Accelerating Sales & Profits

Retail & Shopper

Herb Sorensen, Ph.D., Scientific Advisor, TNS Retail & Shopper
1
 Small Levers, Big Impact

3-6% Lift in 3-6 Months

For the retailer . . .
. . . a little longer for the brand.

Retail & Shopper

Tiered Sales – “Customers”

ƒ Supplier
ƒ Retailer
ƒ Shopper
ƒ Consumer

Retail & Shopper

Retailer Profits (US supermarkets)

ƒ Supplier funds – slotting fees, promos, trade allowances

ƒ Float – interest on cash received, pending disbursements
ƒ Real Estate – buying, developing, managing property
ƒ Margin on sales to shoppers

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
5
Twin Sales Barriers
Where is the . . . ?

. . . which one do I want?

Retail & Shopper
Very attractive . . .

Retail & Shopper

. . . but not very selling!!!
Sorensen’s First Principle of Retail Sales

The faster you close sales . . .

. . . the more you will sell!!!

Retail & Shopper
 $40 Means
Means
$35 more
more
Sales!!!
Sales!!!
Annual Store Sales
$30

$25
(millions)

$20

$15

$10
Faster
Faster
$5 Selling!
Selling!
$0
90 80 70 60 50 40
Speed of Closing Sales
(seconds per dollar)
Retail & Shopper
The Holy Grail – Active Retailing

ƒTo know exactly what each

shopper wants, or may buy, as
they come through the front
door.
ƒTo deliver that to them right
away, accepting their cash
quickly and speeding them on
their way.

Retail & Shopper

“The Amazonification of Walmart”
Retail & Shopper
11
Retail & Shopper
The Faster You Buy, the More You Buy – Shopper
Efficiency
• H1: Decrease in Purchase Time results in an increase
in basket dollars and items
Shopper Efficiency Regression
Basket $s Purchase Count
Coeff t Coeff t
one second
A Intercept 3.00 0.64 1.641 2.25**
decrease in average
Avg Purchase Time ‐0.21 ‐2.65*** ‐0.074 ‐6.01***
Purchase Time increases
Trip Length
Basket Size by 0.02 2.77*** A0.003 3.32***
one second
Trip Duration
$0.21! 0.02 2.87*** 0.007 in5.35***
decrease average
Purchase Time increases
Prob > F 0.00 Item0.00
Count by
R Sq 0.50 0.70
Adj R Sq 0.49
0.07
0.70
*p<0.10    **p<0.05    ***p<0.01
Retail & Shopper
Decreasing Purchase Time results in larger baskets
more effectively than does encouraging longer trips

Retail & Shopper

 Faster Buying Results in More Purchases
Avg Total
Purchase Basket
Time Size

43.6 $12.7
7 6

36.6 $11.1
7 3

24.1 $35.0
4 1

19.5 $53.8
6
(Seconds)

Retail & Shopper

Planned Purchases Take as Long to Buy as Impulse
Purchases

Retail & Shopper

The Three Key Things to Know

ƒ 1. How many items does the

shopper want to buy – or you
might be able to sell them?
ƒ 2. Exactly what are those
items?
ƒ 3. How best to sell those
items – locations and
techniques?

Retail & Shopper

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

Basket Sizes
18%
Mode (most = 1)
16%

14%
Share of Shopping Trips

12%

10%

8%
Median (half = 5)
6%

4%
Mean ("average = 12")
2%

0%
0 10 20 30 40 50 60
Items Purchased – Supermarket scale
Retail & Shopper
 Quick Trippers Do More Spending . . .
$8.00
. . . Than Shopping!
Spending Speed ($/minute)

$6.00

$4.00

$2.00

$0.00
0 10 20 30 40 50 60
Shopping Trip Length (minutes)
Retail & Shopper
1. Focus on the small basket

Retail & Shopper

 Item Share (Count) for the Total Store
1.00%
Contribution of Single Items

The BIG Head

to Total Sales

0.75%
500 out of
32,000 items
contribute
25% of total
store sales
0.50%

0.25%

The L - O - N - G Tail

0.00%
0 500 1000 1500 2000 2500 3000
Rank of Single Items Retail & Shopper
Focus on the Few Products . . .
. . . that Sell the Best! (The BIG Head)
1,000 SKUs
3% Big Head
All Others
33%
# $
67%
97%
By Count By Dollars

Think About Those few Items,

Retail & Shopper
NOT Categories
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
“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

Retail & Shopper

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 News

Charlie Burnett, COSTCO
Retail & Shopper
3. Two Options for Accelerating
Sales of Items
ƒ Move the items to the shoppers –
mostly by secondary placement
ƒ Focus on, and close on the items
. . . wherever they are

Retail & Shopper

 No
Notechnology!!!
technology!!!

Call
Callout
outthe
thetop
topsellers
sellers
Retail & Shopper
 Total
Totalgrocery
grocerysales
salesupup4%
4%
for st
for the 1stquarter
the 1 quarter 2009
2009
over th
over44thquarter
quarter2008!!!
2008!!!

Item Lift After “Top” Sign

Corona 16%
Angel Soft TP 67%
Store Brand Butter 324%

Ice Cream 116%

Retail & Shopper
For the Brand . . .

Retail & Shopper

For the Brand . . .

Retail & Shopper

 Mid-Caps: End-Caps in the Aisle

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

Retail & Shopper

 Break-Through Tools
ƒ Graphic distinction (don’t add to clutter)
ƒ Top Seller - #1 (use social forces)
ƒ New (novelty minimizes “clutter filter”)
ƒ Price (communicates VALUE!)
ƒ “Personal” Shopping Assistant

Retail & Shopper

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

Retail & Shopper

 “. . . an array of mobile
devices . . . continue their
inexorable march from
cellphone novelties to virtual
personal assistants.”
USA Today, March 31, 2010

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

Retail & Shopper

Personal Selling Fundamentals

ƒ Determine what people want

ƒ Narrow their choices to a manageable few
ƒ Make the process easy
– focus on selling the few

ƒ Upsell them on related items

ƒ Close as quickly as possible

Retail & Shopper

www.insidethemindof theshopper.com

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Retail & Shopper

herb.sorensen@tnsglobal.com