1 Retail & Shopper

Accelerating Sales & ProfitsHerb Sorensen, Ph.D., Scientific Advisor, TNS Retail & Shopper

3-6% Lift in 3-6 Months

Small Levers, Big Impact

For the retailer . . .

. . . a little longer for the brand.

Retail & Shopper

Tiered Sales – “Customers”

Supplier

Retailer

Shopper

Consumer

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Retailer Profits (US supermarkets)

Supplier funds – slotting fees, promos, trade allowances

Float – interest on cash received, pending disbursements

Real Estate – buying, developing, managing property

Margin on sales to shoppers

Retail & Shopper

5 Retail & Shopper

The BIG Problem . . .

Up to 80% of the shoppers time in the store is WASTED!!!*

. . . it is also a BIG Opportunity! ! !

*The 'Traveling Salesman' Goes Shopping: The Efficiency of Purchasing Patterns in the Grocery Store

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1608

Retail & Shopper

Where is the . . . ?

. . . which one do I want?

Twin Sales Barriers

Very attractive . . .

. . . but not very selling!!! Retail & Shopper

The faster you close sales . . .

Sorensen’s First Principle of Retail Sales

. . . the more you will sell!!!Retail & Shopper

$0

$5

$10

$15

$20

$25

$30

$35

$40

Ann

ual S

tore

Sal

es

(milli

ons)

405060708090Speed of Closing Sales

(seconds per dollar)

Faster Selling!

Faster Selling!

Means more Sales!!!

Means more Sales!!!

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The Holy Grail – Active Retailing

To know exactly what each shopper wants, or may buy, as they come through the front door.

To deliver that to them right away, accepting their cash quickly and speeding them on their way.

11 Retail & Shopper

“The Amazonification of Walmart”

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Shopper Efficiency Regression

Coeff t Coeff t

Intercept 3.00 0.64 1.641 2.25**Avg Purchase Time ‐0.21 ‐2.65*** ‐0.074 ‐6.01***Trip Length 0.02 2.77*** 0.003 3.32***Trip Duration 0.02 2.87*** 0.007 5.35***

Prob > FR SqAdj R Sq*p<0.10    **p<0.05    ***p<0.01

Basket $s Purchase Count

0.000.500.49

0.000.700.70

The Faster You Buy, the More You Buy – Shopper Efficiency• H1: Decrease in Purchase Time results in an increase

in basket dollars and items

A one second decrease in average

Purchase Time increases Basket Size by

$0.21!A one second

decrease in average Purchase Time increases

Item Count by0.07

Retail & Shopper

Decreasing Purchase Time results in larger baskets more effectively than does encouraging longer trips

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Faster Buying Results in More Purchases

36.67

43.67

24.14

19.5

$11.13

$12.76

$35.01

$53.86

AvgPurchase

Time

TotalBasket

Size

(Seconds)

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Planned Purchases Take as Long to Buy as Impulse Purchases

Retail & Shopper

The Three Key Things to Know

1. How many items does the shopper want to buy – or you might be able to sell them?

2. Exactly what are those items?

3. How best to sell those items – locations and techniques?

Most Common Number of Items Purchased (Globally)All classes of trade: big stores, little stores, hyper-markets, auto parts, drug stores

Basket Sizes

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0 10 20 30 40 50 60Items Purchased – Supermarket scale

Shar

e of

Sho

ppin

g Tr

i ps

Mean ("average = 12")

Median (half = 5)

Mode (most = 1)

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Shopping Trip Length (minutes)

Spen

ding

Spe

ed ($

/min

ute)

$0.00

$2.00

$4.00

$6.00

$8.00

0 10 20 30 40 50 60

Quick Trippers Do More Spending . . . . . . Than Shopping!

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1. Focus on the small basket

0.00%

0.25%

0.50%

0.75%

1.00%

0 500 1000 1500 2000 2500 3000

Rank of Single Items

Con

trib

utio

n of

Sin

gle

Item

s to

Tot

al S

ales

The L - O - N - G Tail

500 out of 32,000 items contribute

25% of total store sales

The BIG Head

Item Share (Count) for the Total Store

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3%

97%

Big HeadAll Others

Focus on the Few Products . . .

Think About Those few Items, NOT Categories

. . . that Sell the Best! (The BIG Head)

1,000 SKUs

#

By Count

33%

67%$

By Dollars

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Item Management . . .“Well, we have never been a category company – that was decided

long before I came . . . We look at it item by item. That doesn’t

mean we don’t have a fair representation with a category. But

usually it’s only the top five or six items in that category, and we

look at them as items!” $1 million per day in their top store!Charlie Burnett, COSTCO

Retail & Shopper

“If an item doesn't pull its weight in our stores, it goes away to

gangway for something else.” Trader Joe’s

“What's not to like? They're very good retailers [Trader Joe’s], and

we admire them a lot.” Jim Sinegal, co-founder CEO, COSTCO

2. Focus on the Few Products . . .. . . that Sell the Best! (The BIG Head)

300 items dominate total store sales.

30 items dominate total category sales

3 items dominate total brand sales

Typical household buys only 300 – 400 items per year!

Half of those, 150 – 200, they buy regularly.

Sell them what they are buying.

Retail & Shopper

Item Management . . .

“So our traffic is up, our sales are up. We’re in the 3% range right now over last year”

. . . March 2010, Drug Store NewsCharlie Burnett, COSTCO

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3. Two Options for Accelerating Sales of Items

Move the items to the shoppers –mostly by secondary placement

Focus on, and close on the items . . . wherever they are

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Call out the top sellersCall out the top sellers

No technology!!!No technology!!!

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Total grocery sales up 4% for the 1st quarter 2009 over 4th quarter 2008!!!

Total grocery sales up 4% for the 1st quarter 2009 over 4th quarter 2008!!!

Item Lift After “Top” SignCorona 16%

Angel Soft TP 67%Store Brand Butter 324%

Ice Cream 116%Retail & Shopper

For the Brand . . .

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For the Brand . . .

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Mid-Caps: End-Caps in the Aisle

23% lift plus halo effect!23% lift plus halo effect!

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Break-Through Tools

Graphic distinction (don’t add to clutter)

Top Seller - #1 (use social forces)

New (novelty minimizes “clutter filter”)

Price (communicates VALUE!)

“Personal” Shopping Assistant

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“Personal Shopping Assistant(“Internet” in the Store?)

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“. . . an array of mobile devices . . . continue their

inexorable march from cellphone novelties to virtual

personal assistants.”USA Today, March 31, 2010

Retail & Shopper

The Convergence of Online, Mobile and Bricks-&-mortar (COMB)

Personal Selling Fundamentals

Determine what people want

Narrow their choices to a manageable few

Make the process easy– focus on selling the few

Upsell them on related items

Close as quickly as possible

Retail & Shopper

Retail & Shopperherb.sorensen@tnsglobal.com

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