Inching Into Impulse Sales
Experts recommend a more focused approach to choosing SKUs, filling shelves
ROSEMONT, Ill. -- The more space a product takes on the shelf, the less profitable it becomes, consultant Kit Dietz told suppliers and retailers at CSP's 2011 Driving Impulse Sales forum.
And 51% of activity-based costs are space related. "So every square inch of your store space is vital to your profitability, and we can't afford to get it wrong," said the principal of Dietz Consulting LLC, Huron, Ohio.
Click on the links below for more information and to access some of the presentations from CSP's Driving Impulse Sales forum.
While Dietz said it is "not as [image-nocss] simple as just slash and burn assortment," he pointed out that about 4% of SKUs drive 50% of sales in c-stores; conversely, the bottom 50% of SKUs contribute 5% of sales. "That tells me we need to rethink the store and the box based on how the consumer shops the store and perceives the store," he said.
Part of the solution might come from optimizing the center of the store to take advantage of destination categories, such as cigarettes, other tobacco products and beverages.
One opportunity could be in health and beauty care (HBC), which generates more profit and uses less space than general merchandise. "[We need to] really look at what's selling, what's the movement and what is the profit per square foot facing," Dietz said. "We need to apply those metrics to every category and really understand the consumer and each one of these minute segments." Liquid vitamins (energy shots), for example, produce 31% of sales and profit and uses only 7% of the space.
Candy and snacks also offer opportunities. While the two together account for 52.5% of the true profit for the center store, that is driven largely by candy.
For snacks, Dietz said, vendor-managed categories mean no overarching plan. "Your DSD vendors come in, you negotiate the amount of space they're going to get and put a plan and program together, but there is no overall thought generally for mix."
He added, "How do we segment the category to make sure we're only offering duplications that matter, rather than duplications that are required?"
Dietz said candy takes up less space, and therefore has lower occupancy costs--while still performing well. Another factor is that retailers and distributors typically set up a category plan for candy, based on what the best items are for the category.
"That is good category management; that practice has been very, very much instilled," he said, adding that much of the focus also has turned to core items. "Everybody is understanding that if they can get better distribution on their core items, which is what consumers want, they're going to drive profitability."
During the forum, several companies shared some additional category insights:
The Hershey Co.
Pat Hesselmann, area sales director at The Hershey Co., shared additional insights on candy. He said that over the last five years, candy has increased in sales every year, and that 53% of candy purchases are made on impulse. "It should be in several locations, if possible."
Procter & Gamble
John DiFalco, senior account executive/project manager, Procter & Gamble convenience and specialty team, spoke of the opportunity in multi-dose health and beauty-care products. "We are concerned that some stores are moving only to single dose, and not stocking the smallest multi-dose product as well," he said, sharing an example where stores with both single and multi-dose respiratory and stomach medicines had higher overall dollars per store and dollars per SKU per store. "You really do yourself a disservice if you only stock the single serve."
Kraft Foods Inc.
Crystal Pinkston, associate director, shopper research at Kraft Foods Inc., said that while gum is not a trip driver, there is an opportunity in promoting it "with some of the categories that are really a strength in convenience, as well as have a high affinity with gum, like coffee and beverage."
Forward Foods/DETOUR Nutrition
The nutrition category is a destination, on the other hand, according to Jim Powers, vice president of sales at Forward Foods/DETOUR Nutrition. But store placement has been "catch as catch can." He said, "You've got to really give it a home and make sure it has a permanent place in your stores." He suggested near the vault or coffee bar as possibilities, as nutrition products generally are purchased with food or beverage.
Dana Rohde, marketing director at Oberto Brands, shared Nielsen numbers that showed total meat-snack sales for the latest 52 weeks were $882 million in the convenience channel. "For meat snacks, convenience is our biggest category, and it is absolutely the focus," she said.
Click below for more information and to access some of the presentations from CSP's Driving Impulse Sales forum. And watch for additional coverage in the October issue of CSP magazine.