Optimizing assortment online and in stores will mean striking a new balance as new variables come into play."
IRVINE, Calif. — To successfully navigate the “perfect storm” created by the nation’s health crisis, financial crisis and supply chain crisis, brands must reconsider nearly every aspect of their go-to-market strategy, according to a panel of retail sales and execution and e-commerce experts at “Optimizing Online and Offline Shelves,” a webinar hosted by Advantage Digital Commerce.
As pandemic-fueled uncertainty dominates the consumer’s mindset and drives new shopping behavior, consumer packaged goods companies must rethink the traditional fundamentals of manufacturing, assortment and sales, according to Advantage Sales’ Jennifer Gruber, vice president, analytics, insights and intelligence.
The supply chain is being tested and will continue to be tested, Gruber said, as challenges with sourcing and manufacturing capacity linger and retailers shift away from their pre-pandemic focus on limiting days of supply and minimizing the cost of inventory. “[Some] retailers were not prepared for shoppers’ larger baskets and the surge in click-and-collect and delivery services,” Gruber noted. “As of April, there has been a 183% increase in online trips for food products compared to pre-pandemic, with click-and-collect seeing a 60% increase in trips. And despite some websites crashing and an inability to schedule pickups, click-and-collect service still had a satisfaction rate of more than 80%.”
Optimizing assortment online and in stores will mean striking a new balance as new variables come into play, including shoppers switching retailers and brands due to safety issues and out-of-stocks. “The industry must start looking at categories in terms of walk rates — not just those walking in the store but those who leave if the product they want is out of stock,” Gruber noted. “And we need to address duplication of products on the shelf, with more representation needed for items with high walk rates.”
The way brands and retailers think about shelving and marketing strategy must become more localized based on traditionally used factors such as shopper demographics, store size, income, education, ethnicity and household size, she said. But now, that data must be layered with other information, such as state unemployment rate, shoppers’ financial security state of mind, and the walk rates by category in the neighborhood.
Gruber was joined by Andrew Keenan, vice president, retail sales operations; Michael O’Donnell, senior vice president, Central Region and Dwayne Drummonds, vice president, Walmart & Sam’s division, all with Advantage Sales; and Marisa Goldstein, senior director, e-commerce for Sage Tree, an Advantage Digital Commerce agency. During the webinar, moderated by Advantage Digital Commerce Director of Business Development Chelsea Vorpahl, the Advantage leaders addressed these key questions about today’s omnichannel marketplace:
How can brands gain a quick understanding of their online and offline shelf conditions in this environment? What are some quick-win strategies?
Marisa Goldstein: The quickest way is to act like your consumer. Search for your products online, understand how your product appears. Is the right product appearing where the consumer is looking for it? Making sure a product is available is the first part of the battle. Then, do you have the right online content for desktop and mobile? Is it spurring conversions? Third, brands need to turn to promotions that will elevate their presence online.
Andrew Keenan: In store, more than ever, it’s time to focus on the fundamentals of identifying core SKUs, retail reporting and execution to improve in-stock positions. Planogram integrity has a heightened importance because much of online fulfillment happens at the item’s home location in the store.
Store footprints are shifting and will continue to do so as more space is allocated to the shopper and the retailer’s backstock. We are using our workforce to help manage these new spaces to drive sales of online grocery pickup and delivery.
Understanding the dramatic shift to online shopping, how should suppliers look at online and offline shopping?
Goldstein: Brands need to dramatically rethink how they look at the business and use an omnichannel lens, not think about “online” and “offline.” They need to rethink in-store tactics, how to launch products more efficiently online and in stores, and sampling. Sampling isn’t dead, it’s different. Using Walmart online grocery as an example, brands are thinking about the market more holistically and still getting products in front of the customer through sampling at pickup or delivery.
Also, brands should consider retailer-agnostic platforms, such as Instacart and Shipt. Their dramatic increase in traffic is not plateauing.
How are these shifts affecting strategies around product innovation?
Michael O’Donnell: It’s important to watch how much of a brand’s portfolio and sales have shifted quickly to grocery pickup or shop-to-home delivery formats. We have seen those sales double, if not triple, in many cases. Upward of 10% of the mix may be coming from online grocery platforms. Mix of online and repeat of current sales will need to be accounted for with future innovation, and packaging innovation will be important for shipping and storage efficiencies.
Product innovation will be driven by how retailers focus on digital and how consumers’ purchase habits evolve. There will be natural SKU rationalization as high-velocity items demand more space to survive longer periods [on the shelf] to serve shoppers. Innovations could be more selective and potentially regional, and we could see more retailers aim at putting products on an online platform before they are put in stores.
Dwayne Drummonds: Retailers will be more likely to weigh the risk of putting a new SKU into a planogram versus putting it online first to see how it is performing. We could see more merchants evaluate innovations on dot-com platforms before taking the bold risk of setting it in stores.
How should the supply chain and replenishment be viewed differently going forward?
Drummonds: Reducing in-store out-of-stocks is critical from an online grocery standpoint. If a consumer or grocery picker goes to a competitive brand, that brand moves into their basket and favorite list, increasing the likelihood of a repeat purchase.
Goldstein: You have to immerse yourself in the data and understand how your brand is trending. Every supplier needs to look at the supply chain with an omnichannel approach, just as retailers are. An in-store set may need more facings because the product is trending higher on online grocery.
How does in-store execution play in this new normal?
Keenan: It all starts at the shelf. Online grocery platforms and delivery services will start at the item’s home location. We all need to be in stock in the right location so the right item is picked and the order filled correctly.
Our retail front-line teams are more informed about item performance and promotional activities in some instances than a department manager or key decision maker is.
There have been systemic out-of-stocks and it can be a challenge to close up phantom inventory on core SKUs if brands and retailers don’t use data to educate and collaborate at the store level.
What does all of this mean for the future of the planograms?
Gruber: We need to look at different metrics, including category and brand walk rates and days of supply and finding the right balance on inventory on the shelf. How do we planogram back rooms so that we keep products with high walk rates in the store?
Planograms will change to accommodate new store designs [that incorporate physical distancing measures]. Retailers will need to understand not just the shoppers in the store put those around the store so that they can get these shoppers to participate in click-and-collect or delivery.
With physical distancing, will there be less in-store displays?
Keenan: Short term, yes, we will see fewer displays. The look of the front end has changed with different layouts and different products displayed. Long term, there will be more competition for shoppers and I believe we’ll see sections of stores devoted to displays and off-shelf promotional pricing.
Drummonds: We’ll see suppliers invest in more digital promotions and consider whether they should invest in traditional in-store promotions or more digital media.
Goldstein: Digital media doesn’t only mean advertising for sales on online grocery platforms. It will also mean more digital couponing and promotions in retailers’ apps. SEO can also drive in-store sales. Seventy percent of consumers use their phones to shop in stores.