Date post: | 28-Nov-2014 |
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Ilkka Alarotu, S Group Grocery Trade
Jim Hertel, Willard Bishop
Cyndy Renfrow, SAS Institute Inc.
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Panelists
Ilkka Alarotu Director, Customer Oriented Assortment and Pricing - Food and Daily Consumer Goods S Group Grocery Trade
Jim Hertel Managing Partner Willard Bishop
Cyndy Renfrow Senior Director, EMEA Retail/FMCG Practice SAS Institute Inc.
Debbie Hauss Editor-in-Chief Retail TouchPoints
Moderator
Unique Challenges Facing Grocery Retailers
Commodity pricing pressures
Decreased household wallet share due to fewer shopping trips
Increased competition from non-grocery retailers, including deep discounters
Empowered consumers
Numerous in-store departments
Fresh food management
Mountains of SKUs and UPCs
Need for a highly optimized workforce
Siloed internal business processes
Insight-Driven Analytics Boost Grocery Profits And Revenue
Insight-driven retailing can break down the barriers/silos and provide transparency across the value chain
Supermarket retailers can expect to increase same-store sales 5% to10% when becoming more shopper-centered
– Jim Hertel, Willard Bishop
Mobile Technology and Social Media will greatly impact the grocery business and analytics will play a key role. “Location-based information …
represents the most important single feature of mobile.” – Richard Hastings, Global Hunter Securities
Retailers must institute “outside-in” thinking in order to analyze customer sentiment and deliver actionable insights
Insight-Driven Analytics Boost Grocery Profits And Revenue
Smart retailers will respond with a focused optimization strategy featuring 4 key components:
1. Assortment Optimization
2. Campaign Planning, Marketing and Promotion Optimization
3. Pricing Optimization
4. Demand Forecasting
9 10/12/11 SOK Päivittäistavarakaupan ketjuohjaus
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Space Optimization 4. Price Optimization 5. Interactive social media services 6. Summary
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Space Optimization 4. Price Optimization 5. Interactive social media services 6. Summary
12 SOK Grocery Trade Chain Management
– The S Group consists of 22 regional cooperatives and the SOK Corporation, which is owned by the cooperatives.
– S Group has operations throughout Finland, in the Baltic Countries, and in St. Petersburg, Russia.
– Retail sales: EUR 12,267 million (+5,0 %) – Profit before exceptional items: EUR 296 million – Bonuses paid: EUR 333 million – 1,636 outlets – 39,646 employees
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Cars and automotive goods
Hotels and restaurants
Service station stores and fuel sales
Grocery sales
Agribusiness
Department stores and speciality goods
Other S Group’s restaurants S Group’s car dealerships
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“Higher quality at a lower price”
S Group leads the industry with consistently lower prices, wide variety and high customer satisfaction.
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– Every Day Low Price (EDLP) requires Every Day Low Costs (EDLC)
– Best demand-based assortment always (continuously) available
– Easiest place to shop in all locations
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Space Optimization 4. Price Optimization 5. Interactive social media services 6. Summary
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Optimization
Space/product In-store efficiency
Logistics costs Display methods
Delivery Pack size Pricing
Store Replenishment
Labour planning
Logistics operations
Automated ordering
2 months 4 – 8 months
Customer-oriented assortment planning
Pricing optimization: volume scenarios
Sourcing
Vendors: Auctions ->Orders
Raw material purchasing
Capacity
Vendors: Logistics plans Inventory levels
Production plans
21 days – 48 hours
Vendors: Labour plans
Production drivers Logistics
operations
• S Group total / Product / Period
1. Forecast •
• Store / Product / Week
2. Forecast
• Store / Product / Day
• 28 days before
3. Forecast
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Tentative Order Optimization
Space in units / Product / Store
Store Replenishment
System
In-store merchandizing
Display methods and delivery pack sizes
Replenishment cycle
(logistical costs) Inventory
level at store
Picking efficiency
(warehouse / supplier)
Wastage level
Recommended facings / product
• • Store / Product /
Week
2. Forecast
• S Group total / Product / Period
1. Forecast
Orders for vendors
2 months 4 – 8 months
Store Specific Planograms
Space optimizer
Store / Product / Day
• 28 days before
3. Forecast
Sourcing Decisions Assortment Decisions
Pricing Decisions
Drivers:
• Store specific space allocation
• 100% Shelf availability
Order
21 days – 48 hours
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Space Optimization 4. Price Optimization 5. Interactive social media services 6. Summary
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Base drivers 1. Shelf availability (100 % availability) 2. Store specific sales forecast by product 3. Store specific space allocation by category
Business performance optimization 1. Efficiency in store activities
• Labour cost of shelving 2. Logistics efficiency
• Drop size • Drop times • Store replenishment cycles • Warehouse picking
3. Vendor efficiency • Order volume of delivery pack sizes
4. Total wastage in supply chain
Customer centricity = Best assortment – Easy to shop Cost reduction in supply chain
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Micro space allocation - effectiveness of space allocation for products
- assortment optimization Automated production of store specific planograms
Space optimization on store/product level
Store layout incl. sections
Allocation of sections to product categories
Space optimization on store/category level
Store layout, total area
Display groups
Sales area
Analyzing,Reporting
Total space utilization
- sales area - auxiliary area
- concept development
Macro level allocation - effectiveness of space
- development of allocation recommendations
Automated replenishment process
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40,000 store-based planograms per assortment period
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Space Optimization 4. Price Optimization 5. Interactive social media services 6. Summary
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Lower prices, better margin
1. More forecasting power: Price elasticity calculations
– When product A price changes, what happens to the product A volume
– When product A price changes, what happens to the product B volume
2. More analytical power – What is the best combination of prices:
– Brand leader price is fixed (competition). There also are rules for economic products. What are optimum prices for other products than brand leader to get best margin possible?
– How we could use customer owner information to improve our pricing?
– Best customers: what do they buy and what they do not ?
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Scenario -example
10/12/11 SOK Grocery trade chain management
– Maximize Margin (%) such that – Units sold is not sacrificed (Units sold ≥ Units sold LY) – Competitor price rules are not violated
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Store Localization 4. Space Optimization 5. Price Optimization 6. Interactive social media services 7. Summary
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Foodie.fm - Facebook for groceries
Personalized product and recipe recommendations Answers to a simple question: What would I buy and eat today? Unique server technology for personalized product and recipe recommendations.
Empower people to consume smarter Foodie tailors recommendations based on your preferences. Use relevancy search to find products that fit your preferences and taste profile.
Social grocery discovery Social interaction influences consumer behavior. Connect family to co-shop and share. Follow friends to discover new ideas and recommendations.
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SMS & Email Facebook & Web Mobile iPhone, Nokia & Android
Shopping list:
CocaCola,
Arla Cheese,
Milk
Widgets
Retailer & checkout assortment link
Foodie.fm – Social shopping where ever you are
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Benefits
– Social media speeds up fragmentation of consumer needs: Personalization technology provides a state of the art way to meet the unique needs of consumers.
– Get the shopper before they buy: Service enables very transparent and interactive way of being part of everyday life of consumers. Create link to checkout from social discovery.
– Analytics: Ability to feed back analytics from social shopping process.
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1. S Group in brief 2. Value Chain Optimization: Big Picture 3. Store Localization 4. Space Optimization 5. Price Optimization 6. Interactive social media services 7. Summary
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Summary
– Best demand-based assortment and availability every day, every hour, every store
– We are ambitious in developing world class productivity and business analytics
– Value Chain Optimization connects all operations together to get the maximum output
– Social media speeds up fragmentation of consumer needs: we need a new level of personalized digital and mobile services for our individual customers
September 2011
Jim Hertel Managing Partner
Copyright © 2011. All Rights Reserved. 36
There are Dramatic Differences Between “Best” and “Worst” Front Page Items
Source: Willard Bishop, Chain 12-store transaction data, for 12 weeks beginning 12-31-2008 to 3-18-2009.
Top 10
Bottom 10
Shopper-centered merchants select Front-Page promotions based on Top Shopper appeal
Copyright © 2011. All Rights Reserved.
Good Loyalty Programs Invite Collaboration
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External (Trading Partners) Internal
Shopper insights Data access Custom research
Shopper marketing New vendor resources investment Marketing services Efficient and effective demand
generation
Shopper insights Behavioral Attitudinal
Shopper marketing: internally funded Shopper-centered merchandising
foundation
Gaining full value starts with placing the shopper at the center
Retail trading partners will add to retailers’ investments, accelerating impact
Copyright © 2011. All Rights Reserved. 38
Over the Past Two Decades, Traditional Supermarket Retailers Have Lost Significant Ground
Source: Willard Bishop
Market Share by Segment
Company Confidential - For Internal Use Only Copyright © 2010, SAS Institute Inc. All rights reserved. Copyright © 2009, SAS Institute Inc. All rights reserved.
Accelerating Growth through Innovation
SAS Grocery Case Studies
October 12, 2011
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Consumers are increasingly difficult to keep up with… In Store
Call Centre
Email Social
Web
Direct Mail
Mobile
Credit
Loyalty Program
4500 212 3344
Catalogue
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Copyright © 2010, SAS Institute Inc. All rights reserved.
How do we offer personalized service to our customers?
How do we provide better value?
How do we continue to maintain market dominance?
How do we improve profitability?
Where do we open more stores? Which format?
How do we innovate and create a unique differentiation?
How do we listen to our customers to better understand what they want next?
Why are we losing share of wallet to our competition?
Should we open alternate channels?
How do we reposition with deep discounters coming in to our market?
Should we open alternate channels?
How do we break our operational silos down to better server our customers coming to us across the Omni-channel?
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Engineering the Solution with SAS Grocers must successfully execute a combination of these five fundamental processes to be competitive.
Add stores to markets Close non-performers
Remodel to retain and attract
Segment and engage shoppers Target market
Optimize prices
Localize assortments Rationalize store space and
assortments Optimize Promotions
Analytics and ESRI ArcGIS Analytics Customer Insights Marketing Optimization Promotions Optimization Customer Sentiment Analysis
Category Management Assortment Planning SKU Rationalization Assortment Scaling Space Management
Regular Price Optimization Promotions Optimization Marketing Automation
SAS Enablers
SAS Forecasting – Predictive Analytics
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Content Server
SAS Media Mix Analytics
Omni-Channel Marketing
SAS Marketing Automation/Optimization
SAS for Customer Experience Analytics
SAS Real-time Decision Manager
Offline Customer History
Online Customer History
Creating Automated Continuous Dialogue SAS Marketing Operations
Management
Inventory Data Pricing Data
Store level data
Customer Sentiment Analysis
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Dynamic Intelligence-Driven Personalization
MRM
MA/MO
RDM
CXA
Product Driven by Data
Headline Driven by Search
Price Offer Driven by Data
Text Offer Driven by Data
Real-time Dynamic Collection Technology
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Innovation…
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Applying SAS Innovation in Grocery
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Leveraging Customer Insight to Generate Competitive Advantage
Company Large U.S. national grocer with over 1,500 stores and in excess of $ 50 billion in sales.
Opportunity Create “competitive advantage that is better allowing the company …. to target customers’ needs and wants” – Deborah Weinswig, Citigroup Global Markets, August 10, 2008
Results “The promotions in these (retailer) mailings have a 40% redemption rate.…which compares to an industry average of 2%” – Deborah Weinswig, Citigroup Global Markets, August 10, 2008
“Helped (retailer) boost sales by 5%” – Business Week, September 22, 2008
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Challenge Large North American grocer was facing increased competition, customer defection and eroding margins. They wanted to gain better customer insight, which would drive better merchandising decisions and offers, and increase share of customer’s wallet.
Solution Licensed SAS Retail Intelligence Solutions to better understand its customer segments and buying patterns by analyzing all point-of-sale data and customer data.
Results Using SAS, the retailer has gained greater customer insight to drive better merchandising and promotion decisions. The projected ROI is a 3-5% increase in sales.
Gain Greater Customer Insight, Loyalty and Spend with SAS
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Delivering Margin Performance
Business Issue Solutions Results • Ability to deliver competitive
pricing to customers while protecting profit margins for the company.
Leverage SAS to create a rules based regular price optimization tool that considers (Retailer’s) competition in creating price elasticity curves. as developed by Deloitte LLP.
Increased the total margin performance of pilot categories by 2.5 % to 8%
A long-standing regional supermarket chain doing business in the U.S. under multiple banners has always stood for real quality and value. Their reputation stands not only on always delivering a quality product, but on constantly striving to find new ways to improve that quality
“Rising Prices are Here to Stay”
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Improved Forecasting and Customer Insight Lead to Precise Pricing
Business Issue Solutions Results Increased competition and eroding
margins
Growing number of customer choices made it difficult to retain customers and increase loyalty
Increase responsiveness to market conditions
Maximize margins and market share
SAS® Revenue Optimization SAS® Regular Price Optimization
SAS® Promotion Optimization
SAS® Shopper Insights
Better forecasting to inform precise pricing
Establishment of comprehensive product and price relationships to improve category management
Multiple margin and market strategies
Expected return 2-5% increase in margin
A U.S. regional retailer with more than 1,000 stores doing business across 13 banners.
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Increased Store Comps while Reducing Inventory Levels
Business Issue Solutions Results Sustain rapid company growth
Continue to know customers
Desire to improve customers’ shopping experience
Desire to add optimization and analytics
Desire to tailor assortments, pricing, store formats; move away from “one size fits all”
SAS® Integrated Merchandise Planning Integrated Merchandise Planning
Suite including Merchandise Financial Planning and Assortment Planning
SAS® Business Intelligence Includes ad-hoc and standard
reporting, built-in analytics and graphics
SAS® Demand Forecasting
Adjust Merchandise Assortments quickly to meet consumer demand
Long term sustainable results expected from new program / platform
Short-term results achieved in this economy include:
Maintain IMU Increase inventory turn Increase GMROI
A fortune 500 Retailer with more than 5,000 stores is one of the largest, fastest- growing retailers in the United States. It offers both quality brand name and private-label products at value prices.
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Gaining Accurate Visibility into Forecasted Demand
Challenge Solution SAS® Demand Forecasting
Results
To utilize forecasting analytics to view spatial performance.
To create optimized assortments tailored to market requirements
To provide numerous
Forecasting business processes that account for demand differences across all stores, geographies and product lines
Includes models for basic product lifecycle and seasonal products.
Create weekly forecasts/ updates automatically with exception
Forecasts incorporate operational updates (re-alignments, re-classifications, promotions, introductions, etc.)
Improved margins with highly accurate forecasts
Automated exception based forecast management reduces the need for manual inputs and forecast updates
Forecast Performance reporting to validate forecasting decisions
Enable users to identify the right forecasting level for item/ locations for specific operational need
Supermarket chain in Europe has established itself as a leader in quality and choice, combining the convenience of a supermarket with the service of a specialist shop.
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Personalized Offers
Business Issue Solutions Results Need to Streamline process
Need to replace current CRM system
High total cost of ownership
Campaign management platform not tightly integrated with customer analytic models
SAS® Shopper Insights
SAS® Campaign Management
Integrated Analytics
Highly Targeted, Personalized Offers
More Automated Campaigns
Consistent process for all types of campaigns
Streamlined process because of integrated analytics reduced time and effort and increased user satisfaction
Lower cost infrastructure
Supermarket chain in Europe has successfully targeted their marketing campaigns to customer profiles supporting tailored promotions.
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Customer Insight Drives Customer Loyalty and Greater Share of Wallet
Business Issue Solution Results Increased competition and eroding
margins.
Growing number of customer choices made it difficult to retain customers and increase loyalty.
Want to gain better customer insight, which would drive better merchandising and marketing decisions
Drive offers to increase share of customer’s wallet
Need to prevent decline in revenues and profit.
SAS® Shopper Insights Using SAS, the customer gains greater customer insight to drive better merchandising decisions, which will in turn increase customer loyalty and spend.
The expected ROI is a 3-5% percent increase in customer spend or revenue.
Large North American grocery store chain addresses eroding margins and customer attrition with SAS Analytics.
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Value of Predictive Analytics and Optimization • Assortment Optimization: National U.S. general merchandise
chain – 5% to 15% sales increase, margin up 2% to 3%
• Regular Price Optimization: Sales 1+% - 3%, margin +2% - 5%
• Assortment Optimization: European department store chain – 5% sales increase via average basket growth
• Promotion Optimization: Sales + 1% - 12%, margin +5% - 20%
• Markdown Optimization: Sales + 0 - 5%, margin +6 – 10%
“(Customer Insight) helped major grocer boost sales by 5%”
- Gartner (Former AMR Research)
- Business Week
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Copyright © 2010, SAS Institute Inc. All rights reserved.
Enabling The Infusion Of Deep Consumer Understanding Into Planning Decisions
Bricks & Mortar
Customers
Direct Mail/Catalog
Customers
Web/Internet Customers
Cross Channel Customers
Action
Services
Promo
Location
Assort-ment
Communications -
Service
Insight
Brand
Customized Interaction
Optimized Planograms
Tailored Assortments
Effective Promotions
Pricing Strategy
Pricing
Layout & Space
Q&A Session
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Q&A | Panelists
Ilkka Alarotu Director, Customer Oriented Assortment and Pricing - Food and Daily Consumer Goods S Group Grocery Trade
Jim Hertel Managing Partner Willard Bishop
Cyndy Renfrow Senior Director, EMEA Retail/FMCG Practice SAS Institute Inc.
Debbie Hauss Editor-in-Chief Retail TouchPoints
Thanks for attending!
You can download this presentation & view the webinar On-Demand here:
http://rtou.ch/optimize-shopper-insights
Contact the Panelists
Contact Ilkka at:
Contact Jim at:
Contact Cyndy at: