Shopper-Centric Retailing Definition
We define Shopper-Centric Retailing as the enhancement of the shopping experience through the shopper centered alignment of strategies, tactics, execution, business processes, merchandising competencies and performance measures across retailer internal functions and between trading partners at the “touch point” with the shopper…the store.
Magnitude of Change
In today’s environment, the category-management process has too many limitations and is no longer positioned to produce the desired results.
The following issues illustrate priority areas in which change must occur:
Organizational alignment does not support shopper centricity. Category management does not provide sufficient shopper-centric process and performance-measurement alignment across retailer functions and from the top down to store-level. Specifically, this relates to the alignment of category management and store operations, the two key stakeholders in the process. As a result, implementation continues to be a significant barrier to effective category management.
Consumer insights are not an essential first step in the category-management process. Beginning with shopper insights can lead to misunderstanding factors that are necessary in developing merchandising-solution strategies and tactics. These factors include gaining a thorough understanding of who the shopper is, what the shopper is seeking, what information the shopper is seeking before going to the store or online, what missions drive them to the store, what other outlets could provide the solution, and what other alternatives inside the store could fill the solution need.
The process is too narrowly positioned by focusing solely on a category. The category-management process is too narrowly positioned by focusing solely on a category instead of more broadly on the solutions that the shopper is seeking. These solutions can often cross several categories and departments, all factors which can influence the effectiveness and ease of the shopping experience. Even the name, “category management,” reinforces this narrowness.
Category roles are not properly positioned. They are integrated as part of the category-planning process, which can result in a disconnect between the retailer’s strategic positioning and the category plan. The role of each category should be part of the retailer’s go-to-market strategy, based on where investments will be made, where positioning will be created, and where the organization believes it can win in the marketplace. This should be part of an annual process for the retailer, one that is tied to the budgeting and goal-setting process.
Merchandising solutions skills are not in place. Category management’s primary emphases on analytics and producing the category plan—without sufficient emphasis on developing creative merchandising solutions—has resulted in a noticeable deterioration in the “art” of merchandising skills across the industry.
Shopper Solutions Planning, a core component of Shopper-Centric Retailing, is the first and only shopper driven planning process specifically designed to translate shopper insights into shopping experience enhancement solutions at the category, aisle and department levels. It builds upon the positive aspects of the 27+ year old category management process and addresses those weaknesses that prohibit category management from generating sustainable incremental gain in today’s shopper centric environment.
Shopper Solutions Planning, a Core Component
Shopper Solutions Planning is a core component of the Shopper-Centric business model. Shopper Solutions Planning is designed to drive toward a more insights-driven and solution-oriented result. You can learn more by clicking on the retailer consulting section of this website.
Essential Change: Retailer Organization Realignment
Based on a retailer’s strategic positioning, scale, resources, and related factors, it is logical to assume that one shopper-centric organization model will not fit all retailers. However, there are certain structural elements that can and should be applied to how retailers structure their organizational designs in the future. These elements include how support is provided to the merchandising teams, how merchandising and operations should interact, and how store execution should be addressed. In addition to making changes to the way organizations are structured, job titles and the vocabulary that is used may also require updates.
- Shopper-Solutions-Focused Structure. Our experience suggests that category solutions merchants (formerly category managers) should be focused on driving sales, understanding shoppers, creating solutions that differentiate from competition, and exceeding shopper expectations. The Shopper Solutions Team structure should move from the current department structure (grocery, nonfood) to focus on the shopper solutions. More on this change is covered in the “process and approach” section. Within each Solutions Group Team should be a manager working with the solutions merchants on the promotional and solution elements of the plan. This position may be called the planning manager, promotion manager, or a similar title that clearly defines the role. With the need to be focused on the shopper in mind and the growing complexity of this position, it is recommended that category solutions merchants should not be managing support personnel..
- Solutions Support. Analytic support for a retailer’s Merchandising Solutions function, in the future, must be viewed as a strategic imperative and essential investment. This takes into consideration the fact that the category solutions merchant’s role going forward will evolve from the narrowness of a specific category and product focus to a more strategic and merchandising solutions-oriented role with a multidepartment, total-store shopping-experience perspective. Solutions merchants need the right information for making decisions in this environment. They cannot be expected to be experts in everything. They need to be supported by a number of specialists with deep expertise in specific areas.
- Solutions and Experience Alignment. Retailers should create a senior-level executive position within their Shopper Experience (formerly Store Operations) structure that is responsible for executing merchandising plans, interfacing with the solutions team to ensure that plans are implementable, communicating with the stores on all merchandising activities, providing input on the need for locally relevant assortment—including local brands or ethnically important items for the neighborhood—and acting as the feedback loop from the stores to the solutions team on what is working and what is not. This position establishes vertical alignment of merchandising responsibilities and shopper-centric priorities. As the solutions teams are developing plans, these should be interacting with this function to ensure alignment and execution. Importantly, it creates an alignment that is more conducive to collaboration between the two organizations.
- Organizational Structure of the Store. The decades-old store-execution problem must be addressed, since enhancing the shopping experience is essential in today’s shopper-centric and highly competitive marketplace. Out-of-stock conditions have remained in the 8 percent to 10 percent range for years, with 72 percent of the problem directly related to store ordering/forecasting and “in-store, not-on-shelf” conditions. A new management function, titled Manager Store Execution, Manager Shopper Experience, or Manager Merchandising Solutions, should be added to store-management teams with the responsibility of coordinating cross-merchandising activity within the store, supporting the execution of corporate initiatives, and being the conduit for local merchandising within tight guidelines. This position is accountable for the execution of all cross-merchandising related activities across the store, with the manager’s compensation directly related to specific shopper-experience measures.
What We Do
We are the most qualified to guide a retailer’s category management evolution to Shopper-Centric Retailing. A consulting engagement would begin with a review of the output from the industry survey we conducted at FMI’s request in conjunction with Deloitte Consulting. A two-hour presentation highlighting the survey results, the business model being proposed and the Shopper Solutions Planning model that we have developed and implemented with several retailers. At the conclusion of the presentation and discussion, WWA will develop a proposal to conduct a needs and capabilities assessment to determine the path forward for the retail organization.