Stores with targeted dedicated retail coverage saw a nearly 6:1 return on investment in retail services as measured by dollar sales performance."
I’ll never forget the day one of our largest clients for retail merchandising execution services asked us to quantify the return on its investment.
The request came a year into the pandemic, during the most uncertain time the consumer packaged goods and retail industry — and our company — faced in terms of retail execution, supply chain disruptions and uneven retail conditions. I was soon heading into budget season and planning for the coming year and this very valued business partner was asking big, bold questions about its investment in our dedicated retail services.
It was a bit unnerving. This company’s leaders are very savvy on the subject of retail execution. They’re extremely in tune with what best-in-class retail execution can do and we’d had many successes at retail to celebrate together. For them to bring the investment into question at a time when all of these unpredictable contributing factors were happening was a surprise.
With a portfolio of household-name products — and its top 15% of items representing the bulk of its sales — any decline in in-stock levels means meaningful lost-sales opportunities and possible long-term loss of once-loyal shoppers who depend on these items for their families. What’s more, for a partner whose identity is closely tied to product innovation, speed-to-shelf and planogram compliance are critical to executing brand strategy. New items must be in place and highly visible ahead of national campaigns to leverage its sizable trade and other marketing investments.
The value of the core aspects of retail merchandising — creating orders where possible, executing new items, ensuring planogram compliance, selling displays and, critically, eliminating out-of-stocks — is well established. But, as our teams represent this client’s products in more than 20,000 stores across the U.S. and Canada, we play a crucial role in getting the right products on the right shelves in the right stores at the right time. So, I certainly understood our partner’s desire to quantify and optimize its long-term investment. Our task: Measure and verify the real-world impact of our retail services, which are selected, prioritized and scheduled using our proprietary, data-driven Advantage Retailer Impactability AnalysisTM that segments products, services, customers and locations to deliver the largest return.
So, for 17 weeks, we conducted an A/B test measuring the effect of targeted retail services, including weekend coverage, on sales of 37 key SKUs at mass merchandiser and grocery stores. During the testing period, dedicated retail services were pulled from 63 “sister stores” across the U.S., which were selected to avoid geographical, volume and other biases. Sales of SKUs in the grocery, frozen and health and beauty categories in these no-coverage stores were compared to sales of the SKUs in 75 full-coverage stores with similar volumes and shopper demographics. External factors affecting sales, such as stores using different distribution centers, freezers needing repair, closures due to weather events and COVID-related supply chain shortages, were tracked and considered.
The results were even stronger than we estimated they would be. Stores with targeted dedicated retail coverage saw a nearly 6:1 return on investment in retail services as measured by dollar sales performance. The test was a great validator of the power of data-driven retail execution. We knew the impact our teams made but hadn’t quantified it at this new level of granularity in the past. Seeing the results, our partner increased its investment in our dedicated retail services.
Now, a year later, consumer packaged goods manufacturers are dealing with continued reverberations of the pandemic and months of inflation. Costs are still high. The supply chain is challenged by transportation and other issues. (See “Advantage Sales Outlook | October 2022.”) Promotional display compliance is strained by scarcity and turnover of retail labor. Inflation-weary, price-sensitive shoppers are primed to change brands and retailers.
Once again — or maybe still — we’re all operating in a marketplace where keeping products in stock and promotions on display is extremely important for maintaining, then growing, brand position and brand loyalty. Thanks to the unexpected request by our second-largest client, we can confidently state and validate: Getting back to basics on retail execution translates into very real sales — in any market conditions.
Download “Transformative Retail Merchandising: Optimizing Results and Return on Investment” for more details.