I have to admit, I have become a slave to my habits. Of course, it’s not unusual that one develops comfortable and familiar habits and routines around one’s home. But I’ve noticed that, when visiting our offices in different countries, I’ve started to fall into a distinct pattern of behavior that I follow in each country. That in turn has led me to become aware of those little differences in the everyday habits we normally take for granted that reflect the character of life in different places. Increasingly I notice how culture, infrastructure, history, economics or other factors within a particular country, or even city, affect how people act, what they eat, how they commute and how they shop. Thinking about this brought to mind something that happened when I was in the UK.
Most mornings, on the way to work, I’ll grab myself a sandwich for my lunch. There’s one particular place that I go. It’s an up-market chain that specializes in sandwiches. I have to make a small detour on my way in, that adds perhaps five or ten minutes to my journey. I have my favorites, a small list of three or four regulars from which I’ll choose; salt beef, avocado wrap, prawn and mango wrap and mozzarella and tomato baguette.
I could buy a sandwich at the supermarket that’s on the direct route to the office but the convenience store’s sandwiches are really good, if a bit more expensive. Think of it as one of those small treats that most of us allow ourselves. It makes me look forward to lunch.
However lately I’ve come in on several occasions to find that most of my favorites are out of stock. It’s made me think twice about whether it’s worth the extra effort to go to the convenience store if I can just buy something at the supermarket.
I happened to get chatting to Frank, the merchandising manager at the chain on the route to the office, and asked him why their availability had been so patchy lately. The chain has a problem, he explained. It finds sandwich sales hard to forecast. As a result it’s often left to discount stock at the end of the day or throw food away and that really hits the bottom line.
What’s more, those unsold sandwiches take up shelf space and, because the stores are small and in prime locations, that’s a problem. This raises all sorts of questions. So I picked Frank’s brains and got a little more detail.
Sandwich sales grow towards the end of the month, ahead of payday, and the growth comes from sales of cheaper sandwiches. Expensive sandwiches sell better on Mondays. People buy relatively few sandwiches on the weekends but cakes and pastries sell out quickly. Afternoon sales across the board are poor. Whatever the reasons it appears there are distinct patterns.
Frank’s chain also has problems arising from its wide assortment – and assortment is something it prides itself on. And yet 90% of sales come from about 50% of its products. We talked about what has been called ‘the tyranny of choice’ and the sweet spot to be found through rationalizing the assortment at a level that optimizes both differentiation and profit, something my colleague Mikko wrote about recently. Using consumer decision tree as an approach and by categorizing sandwiches by filling; meat, fish, prawn, cheese, non-dairy vegetarian, and making sure that there is a choice within each category, it focuses on the most popular lines and encourages substitution (bearing in mind that a meat eater may eat a vegetarian sandwich but not vice versa).
However there are also variations across the week and month. Frank maintained that space was a challenge. The chain typically chooses prime locations for its stores so they tend to be small because rents are high. As a result there’s considerable pressure to maximize he revenue from limited space.
‘Well what you need is rapid-fire planogramming,’ I said. I explained that the stores could each have planograms optimized for Monday to Thursday and another for Friday and Saturday, or even for individual days of the week for the Monday to Saturday cycle and a separate set for each day in the week leading up to payday. Frank looked rather shell shocked.
‘That would be a lot of planograms multiplied by a lot of stores,’ he said.
‘Even better, make separate planograms for the weekday afternoons,’ I suggested, ‘and stock the shelves with items people will grab on the way home from work – ready meals, fresh pasta and sauces, premium cooking ingredients…”
‘But won’t that mean each store is taking hours every week building planograms?’ Frank asked, looking distinctly pale.
I shook my head. ‘It’s all automated,’ I said. ‘The work involved is small. And look at this!’ I showed him an article from the Harvard Business Review about approaches pioneered by Zara. ‘It’s where I got the idea of taking the ‘rapid-fire’ approach and applying it to planogramming. Once you establish a rhythm for the operation it becomes second nature,’ I said. ‘You already replenish several times a day as it is, so it’s not such a big step to move to a routine where that replenishment accommodates changes to the assortment so that the display reflects sales patterns for that time of day or day of the week. So you’re just catering for customers’ different priorities as they come in on the way to work or back home, or grab a couple of croissants for a lazy Saturday breakfast in bed.
Of course what works in a small store doesn’t necessarily work in a supermarket. It’s the question of tyranny of choice again – in a large store you need to be find things in their regular place. But in small outlets, especially in high rent areas, making every square meter deliver its maximum is a priority – as is meeting customer needs.
Assortment management, planogramming and efficient communication through the chain are great tools to help retailers do just that.