer experience is made easier with visual merchandising that helps lead shoppers to discovery, selection and purchase. Personalizing that in-store experience is key to capturing interest and converting sales. Many manufacturer-supplied POP materials are thoughtfully designed with that goal in mind. But because those materials expectedly tend to emphasize their brands’ personalities, the main idea may at times get lost in a dizzying array of graphics that may not always zero in on the interests of the neighborhood.

QR codes added to the merchandiser signs may be one way to punch up some local interest. By scanning a QR code with a smartphone, your shoppers can quickly bring up a web page or a YouTube video that the company or an individual may have placed there about a particular subject.
For example, if it’s the time of year when swimming pools are being opened in your community, search YouTube for a video that provides tips on reconditioning pool water and solving problems like algae. Note the website URL address of that video and you can save/print a corresponding QR code for free on sites such as QRstuff.com. Feel creative? Consider developing your own videos featuring product demos or other topics on YouTube. The video production doesn’t have to be fancy. In some ways, a more homegrown flavor may be a positive, while still associating your store with problem solving expertise.

New digital POP signs and web enabled kiosks, though more expensive to implement than QR codes, also allow tailoring the in-store message in real time for any number of purposes – spotlighting products, flagging special promotions and projects. We’ll be seeing more of this digital technology becoming accessible for an expanding range of uses.

5. Does the packaging speak your customers’ language?

Smarter assortments for local customers should also have smart packaging that can be read by all. Many retailers favor brands that “get it.” For stores in Spanish speaking areas, or in several provinces of Canada where French is common, the English-only packaged products are losing big. The home improvement chains have long been demanding bilingual or trilingual packaging from their vendors. It extends their attractiveness to rising numbers of non-English speaking DIYers. Converting packages to utilize more icons and photos, possibly less text to make room for language variations, seems a win-win for all, though the transition is slow in coming for products sold in certain channels.

6. Seek customer feedback using social media.

Maintaining a connection with local customers is now made easier with social media, particularly Facebook, which has a growing number of business-to-consumer uses. Once a Facebook following is established, it is a great opportunity to obtain feedback on products or services, offer limited time coupon deals and generally keep the conversation active, as long as you observe certain practices that are not too overtly commercial. For pointers, visit the NRHA website which features several articles and
webinars.

As a Facebook page sponsor, be prepared for some zingers from folks who may tend to tell it like it is on your wall. But all-in-all, Facebook, Twitter and related forums offer many benefits that cannot be ignored by retailers as well as manufacturers who are sincere about listening to what customers want.

7. Utilize online survey tools (It’s easy)

When in doubt, ask customers directly by using online survey tools that are economical and very easy to use. If you have an opt-in email list as part of a customer loyalty program, you can upload that list to a secure site such as Survey Monkey.com or Zoomerang.com. Using tools offered by those services, you can then create a survey, send email invitations to customers and get survey responses back in real time. One suggestion is to offer an incentive such as a gift card for those who are among the first to respond. That will encourage overall participation. Note also that survey services like the above typically offer respondents the chance to opt out of your email surveys. That functionality is built right into the survey templates, a courtesy that customers will appreciate.

8. Be known as a destination for something.

NRHA regularly profiles hardware retailers that have executed a location-based formula, successfully carving out niches such as gas grills and patio furniture in recent examples. Customers know those retailers for their impressive selection (i.e., category dominance).

With gas prices at present levels, consumers are thinking twice about long drives for many products. They are shopping online, or to the potential advantage of hardware stores located conveniently nearby, they may be customers to court with a value proposition that is uniquely yours.

Benefits of Localized Assortments

Going beyond standard or canned assortments, retailers and manufacturers can jointly gain by taking a few extra steps to identify SKUs with best potential for the local market. Customized POP messaging and properly timed promotions can add further to sell-through performance. Benefits include:

  • Improvements in average transaction size and margins
  • Higher rates of sell-through at regular prices
  • Less need for markdowns
  • Reduced inventory expense for low performing items
  • Fewer returns
  • Greater productivity per square foot
  • Consolidation to make room for seasonal items and additional lines
  • Higher overall traffic, repeat traffic, customer referrals
  • Enhanced customer satisfaction, loyalty

Topics: Merchandising, Consumer Retail