Home' National Liquor News : NLN MAY 2016 Contents 26 | MAY 2016 NATIONAL LIQUOR NEWS
So far in the Retail Rules 4-5-6-7 series we've reviewed four profit
principles and five growth drivers. Now, we start on the first of
six point of purchase (POP) drivers. The six POP drivers can be
remembered using the acronym, 'RSVP3', which stands for range,
space and layout, visibility and display, price, promotion, and persuasion.
Here we are going to start with range (also known as assortment).
Most retailers position themselves on one or more of range, price
and service (and sometimes convenience) so getting your range right is
pivotal. Below are some ways to start thinking about this, to ensure your
range is strategic and not based purely on what's hot at the moment, or
what your personal preferences are.
WHAT'S YOUR RETAIL POSITIONING?
Is your retail positioning based on convenience (the basics, readily
available), one-stop-shop (large range), price-based (whether premium
or discount/value), specialism (we do one or two things really well), or
service (we understand complex categories and make them easier for
you)? Your range should reflect your retail positioning. Most retailers,
intentionally or otherwise, will follow a good/better/best range strategy
for their categories based on quality and price. So, if you're positioning
yourself as a premium retailer, for instance then you would carry one or
two lower-end products in each category but put the focus on the mid-
range through to high-end.
WHAT'S THE ROLE OF EACH CATEGORY?
Different categories and subcategories play different roles. Some
are traffic drivers, some drive profit, and some drive volume. In
PART ONE: RANGE
NORRELLE GOLDRING FROM GFK DISCUSSES THE
CRITICAL ROLE OF RANGE AND ASSORTMENT IN RETAIL.
liquor retailing, mainstream beer is volume but craft beer is profit. In
convenience stores cold beverages and tobacco are destination traffic
(with or without fuel purchase). Typically, premium items and niche
products (such as gluten free) are traffic driving from a destination
perspective but not volume of foot traffic. Top selling brands and
products will typically be traffic driving and volume driving, but not
necessarily profit driving (and not if you loss-lead with them to drive
more traffic). If you understand the role of each category and subcategory
you can cover your range bases against the different roles.
DEPTH, BREADTH OR BOTH?
Breadth is ranging every category and subcategory, but having only
a couple of products (normally the top sellers) in each. If you're a
convenience store this means having, for instance, one toothpaste, one
liquid soap or one box of tissues. If you're in appliances this would mean
having one or two upright vacuum cleaners, one or two barrel vacuum
cleaners and one or two handstick vacuums. Breadth might mean that
you can only carry one format or size product per subcategory so it needs
to be the size or format that will cover the most shopper needs bases. In
order to determine breadth you need to map out all the categories your
store is going to cover at a top-line level, for example in liquor that could
include beer, wine, spirits, RTD, cider, snacks, giftware.
Depth is going big on range in a particular subcategory to position
yourself as a specialist and therefore as a destination for that subcategory.
In liquor you might go deep on Scotch, or sparkling wine, or American
IPA beers. In order to determine depth you need to map the subcategories
within each category in order to determine where to go deep. Within beer,
this might be mainstream (full strength, medium, light); and craft. Within
craft you've got a few options: domestic versus international, light versus
dark, or by style (lagers, ales, porters, stouts, IPAs). Obviously, you then
need to advertise and promote that you specialise in that category or
range particular unique SKUs; don't expect shoppers to discover it for
themselves once they're in-store.
BIGGEST BRANDS ARE MUST HAVES
Time and again, when we run shopper research, we see that 'ranges the
brands and products I buy' is one of the top reasons for retailer and
store choice (along with 'I know it will be in stock' and other things like
location, parking, quick in and out).
Classic category management thinking is that 20 per cent of the
SKUs will be 80 per cent of the sales. This means you need to range the
top sellers -- the brands and SKUs with the biggest market share -- in
the relevant categories. Sure, you can specialise in a certain category
and go deep on range in, say, Scotch in liquor or food preparation in
appliances, but you've got to cover off the top sellers across the board
first as these are the main reasons shoppers will come to you. This
comes back to the GMROI profit principle we discussed, which is
stock turn times margin -- you make more money in the long run (and
get more shopper frequency and thus loyalty) from high moving lower
margin products than you do from rarely-selling high-margin products.
And, if you're going to range unique SKUs that will drive destination
traffic for only a small portion of shoppers, then you need to shout
loudly about them.
ABOUT NORRELLE GOLDRING & GFK: Norrelle Goldring is
shopper lead APAC at global consumer research and retail
datahouse GfK. She has 20 years' experience in retail research
and marketing across manufacturer, retailer and agency roles with
companies ranging from Diageo to Coca-Cola to Vodafone Stores.
Norrelle helps improve shopping experiences by understanding how
and why people buy things. Call Norrelle on 0437 335 686 or email
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