Articles

How Much & How Often.

So, do you want to play it the hard way or the easy way? That should be the question leaders of retail businesses ask their teams right now. Because, truth be told, modern retail is losing sight of what really drives sustainable profit growth by becoming buried in a sea of complexity.

The heart of a successful retailer really boils down to how much the shopper spends (basket size) and how often they spend (purchase frequency).

Everything else is a means to affect that end.

What has complicated the retail world is the tidal wave of mounting technological innovation and the process management styles and belief systems of many contemporary managers. This is further compounded when executive and board levels of retail businesses are dominated by people who have never been and never will be merchants.

Since the day Adam and Eve bought the first apple, great retailers have held the basic tenet that you don’t spend additional energy, time or money on anything in a retail business that doesn’t lead to an improvement in how much the shopper spends and how often they spend.

So what are the things that great retailers around the world are doing right now to drive basket size and purchase frequency?

Customer stimulation – or finding ways to get the customer to behave differently than they otherwise would anyway – is rapidly polarizing into high-tech and low-tech activity.

The high tech area is always sexy and intoxicating.

At the most advanced end lies the business-wide customer relationship management (CRM) system like the one used by Tesco in the United Kingdom. That system, underpinned by the Tesco Club Card credit card program, gives the business incredible knowledge about what can be used to stimulate from as many as 20 million shoppers to as few as 1 shopper to change their behaviour. Its direct communication to customers has over 2 million possible variables that can be used to make a specific offer to any single person or group of people in the system.

While they may know I need an incentive in a particular product area of say 25% to get me to shop on a certain day and add a specific item to my basket, they also know that it may only take 12% for you and that there is also the chance to sell you a different item as well. Targetted, individualized offers that are discrete to an individual power this system. It is so all pervasive though that it gives them information about where, when, what and how their card holders shop – even in their competitors stores and allows them to play with everything from store formats, to geographic coverage, merchandise planning, supply chain, pricing architecture and much more.

Effectively the entire organization is re-oriented around an information system that gives them the insight to be more efficient at getting the shopper to increase their basket size and their shopping frequency.

At a different level the Metro Group in Germany are using some other technology to achieve a similar goal. One of these is the use of integrated radio frequency identification (RFID) systems. In one of Metro’s apparel businesses now every item is RFID tagged. All the shelves and change-rooms have readers and they all link back to an inventory management system.

Their frequent shoppers also have an RFID tagged store card. The shop recognizes the shopper when they enter. It connects the shopper to the items they pick up and browse because the readers recognize both the shoppers RFID store card and the item RFID tag. When the shopper takes the item to the change-room the customer’s name comes up in LED lights on the change-room.

When they enter the change-room and try on an item, the LED touch-screen in the change-room also lets them know that the same item is available in their favourite colour and suggests other items that would go with the selected item. If it is the wrong size it lets them know what other sizes are available in the store right now and – by simply pressing an alert button on the LED screen – the shopper can summon a shop assistant to fetch the selected items and bring them to the change rooms for them.

Metro have also introduced a friendly robot in their hardware stores which can help navigate customers to the desired SKU from the over 85,000 in stock and prompt additional complimentary products and offers as it navigates. You have the choice of reading the LED directions on the touch screen on the robot, listening to his verbal directions or having him escort you to the item you want.

The latest in visual merchandising signage is now LED based and infinitely change-able. RFID enabled screens can transmit messages aimed at a single customer to them as they pass by – using their name or however they prefer to be addressed. Messages can be changed by time of day and time of week to better match the customer profile or purchase triggers of that particular time.

Multi-channel or blended retailers have created a seamless transition for their shoppers from physical to virtual and back again at the customer’s discretion. The smart ones don’t see e-commerce as anything more than just another store option or buying option for the customer to choose from in an integrated array of channels. These retailers use the same techniques, same navigation, same look and feel and same communication hierarchy for their stores, their catalogues, their on-line store, their call centres and their mail order. All the systems talk to one another and know the shopper and where they are up to in their latest purchase or inquiry so the shoppers feels they are known and the retail experience is personally efficient and enjoyable. They choose where they buy and how they collect the products they have bought.

All of these relatively high capital cost tools are being use right now by retailers around the world to drive basket size and purchase frequency.

But there are also low-tech options which can be just as effective.

Mountains and mountains of research conducted by everyone from Proctor & Gamble to Yale University continues to prove that more and more shopping purchase decisions are not only made at the very last minute, they are increasingly made impulsively and on emotional and sub-conscious criteria.

This has led great retailers around the world to increasingly focus on the power of their selling environments themselves to affect behaviour change. Great retailers understand how to visually merchandise impulse products; how to use colour; the power of bulk stacking and colour blocking; how in-store signage and ticketing can affect purchase; the role of product placement and planagraming; and how to combine price offers on one item with additional purchases to achieve a basket take increase rather than just the sale of the first off-price item.

Not to mention sampling programs; where and when store staff deployment adds value; store layout and navigation; ambience; multi-sensory experience and the like which play on the physiological triggers of the shopper and create not only compulsion to buy now, but also a desire to return soon.

If all you do is focus your attention on creating five hot spots within your store where you focus your effort on cross-selling and showcasing items through smart visual merchandising you will improve your bottom line by adding another item to the basket in a theatrical and stimulating way.

In retail you can make it more complicated than it really needs to be. Lets face it, retail is hard enough because it is an energy intensive business. But if we focus on what counts – basket size and purchase frequency – and only do the things we believe lead to supporting sustainable growth in those areas we can build a simple, realistic plan of tiny steps that eventually lead to the top of the mountain.