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Today’s convenience stores present challenging environments in which to achieve merchandising excellence in the consumer packaged goods (CPG) retail world.
While the challenges are substantial, those that succeed will reap significant sales and share gains. The 154,195 convenience stores in the U.S. market account for more than 34 percent of all retail outlets tracked by Nielsen, and the channel represents one of the few remaining growth engines in the U.S. market, according to NACS, the Association for Convenience & Fuel Retailing. Yet, unlocking this growth opportunity poses a significant challenge to CPG manufacturers in the resource-constrained world we live in today, especially with the economic pressure we all face.
In this three-part series, I will break down the key challenges to merchandising excellence in the convenience channel and provide practical advice on how to overcome them and win at the shelf, every day, in every store.
Compliance Stinks, Despite What We Think
The majority of industry merchandising executives falsely believe compliance is 85 percent for permanent merchandising and 78 percent for temporary displays, according to a recent 2016 Point of Purchase Trends Study from the Path to Purchase Institute and packaging solutions company Menasha.
In truth, compliance rates are much lower than we believe or, perhaps, want to admit. For example, preliminary data from Quri’s State of Merchandising Report in the convenience channel indicates temporary display compliance levels are only 49 percent, right in line with the national average.
This challenge is being overcome by innovative, savvy manufacturers, but the keys to success may not be so obvious. We all recognize that merchandising these environments takes a ton of point-of-purchase display creativity and, in response, display manufacturers and agencies have done tremendous work to build out semi-permanent modular displays that are easy to set up and maintain, making optimal use of limited physical space, and remaining flexible to the variety of store formats seen in the channel.
We will come back to this issue in Part 2 of our series, but surprisingly, the merchandising design creativity here is not the first issue to be dealt with. Before tackling the inherent value of the point-of-purchase materials themselves, we must first deal with the inherent complexity of execution that mutes the sales impact of our merchandising plans in this growing channel.
By focusing on the issue of compliance in a solely objective data-driven manner, numerous case studies show innovative manufacturers are able to get display merchandising compliance to 80 percent in the convenience channel by leveraging a system that relies on two key process changes:
1. Get the Fox Out of the Henhouse
First, we must measure compliance at the store level for authorized stores routinely. New technologies are emerging, including crowdsourcing capabilities that dramatically lower the cost of data collection and backup the information with indisputable photographic evidence.
Looking once again at the 2016 Point of Purchase Trends Study, we learn that 78 percent of merchandising compliance reporting is done by the manufacturer’s own field labor force or their hired third-party field labor force. It’s clear this approach is not yielding accurate or actionable data, not to mention the fact that data collection detracts from the primary value of this team when they are in-store – namely selling in the next program, a new item, etc.
The key is to use the right tool for the right job. Your field labor teams are far more productive and efficient when selling or executing in-store. Leave the auditing to a much cheaper crowdsourced workforce.
2. Carrots, Not Sticks
Second, manufacturers must take the time to train their field labor resources on how to consume and use in-store compliance data routinely and quickly. This can also introduce a new process into the equation. This is not a trivial change. Only 11 percent of the market is currently leveraging new techniques, such as crowdsourcing, to tackle the issue of compliance tracking.
Operating under this model is a big change for field labor teams that tend to irrationally fear measurement. The key is to train and explain the noble purpose of measurements – a data-driven means of delivering more sales and ultimately putting more bonus dollars in their pockets.
Carrots work better than sticks, and routine compliance measurement in the difficult convenience channel, backed up by sound operational practices, ensures its use will drive competitive advantage for some. Laggard manufacturers will begin to lose sales and share to competitors who act faster in this area.
Editor’s note: The opinions in this article are the author’s and do not necessarily reflect the views of Convenience Store News.