Distribution & Merchandising 2024/2025 PDF

DISTRIBUTION AND MERCHANDISING PGE2 2024/2025  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization...

DISTRIBUTION AND MERCHANDISING PGE2 2024/2025  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising  A BIT OF HISTORY Emotional capitalism 1975-… Consumption capitalism 1945-1975 Production capitalism 1820-1945 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 1860: ORGANIZATION OF THE DISTRIBUTION Simplification Geographical organization – gathering Priority given to volume and not anymore to the margin of the single sold product Quest for a better attractiveness to achieve high volume 1915-1945: ACCELERATION – MOVING TOWARDS A BETTER KNOWLEDGE OF THE CONSUMER Acceleration of mass production – policy of low price for higher volume Distribution: Self-service, Cash & carry Specialized distribution and franchise Moving from “Fordism” to “Sloanism” Segmentation Management of a range of products  A BIT OF HISTORY Emotional capitalism 1975-… Consumption capitalism 1945-1975 Production capitalism 1820-1945 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 1960-1965: THE RETAIL SECTOR The first supermarkets and hypermarkets => Increasing need of partnership between the retail sector.  A BIT OF HISTORY Emotional capitalism 1975-… Consumption capitalism 1945-1975 Production capitalism 1820-1945 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010  Consumer Professional Active L’Oréal The Body Products Products Cosmetics Luxe Shop Division Division Division Giorgio Armani Beauty L’Oréal Paris L’Oréal Professionnel Paris Vichy Lancôme Garnier Kérastase La Roche-Posay YSL Beauty Maybelline Redken Skiceuticals Helena Rubistein La Provençale Bio Matrix Décléor To readD.atK., Evolution Gauri, of home: retail Jindal,formats R. P., Ratchford, B., Fox, E., Bhatnagar, A., Pandey, A.,... Howerton, E. (2021). Evolution of retail formats: Past, present, and future. Journal of Retailing, 97(1), 42-61. To read at home: Evolution of retail formats Gauri, D. K., Jindal, R. P., Ratchford, B., Fox, E., Bhatnagar, A., Pandey, A.,... & Howerton, E. (2021). Evolution of retail formats: Past, present, and future. Journal of Retailing, 97(1), 42-61.  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising  HOW DOES DISTRIBUTION BRING VALUE? Manufacturer Customer Manufacturer Customer Manufacturer Customer Manufacturer Customer Manufacturer Distributor Customer Manufacturer Customer  Advantages? Matches supply and demand Logistics Proposes a bigger choice to the customer Complete the offer (association of products) Information intermediary  DIFFERENT LEVELS OF COMPLEXITY Producer Producer Producer Direct Wholesaler Examples? marketing channel Retailer Retailer Customer Customer Customer  ENVIRONMENT OF THE DISTRIBUTION Socio-economic environment Law Authorizations / Protection of the consumer / Buying contracts Technology Logistics / Cashiers / Product informations / Caring15/06/23 LSA, for the elderly Caring for the elderly Consumer behavior analysis, etc. LSA, 15/06/23 Ecology https://www.youtube.com/watch?v=8nKPC-WmLjU Video Video https://www.youtube.com/wat ch?v=8nKPC-WmLjU https://www.youtube.com/watch?v=Nf-P-qNej3c Video Video https://www.youtube.com/wat ch?v=Nf-P-qNej3c  For further information: https://www.youtube.com/watch?v=Jh27vjAhE-c Video Video https://www.youtube.com/watc h?v=Jh27vjAhE-c https://www.youtube.com/watch?v=FlcdIQ4RkNE Video Video https://www.youtube.com/w atch?v=FlcdIQ4RkNE  ENVIRONMENT OF THE DISTRIBUTION Socio-economic environment Law Authorizations / Protection of the consumer / Buying contracts Technology Logistics / Cashiers / Product information / RFID technology / Consumer behavior analysis, etc. Ecology Turning LSA, 15/06/23 parking lots into power plants Turning parking lots into power plants LSA, 15/06/23  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising THE DISTRIBUTION CYCLE Maturity Hypermarkets Growth Hard discount Decline Specialty hypermarkets Department stores Luxury department stores E-commerce Discount specialty stores Launching THE DISTRIBUTION WHEEL  STRATEGIC ANALYSIS OF THE DISTRIBUTION Hard Food Department discount Hypermkets stores (galleries (Lidl, Netto, (Auchan, Lafayette, etc.) Carrefour) Printemps, etc.) Gross margin 12-14% 18-22% 35-40% Employees 1/3 of the 1/2 of the 2/3 of the margin costs margin margin The hypermarket Article LSA, 15/06/23 is making resistance Article The hypermarket is making resistance LSA, 15/06/23  GROSS MARGIN Gross Margin in %: Selling price – Purchase costX 100 Selling Price Excl. tax  EXERCISES Product A: Gross Margin: 12% Gross Mg Vol = Sales: 1,000€ Sales (in €) x GM (in %) Product B: Product A: 1,000x0,12 = 120€ Gross Margin: 7% Product B: 5,000x0,07 = 350€ Sales: 5,000€. What product brings more margin in €?  Fill in the yellow cells of the following table: Gross Gross Selling Purchase Margin Margin / Sales in Total Gross Price Price % unit Vol Sales in € Margin € A 500,00 € 450,00 € 10,0% 50€ 100 50 000€ 5 000€ B 400,00 € 352,00 € 12,0% 48€ 50 20 000€ 2 400€ C 350,00 € 322,00 € 8,0% 28€ 200 70 000€ 5 600€ D 300,00 € 279,00 € 7,0% 21€ 500 150 000€ 10 500€ E 180,00 € 168,00 € 6,7% 12€ 950 171 000€ 11 400€ Total 7,6% 461 000€ 34 900€ What strategy can you implement to increase the Gross Margin rate?  Fill in the yellow cells of the following table: New New Intial New Sellg Price Price Purch. Gross Gross Sales Sales Total Gross Price elast. evol. Price Mg % Mg/U Vol Vol Sales in Value Mgn € A 500 € -0,20 5,0% 450 € 100 B 400 € -0,20 5,0% 352 € 50 C 350 € -0,20 2,0% 322 € 200 D 300 € 279 € 500 E 180 € 168 € 950 Total  Fill in the yellow cells of the following table: New New Intial New Sellg Price Price Purch. Gross Gross Sales Sales Total Gross Price elast. evol. Price Mg % Mg/U Vol Vol Sales in Value Mgn € A 500 € -0,20 5,0% 450 € 14,3% 75€ 100 99 51 975€ 7 425€ B 400 € -0,20 5,0% 352 € 16,2% 68€ 50 50 20 790€ 3 366€ C 350 € -0,20 2,0% 322 € 9,8% 35€ 200 199 71 114,40€ 6 972€ D 300 € 279 € 7,0% 21€ 500 500 150 000€ 10 500€ E 180 € 168 € 6,7% 12€ 950 950 171 000€ 11 400€ Total 8,5% 464 879,40€ 39 663€ Conclusion?  STRATEGIC MANAGEMENT IN RETAIL 1. Ansoff Matrix: strategic options for growth Existing products New products Existing Market Product markets Penetration Development Mkt New development / Diversification markets Mkt extension 2. Activity slow-down or stop Tesco sells its South Korean subsidiary Article Article 3. M&A Tesco sells its South Korean subsidiary  INTERNATIONAL STRATEGY OF THE RETAILERS 1. Potential Market Selection? 2. International Expansion Strategy? 3. Standardization or adaptation? Carrefour returns to India Article Article Carrefour returns to India From Carrefour to Walmart Article Article From Carrefour to Walmart To read Changing Kunc, J.,atKrižan, European home:F. (2018). retail landscapes Changing European retail landscapes: New trends and challenges. Moravian Geographical Reports, 26(3), 150-159. To read at home: Changing European retail landscapes Kunc, J., & Križan, F. (2018). Changing European retail landscapes: New trends and challenges. Moravian Geographical Reports, 26(3), 150-159.  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising  A/ CLASSIFIC ATION 1. Type of channel 2. Mass / Selective / Exclusive distribution 3. Types of classification  A/ CLASSIFIC ATION 1. Type of channel 2. Mass / Selective / Exclusive distribution 3. Types of classification  A/ CLASSIFIC ATION 1. Type of channel 2. Mass / Selective / Exclusive distribution 3. Types of classification  A/ CLASSIFIC ATION Organization (see later) Format Sales area Assortment typology Sales volume Food / Non food Number of point of sales Generalist / Specialist Level of self-service Discount Geographic location Opening hours Type of Assortme Format and size Geographical Main ex in France Main store nt area international ex Supermarket Mainly 400-2.500m² Outside the cities Intermarché, Colruyt (B), Coop food Large assortment not or inside small Carrefour Market, (Ch), Kroger, Publix deep cities Casino (USA) Hypermarket Generalist 2.500-15.000 m² Outside cities Carrefour, Auchan, Target, Walmart Leclerc Convenience 7 eleven Mainly 50-300 m² City center, close Carrefour City, Daily store food Small assortment not deep to the city Monop Hard Food 600-800m² Close to the cities, Leader Price Aldi, Lidl, Norma discount Short and tight outside main cities, assortment small cities Specialty Specialized >1.500 m² Outside cities or Kiabi, Leroy Merlin, Ikea, Intersport, Hypermarket Large assortment and city center Darty, Go Sport, C&A, H&M, Zara (GSS) very deep FNAC Cash and - Food 10.000-16.000 m² Metro, Sam’s club, carry - Specialist Large not deep assortmt Price Costco Prices < 20-50% Megastore Specialist > 2.500 m² - scenery Niketown, Adidas, Nokia (flagship) Large and deep assortmt store, Apple store Department Non food 2.500-50.000 City center Printemps, Galeries Bloomingdale’s, Fifth store Large and deep assortmt Lafayette, Le Bon Avenue, Harrods, Marché Selfridges, Hamleys, Liberty, Woolworth’s  B/ ORGANIZATIONS 1. Independent stores 2. Branch offices 3. Cooperatives Consumers’ group https://www.youtube.com/watch?v=ryQE5_aNy2I Video Video https://www.youtube.com/watc h?v=ryQE5_aNy2I  B/ ORGANIZATIONS 1. Independent stores 5. Autres 2. Branch offices Selective distribution 3. Cooperatives Licensing Consumers’ group Exclusivity supply contract Stores’ group Concession Commercial center / mall Shop in shop 4. Franchise https://www.youtube.com/watch?v=rG-EkVJFv2Q Video Video https://www.youtube.com/watc h?v=rG-EkVJFv2Q  Advantages and risks?  B/ ORGANIZATIONS 1. Independent stores 5. Others 2. Branch offices Licensing 3. Cooperatives Concession Consumers’ group Shop in shop Stores’ group Commercial center / mall 4. Franchise Decathlon shop in shop Article Article Decathlon shop in shop  Source: Retail’s Big Show 2023, NRF, Kantar retail https://www.ecommercemag.fr/Thematique/retail-1220/veille-internationale- 2170/Breves/Zoom-sur-le-Top-50-mondial-des-retailers-internationaux-370671.htm OVERVIEW OF THE RETAIL WORLDWIDE Rk Company Origine CA (Mds US$) Format principal 1 WalMart US 537,15 Hypermarket / Supercenter / Superstore 2 3 4 5 WALMART ❑Created in 1962 by Sam Walton ❑+ de 11.000 point of sales ❑Successful business model based on 4 key competencies: logistics, negotiation and cost controlling efficiency, differenciating geographic strategy (small cities in rural areas), strong internal culture ❑50% of the sales are non-food related ❑Low price policy ❑Focus on complementary services ❑Innovation: strong R&D investments  Source: Retail’s Big Show 2023, NRF, Kantar retail https://www.ecommercemag.fr/Thematique/retail-1220/veille-internationale- 2170/Breves/Zoom-sur-le-Top-50-mondial-des-retailers-internationaux-370671.htm OVERVIEW OF THE RETAIL WORLDWIDE Rk Company Origine CA (Mds US$) Format principal 1 WalMart US 537,15 Hypermarket / Supercenter / Superstore 2 Amazon.com, Inc US 330,20 Ecommerce 3 Schwarz Group D 158,58 Discount Grocery 4 Aldi D 134,67 Discount Grocery 5 Costco US 187,18 Warehouse Club  OMNICHANNEL DISTRIB. B2C E-commerce +10 % +16 % +27 % +15 % * Total e-commerce sales in the world in 2022 Source: eMarketer M-commerce: Definition? 2022: 2/3 of the transactions were done through a mobile device. +3/4 of the world population is equipped with a smartphone (vs only 1/8 owns a computer)  Pure player? Click & Mortar? Brick & Mortar? Social selling? To read at Challenges Bijmolt, T. home: H., at the Broekhuis, marketing–operations M., De Leeuw, interface S., Hirche,inC., omni-channel Rooderkerk,retail R. P.,environments Sousa, R., Zhu, S. X. (2021). Challenges at the marketing–operations interface in omni-channel retail environments. Journal of business research, 122, 864-874. To read at home: Challenges at the marketing–operations interface in omni-channel retail environments Bijmolt, T. H., Broekhuis, M., De Leeuw, S., Hirche, C., Rooderkerk, R. P., Sousa, R., & Zhu, S. X. (2021). Challenges at the marketing–operations interface in omni-channel retail environments. Journal of business research, 122, 864-874.  BUSINESS CASE MELLOW YELLOW Omnichannel strategy SYNTHESIS  CHALLENGES AND OPPORTUNITIES 1. Socio-economic: 2. Techonological a) Price sensitivity 3. Legal b) Social trends, 4. Ecological demographics c) Evolution of demand and shoping patterns d) Business model Margin Needs to reinvent  RETAIL CLASSIFICATION AND ORGANIZATION 1. Long vs short vs direct channel 2. Mass distribution vs selective vs exclusive 3. Different organizations 1. Independant stores 2. Franchise 3. Cooperatives 4. Branch offices, etc. 4. Shopping pattern – omnichannel strategy BUSINESS CASE ZARA  PART 1 INTRODUCTION TO RETAIL 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising  MERCHANDISING: DEFINITION Merchandising Magic Article: What is merchandising? Article: Merchandising Magic Methods and techniques to display and sell products/categories in a store (physical or digital)… … in order to increase the sales and/or the profitability of the products/categories. Building an effective merchandising strategy Article: Article: Building an effective merchandising strategy = A series of actions at different levels aiming at selling better the products in the store. Relates to all that is happening in the point of sales, in order to perform better: its action zone is basically the whole space between the four walls of the store. Concerns every kind of contact-point with the customer (store, Internet, services) Relates also to the notion of profitability and its measurement. Notion of image and branding Different vision between the manufacturer and the retailer: why? Merchandising = sell more, sell better, with more profit  FUNDAMENTALS OF MERCHANDISING The 5R’s of Kepners - The Right product, at the Right time, at the Right place, in the Right quantity, at the Right price) - A 6th one: with the right information) The 4 main aspects of merchandising: Organization Seduction / Attractiveness Communication Controlling  ORGANIZATION MERCHANDISING => Organize the space COMMUNICATION SEDUCTION / ATTRACTIVENESS MERCHANDISING CONTROLLING Complementary videos (in French, but you can activate the subtitles and translation) https://www.youtube.com/watch?v=Znk1n4I86h8 Video Video https://www.youtube.com/watch?v =Znk1n4I86h8 https://www.youtube.com/watch?v=5jS_4YU50lQ Video Video https://www.youtube.com/watch?v=uxN5_MeYnn4 Video https://www.youtube.com/watch?v =5jS_4YU50lQ Video https://www.youtube.com/watch?v =uxN5_MeYnn4  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  THE 7PS (SERVICE)  THE RETAILING MIX Contains: The geographical location of the store; The commercial offer: assortments, services, price level, etc.; The structure and organization of the store (merchandising, internal and external design, etc.); The communication (brand name, logo, advertisement, internal and external communication); Employees and relationship, etc. Values, vision The 7Ps Segmentation Positioning, Shelves Differentiation Services organization Internal Design Assortment Merchandisg External Retailing Mix Promotion design Brand Advertisement name Geog. Pricing Sales location strategy Employees  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  WHERE TO SETTLE? GEOGRAPHIC AL SETTLEMENT CRITERIA: What will it depend on? ✓ Customers ✓ Commercial Urbanism policy and regulations ✓ Geographical localizations strategies ✓ Competitors strategy: 2 approaches: ▪ Go where the leader is. ▪ Get far from the competitors. Pros and cons?  TRADING AREA (ZONE DE CHALANDISE) Definition? Defined by?  EXAMPLES OF GEOGRAPHICAL COVERAGE STRATEGIES Opportunity approach Ex: Ikea Methodical coverage approach Ex: Lidl in France Acquisition strategy Ex: Walmart in Western Europe  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  EXPERIENTIAL MARKETING ≠ Sensorial and experiential marketing Risks? Elodie Crepin 2023/2024 Elodie Crepin 2023/2024 Auchan Harry Potter Article: Article: Auchan Harry Potter  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  THE STORE GROUND PLANE / ZONING 1. The circulation, the flow: Free itinerary => Ex? Constrained itinerary => Ex? Directed itinerary => a mix Other types of itinerary adapted to the type of shopping Ex: Carrefour City 2. The zoning = how you allocate the space: What surface? Where? Ex: Carrefour Planet 3. The warm / Cold zones: Backoffice Peripheral alley 2dary alley 2dary alley Cold Peripheral alley Penetrating alley Peripheral alley Central alley Warm Checkouts F l o w 4. Floor area (occupancy) rate: Shelve and sales surface / total surface of the store.  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment  1. Category Category Definition Management Category Role Category Assessment Category Category Objectives Review Category Strategy Category Mix Category Management Heineken Category Management Category Implementation Heineken THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment 2. Organization of the offer a) Division in categories ✓ Answering to the same needs ✓ Storage constraints b) Segmentation Categories => families => Sub families => Segment => subsegment  Several levels of segmentations for a fruit juice: Food / Non food Perishables / Frozen food / Bakery / Beverages / etc. Alcohols / Non alcoholic beverages Sofas / Waters / Fruit juices / Tonics and limonades / syrups Pure fruit juices / Concentrated fruit juices / Nectars By brand Orange / Apple / Pineapple / fruit mix / tomato / etc. Small boxes, big boxes, bottles, etc. References Example: soft drinks / Sodas? What need(s)? Refreshment, thirst, pleasure, health, fun, well-being, hydration What other products could also satisfy those needs? ✓ Water, ice-tea, fruit juices, etc. => Meet the same consumer needs.  SOFT DRINKS Possible Complementary in terms substitutes: of use and consumption: Water Snack, pizza, sandwich, etc. Category of the soft drinks = “all the non- alcoholic drinks that refresh, hydrate, give energy and pleasure.” (Coca-cola) => Gives a first idea of a possible lay-out THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment 3. Definition of the category role Category strategy => category management Destination Routine Occasional / Seasonal Convenience a) Destination category? The shopper will come to the store specifically to find that kind of product. What the store is known for. ✓ Must deliver constant and superior value to the shopper than the other stores. ✓ Must be the reference for the shopper for this category ✓ High Market share objective ✓ Helps defining the positioning and image of the store Examples? b) Routine category? Consistent competitive value for the consumer’s every day needs ✓ Main supplier of a category for the shopper; ✓ Helps defining the positioning and image of the store; ✓ Be profitable and have a high rotation. Examples? c) Occasional / Seasonal category? ✓ Helps differentiating the store during a certain period ✓ Usually also proposing highly competitive products. Examples? c) Convenience category? ✓ Reinforces the image of the store for the shopper as a store satisfying all types of needs. ✓ Good value and solution to the shoppers to satisfy their unplanned needs. ✓ Usually a high-margin category. Examples? How to define the category role? According to: The retailer’s strategy and positioning; The market data of the category (growth, market size and trend, etc.); Shopper data (penetration, purchase frequency, importance of the category in the average basket, average purchase value) Analyze the past role of the category and assess if continue or change. THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment 4. Understand the keys and criteria of segmentation Ex: biscuits and cookies for sweet snacking  Can be: Sweet biscuits Assortmen Chocolate Jam / Fruit Plain Pastries t Chocolate covered Chocolate Jam / Fruit Plain Cookies biscuits Balls Family packs Individual packs Or it can be: Sweet biscuits Breakfast Tea/Coffee time Day-time snack Desert Ex: light bulbs THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment 5. Prioritize and analyze them What data to analyze? Category trend (market vs store) Sales in volume and value per distribution channel (market vs store) => Measure the gap between the market and the store Market share Margin Seasonality Number of customers that enter the store and buy from that category, etc. Analysis per brand and subcategory.  Exercice Exercice Exercise : GfK – freezers (You will consider the segmentation from column B to F only to define the segments, and columns Q and R for the sales) a) What information do you get from those tables? What can they be used for? b) What is the biggest segment in value and volume for the chest freezers? c) What is the biggest segment in value and volume for the total freezer market? d) What is the market share (value and volume of the “Société X” in this segment? e) What is the stronger segment of the “Société X” on the freezer market? (both total retail and Internet)? f) What would you recommend to the Société X? a) What information do you get from those tables? What can they be used for? Market data per segment : sales in value and volume: What are the main segments? What are the segments that are low? Comparison between 2 years: trend and evolution? Comparison with the sales of our company: same trends? Opportunities? Gap in some segments? Market shares in sales and volumes, for both market: consistent with strategy? Opportunities? Comparison of the sales between different channels of distribution b) What is the biggest segment in value and volume for the chest freezers? Sales in units: =>Chests Chests 250-350L (31M€) c) What is the biggest segment in value and volume for the total freezer market? Sales in units: => “chest freezers “standing freezers; 148-174cm height; 58-64cm wide” (32,960,136 €) But if you go by segment: In units: 1. Standing (408,747 units vs 307,724 for the chests) 2. 90-148 cm-height (105,726 units) 3. Big choice Breadth - Breadth + => Few needs covered => Many needs covered => Little choice => Little choice Depth -  Ex: where would you situate the assortment of the following stores? Convenience Hypermarkets? Web? Specialists? Specialized Supermarkets?store? hypermarkets? Depth + Specialists Web Specialized hypermarkets Hypermarkets Supermarkets Breadth - Breadth + Convenience store Depth -  Product Pricing Visibility Promotion (not assortment strategy necessarily discounts) Destination Wide and deep Best Visibility Numerous category assortment quality/price No stock communication (specialist) ratio shortage and highliting, Scenery attractive Routine Extended Competitive on Warm areas, no Average category 20/80 as a the 20/80 stock shortage, Enough to minimum More freedom clarity « animate » on the rest Occasional Wide but not Competitive on Limited space Strong during category deep leaders and reasonable seasonality volumes Convenience Short A bit higher Small spaces in Nearly non- category assortment, at than then cold zones existant least the leading competition products THE ASSORTMENT STRATEGY 1. Category management 2. Organize the offer 3. Define the category role 4. Understand the entry keys 5. Prioritize and analyze them 6. Define the category objectives and strategy 7. Build the category mix 8. Build the assortment 8. Build the assortment a) Number of references How would you select the references? Depend on what? For each subsegment, the reflexion can start with the ratio: %CA / %nb ref =1 But can never be the only guideline.  Exercise : Products Year 1 Year 2 % CA Nb ref % ref % CA Nb ref % ref Tomatoe 60,4 % 29 41 % 59,5 % 39 42 % sauces Non- tomatoe 26,6 % 33 47 % 27,9 % 44 48 % sauces Culinary 13,0 % 8 12 % 13,6 % 9 10 % bases 100 % 70 92 What do you think? What could explain those results? What more information would we need in order to assess the strategy here? Product Year 1 Year 2 s % CA Nb ref % ref %CA / Theor. % CA Nb % ref %CA / Theor. %nb ref Nb ref ref %nb Nb ref ref Tomatoe 60,4 % 29 41 % 1,47 42 59,5 % 39 42 % 1,41 54 sauces Non- tomatoe 26,6 % 33 47 % 0,56 18 27,9 % 44 28 % 0,58 25 sauces Culinary 13,0 % 8 12 % 1,08 10 13,6 % 9 10 % 1,36 13 bases 100 % 70 70 92 92 b) Choice of references - Leader brand - First price - Top of the range - Home brands - Exclusive brands  Respect the coherence 68% 16% 0% 32% 84%  Home brands Getting stronger and strong brand equity too associating quality and better prices Advantage for the shelf pace and in-store visibility Not only entry product but also higher range Can be a strategy of several brand ranges at different levels  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  VI. THE LAYOUT STRATEGY 1. The segment organization Vertical presentation Horizontal presentation Range F Range E Range D Range C Range B Range A Range B Range C Range A  The vertical presentation => pros? Natural movement of the head (the look goes horizontally) Circulation flow Vertical search: once the customer is in front of the shelves, he/she searches vertically Clarity of the structure Easier highlighting (complementary products, In-store advertising, information, etc.  Customer circulation flow Segment 5 Cold Segment 3 Segment 4 Segment 1 c Segment 2 1st level: vertical Segment 6 Warm 2nd level: horizontal Segment 6.1 Segment 6.2 Segment 6 => Segment 6.3 3rd level: vertical Segment 6.1 => Seg. 6.1.1 Seg. 6.1.2 Seg. 6.1.3 etc.  EXAMPLE: BABY FOOD TRY AND UNDERSTAND THE ORGANIZATION OF THE LAYOUT: WHAT ARE THE ENTRY KEYS HERE?  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning  VII. THE FACING = the space occupied by a reference (in cm or in units) on the shelves. What does it depend on? The size of a product Stock rotation and safety stock Frequency of delivery Potential of sales Promotion (increase the sales) Seasonality Perception / market value of the product (image) 1. The segment organization : the planogram  a) How to decide of the space allocated to each reference? Minimum: under this level, no Sales visibility, no credibility, no sales. Minimum Maximum Saturation Maximum: saturation. Space wasted. Inflexion point Double place: Some products can be placed at different places to increase their Shelves space visibility (Complementary products, promotions, seasonal products, etc.) What are the criteria to decide the space to allocate to each reference depend on? Having the minimum to be visible Not to have an over stock Avoid being out of stock i. Make sure to have the necessary stock between 2 supply deliveries. o Average number of units sold per week (U) o Security stock (S) (around 20% of the average weekly sales) o Frequency of supply (F) => LINEAR CAPACITY (LC) = F x U + S (in units) If delivery every week, F = 1 If delivery every other week, F = 2 If delivery twice a week, F = 0,6 (not 0,5 => importance of the week-end on the sales. ii. Calculate the facing: LC = D x H x Fcg D: nb of units in depth in the linear H: nb of units in height in the linear Fcg: facing (nb of units in length) Fcg = (LC) / D x H) (in units) iii. Calculate the linear space  Ex: what would the size of the linear (the shelf space or linear space) in the following case scenarios, knowing that the shelves can have 6 units in depth and 2 units in height, and that one facing = 6cm? Weekly average If delivery If delivery If delivery sales in units: once / week every other twice / 60 week week Security stock = 20 % Security stock = 35 % Security stock = 50 % Weekly If delivery If delivery If delivery average sales once / week every other twice / week in units: 60 week LC=(2x60)+60x0, Security stock LC=(1x60)+60x0,2 LC=(0,6x60)+60x0,2 2 = 20 % = 72 = 132 = 48 F=72/(6x2)=6 F=48/(6x2)=4 F=132/(6x2)=11 Shelf space: 6x6=36 Shelf space: 24cm Shelf space: 66cm Security stock LC=(2x60)+60x0,3 LC=(1x60)+60x0,3 LC=(0,6x60)+60x0, 5 = 35 % 5 35 = 141 = 81 = 57 F=141/(6x2)=11,7 F=81/(6x2)=6,7 =>7 F=57/(6x2)=4,7 =>5 =>12 Shelf space: 42 cm Shelf space: 30 cm Shel space: 72 cm Security stock LC=(1x60)+60x0,5 LC=(2x60)+60x0,5 LC=(0,6x60)+60x0, = 50 % 5 = 150 = 90 = 66 F=150/(6x2)12,5 F=90/(6x2)=7,5 =>8 =>13 F=66/(6x2)=5,5 =>6 Shelf space: 48 cm Elodie CrepinShelf space: 78 2023/2024 cm Shelf space: 36 cm If facing < visibility level: Increase the number of facings, diminish the frequency of supply delivery Visibility and readability come first If facing > saturation level: = Waste of space, and of potential sales on other references. Diminish the number of facings Increase the frequency of delivery. b) Where to put each reference? Hat level 3 The leader Eyes level 1 Home brand Hand level 2 The challenger Foot 4 1st price level After having placed those particular brands, you will focus on the complementary brands: If margin rate > average => level of the home brand; if not possible then level of the challenger; If not possible the, level of the leader; Otherwise level of the 1st price. References whose shelf occupation space (cm) is low: same rule as high margin products. References whose shelf occupation space (cm) is high: contrary.  Exercise : Coffees: build the lay-out Reference Nb of facings Shelf space Margin rate (length) Gd-mère Carte Noire 7 70 cm 4,1 % Jacques V. Nectar 6 60 cm 4,5 % 1st price 7 70 cm 6,0 % Gd-mère familial 5 50 cm 6,5 % J.Vabre Régal 3 30 cm 8,5 % Gd-mère Velours Noir 3 30 cm 9,5 % Home Brand 5 50 cm 11 % Lavazza Gd Expresso 5 50 cm 12 % Gd-mère Dégustation 3 30 cm 13,5 % Lavazza Bel Canto You have 4 levels 3 available in height. 30 cm 17 % Total Your shelves measure 47 1,30m. 470 cm 7%  Which would give: Reference Nb of facings Shelf space Position (length) Gd-mère Carte Noire 7 70 cm Top level Jacques V. Nectar 6 60 cm Middle down 1st price 7 70 cm Lowest level Gd-mère familial 5 50 cm J.Vabre Régal 3 30 cm Gd-mère Velours Noir 3 30 cm Home Brand 5 50 cm Eye level Lavazza Gd Expresso 5 50 cm Gd-mère Dégustation 3 30 cm Lavazza Bel Canto 3 30 cm Total 47 470 cm  Which would give: Leader (Gd-mère Carte noire) 7f Home brand 5f J.Vabre Nectar 6f 1st price 7f  Which would give: Reference Nb of Shelf space Margin rate Position facings (length) Gd-mère Carte Noire 7 70 cm 4,1 % Top level Jacques V. Nectar 6 60 cm 4,5 % Middle down 1st price 7 70 cm 6% Lowest level Gd-mère familial 5 50 cm 6,5 % J.Vabre Régal 3 30 cm 8,5 % Gd-mère Velours Noir 3 30 cm 9,5 % Home Brand 5 50 cm 11 % Eye level Lavazza Gd Expresso 5 50 cm 12 % Gd-mère Dégustation High 3 30 cm 13,5 % Eye level c Lavazza Bel Canto margin 3 30 cm 17 % Eye level b Total 47 470 cm 7%  Which would give: Leader (Gd-mère Carte noire) 7f Lavazza Bel Gd-mère Home brand 5f Canto 3f dégust. 3f J.Vabre Nectar 6f 1st price 7f  Which would give: Reference Nb of Shelf space Margin rate Position facings (length) Gd-mère Carte Noire 7 70 cm Top level Jacques V. Nectar 6 60 cm Middle down 1st price 7 70 cm Lowest level Big Gd-mère familial 5 50 cm 6,5 % Lowest level b space J.Vabre Régal 3 30 cm 8,5 % Gd-mère Velours Noir 3 30 cm 9,5 % Home Brand 5 50 cm Eye level Big Lavazza Gd Expresso 5 50 cm 12 % Top level b space Gd-mère Dégustation High 3 30 cm 13,5 % Eye level c Lavazza Bel Canto margin 3 30 cm 17 % Eye level b Total 47 470 cm 7%  Which would give: Leader (Gd-mère Carte noire) 7f Lavazza Gd Expresso 5f Lavazza Bel Gd-mère Home brand 5f Canto 3f dégust. 3f J.Vabre Nectar 6f 1st price 7f Gd-mère familial 5f  Which would give: Reference Nb of Shelf space Margin rate Position facings (length) Gd-mère Carte Noire 7 70 cm Top level Jacques V. Nectar 6 60 cm Middle down 1st price 7 70 cm Lowest level Big Gd-mère familial 5 50 cm 6,5 % Lowest level b space J.Vabre Régal 3 Small 30 cm 8,5 % Middle down b Gd-mère Velours Noir 3 space 30 cm 9,5 % Middle down c Home Brand 5 50 cm Eye level Big Lavazza Gd Expresso 5 50 cm 12 % Top level b space Gd-mère Dégustation High 3 30 cm 13,5 % Eye level c Lavazza Bel Canto margin 3 30 cm 17 % Eye level b Total 47 470 cm 7%  Which would give: Leader (Gd-mère Carte noire) 7f Lavazza Gd Expresso 5f Lavazza Bel Gd-mère Home brand 5f Canto 3f dégust. 3f Grand-mère J.Vabre Nectar 6f J.Vabre Régal Velours noir 1st price 7f Gd-mère familial 5f Leader (Gd-mère Carte noire) 7f Lavazza Gd Expresso 6f Lavazza Bel Gd-mère Home brand 7f Canto 3f dégust. 3f Gd-mère J.Vabre Nectar 7f J.Vabre régal 3f Velours 3f 1st price 7f Gd-mère familial 6f  PART 1I CONCEPTION OF THE POINT OF SALES 1. The retailing mix 5. Assortment strategy 2. The trading area 6. Layout 3. Experiential marketing / 7. Facing Retailtainment 8. Information on the POS 4. Zoning VIII.POS INFORMATION (ILV)  PART III SALES PROMOTION AND ANIMATION  SALES PROMOTION STRATEGY Definition: = Temporary modification of the offer. Motives/Objectives? Attract new customers Highlight a new product / Propose new service => Image Overstock Signal a good deal, an opportunity Break the monotony of the shelves (or category) => dynamism / Animation Propose a complementary product Etc. => Not necessarily linked to a price discount => Always KPIs to be defined (objectives) Different levels of promotions: Promotions made by retailers designed for the customers Promotions made by the manufacturer designed for the retailers Promotions made by the manufacturer designed for the customers. Promotion evaluation  Inefficient effect Classic effect Success promotion Catastrophic Promotions can temporarily promotion support sales Repeated promotions can be harmful to brand and/or company image  HIGHLIGHTING ON THE SHELVES CHIMNEY BREAKING THE RHYTHM Chimney  In-store advertising HIGHLIGHTING OFF THE SHELVES SALES PROMOTION TOOLS  EXAMPLES OF CUSTOMER- ORIENTED PROMOTION TOOLS Free Objective? samples → Attract consumers to try out a new product → Gain new customers Free Definition? testing Techniques that help the consumer try the product for free without engagement Samples can be one, samples packages sent directly to very targeted customers at home (often with discount coupons), demonstration, etc. Premiums, Definition? bonuses, Small item or service given to the customer who free gifts purchased something. Ex: Object (toy, gadget), educational premium (free recipe), utilitarian premium (accessory making of the product purchased easier to use), sample (of a product different from the one purchased) → Can be free → Can require the customer to pay a little extra or participate → Can be immediate or differed in time (on request) Bundles Definition and examples? Sales in one pack of two complementary products at an advantageous price, “buy one get one free” (BOGOF), offer of a second one or a complementary product for a symbolic amount (for 1€ more you have one free), etc. (Virtual bundle: the customer chooses the complementary item among a certain choice) Price Definition? discounts Immediate and with no condition price discount Examples? % or value discount, price-off offer, special price for new product, cost price, free product included (type of immediate discount expressed in free %), etc. Coupons Definition? Usually a small piece of paper presented by the customer to the retailer that allows him to have an immediate discount on the product. Included in a pack of product previously bought, or in a magazine, or given during an animation within the store to incite to try the product, sticker on the product to take off at the check- out for immediate discount Contests, Definition? games Competitions. Contests: Winners are determined by some skills or knowledge. Games: winners are randomly selected by chance Scratch- Definition? and-win The customer scratches a offers specific marked area on the package of the product and gets the benefit of the message appearing then. Objective = to induce a customer to buy a particular product. Money Definition? back offer Full or partial value of the / refund product will be reimbursed to the offer / customer by showing a proof of Cashback purchase. offer Objectives? → Reassure the customer who is hesitant about the product → Incite the customer who is hesitant to pay the price to buy the product Offers specific to Examples? card owners Fidelity points to cumulate according to the amount of (fidelity) purchase or the number of visits and that can transform into discounts, presents. Can be also bonus points linked to the purchase of specific products. Discounts on the Definition? cash receipt Discounts proposed on some specific products according to the purchases made by the customer. Various Examples? Charitable offer (give advantages or give money to a charitable association) Partner offer (advantage on a service or something proposed by a partner company) Limited editions, etc.  ANIMATION January Sales Space (ceiling, etc.) February Gloves, etc. Materials March Perfumes, gardening April Easter, chocolate Colors May Mother’s day, jewels, SHA Lighting June Father’s day Decoration July Sales, holidays, outside activities related items Noises August Bricolage, school items September School items, kids clothing Temperature October Gardening Personal November Toys, decoration, wine December SHA, toys, chocolates Specific environments (High tech, cheese, fishmonger, fashion, etc.)  PART 1V E/M-MERCHANDISING 1. A bit of history to understand the retail sector 2. The role and the environment of the distribution 3. The business model of the distribution 4. Organization of the retail sector 5. Introduction to Merchandising  E-MERCHANDISING CHARACTERISTICS Dematerialization of the offer => no limit of the sales space => category killers No trading area Full and total self-service Computerized and digital E-merchandising: very challenging and completely different from merchandising! … or not…  EXERCISE 1. Analyze the merchandising and the strategy of an e-commerce company. It can be a click and mortar or a pure player. 2. For each merchandising tool that you present, you will specify the objective for the e-shopper: how is this tool efficient for merchandising and eventually helping to increase the sales? 3. Any recommendation you would make ? Navigation tools: Objective: help the e-shopper to find easily the right product. Architecture of the site (pre-home page, home page, category home page, etc.) Main navigation, secondary navigation Filters Product list “Favorites items” Product description Comparator The search engine, etc. Reassuring tools: Objective: to reassure the e-shopper the purchase or transaction is safe and the right one: The services, delivery info, etc. The reviews, The complete description with photos or even videos, Payment and safety process Contact Chat bot, etc. Particular attention in the tunnel of purchase! Optimization tools: Objective: to increase financial efficiency of the offer: Algorithm for the product list (according to obj defined), Cross-merchandising (or cross-selling) Upselling, etc. Customer account  MAIN KPIS Conversion rate = number of customers buying / number of customers visiting the website Number of visitors Rebound / bounce rate Exit rate  SYNTHESIS MERCHANDISING  FUNDAMENTALS OF MERCHANDISING The 5R’s of Kepners The 4 main aspects of merchandising: Organization Seduction / Attractiveness Communication Controlling Trading area  FUNDAMENTALS OF MERCHANDISING Experiential marketing / Retailtainment Zoning / Itinerary Warm area vs cold area x3 Assortment strategy / Category Management  Category Definition Category Role Category Assessment Category Category Objectives Review Category Strategy Category Mix Category Implementation  FUNDAMENTALS OF MERCHANDISING Entry keys Assortment strategy Layout and planogram / Facing / Visibility Promotion and Advertisement / Communication E-merchandising / Specificities