Store execution has been the “Achilles Heel” of retailing for decades. Out-of-stocks have been
reported at between 8% and 10% since the first research on the topic was conducted in 1990.
We believe the answer is a combination of structure, process and tools.
The lack of desired execution on store merchandising initiatives continues to be at the top of the list among retail and consumer products manufacturer executives as a source of frustration and the reason category plans do not deliver the planned results. Countless efforts (third party services, dedicated teams, supplier merchandisers) have been tried. But the results remain the same. In today’s intensely competitive marketplace, retailers need to correct this issue or sacrifice losing out to others.
We believe there are several reasons why the industry has struggled with store execution. One is process and the other is structural.
The Organization Structure Solution
Retailers need to create a senior level executive position within the Store Operations organization that is responsible for the execution of plans; interfacing with the Merchandising team to ensure that plans are “implementable”; communicating with the stores on all merchandising activities; and acting as the feedback loop from the stores to the Merchandising team on what is not working and what is working.
Another structural change in the Store Operations organization needs to occur at the store level. A Manager of Merchandising Solutions and Execution should be in place in each store. These managers need to be responsible for executing the merchandising plans across all departments in the store. This function ensures compliance on corporate programs AND positions the store for the growing trend toward local merchandising.
The two new positions in Store Operations can have a significant impact on performance… better alignment of merchandising programs with store capabilities, improved execution and a more effective shopping experience. We have implemented these positions with several retailers. The results have met and/or exceeded expectations.
The Process for Center Store Space Solution
The process for the allocation of center-of-store space is often based on averages. We know that averages can be a big part of the challenge in retail execution. Stores know this and deal with it every day. “I sell more of this in my store than they believe”. “This does not sell in my store”. “Why are they asking me to build this display? Sales do not warrant a display.” Considering the differences in store formats and sizes, neighborhood demographics and purchase patterns, averages do not work in today’s dynamic marketplace. Keeping in mind that the trend toward neighborhood or local merchandising is accelerating, it is important for retailers have a process that enables them to move from total chain or store cluster averages to store specific. This is essential to the optimization of space productivity and customer satisfaction.
Merchandising Standards and Compliance Solution
Two components essential to improve the improvement of store execution are merchandising standards and compliance disciplines. Without specific, defined and well-communicated merchandising standards category managers and stores are left to their own to decide how to merchandise, sign and display categories. These standards can include stocking procedures, case pack-out minimums, rotation practices, display signage, shelf tag placement, private label placement and private label pricing. Once the standards are developed, they must be communicated across all impacted functions.
But simply setting standards will not deliver the desired results. Compliance reinforcement disciplines must be put in place to ensure that category managers are adhering to the standards.
- Is private label pricing in line with the defined delta?
- Are all planograms set with minimum case pack-out?
- Are the proper quantities being forced out to stores in support of promotions?
This same reinforcement of compliance needs to occur at the store level.
- Are new items being cut-in according to the planned timeline?
- Are schematics being maintained to the established planogram?
- Are displays being executed as planned?
- Are shelf standards being followed?
Establishing compliance disciplines is not enough. There must be consequences for failure to comply. A corporate culture needs to be in place that rewards the desired behavior and at the same time does not tolerate non-compliance. This reinforcement needs to come from the vice president level and permeate the organization.
These structure, process, standards and compliance disciplines are critical in order to create the shopping experience that the customer will recognize and reward with her loyalty.
What We Do-Merchandising Standards and Compliance
We have extensive experience and work closely with our retail clients to:
- Design the required merchandising standards. These standards include:
- Planogram disciplines (i.e. stocking procedures, case pack-out minimums, rotation practices, shelf tag, private label placement, reset execution)
- Assortment disciplines (i.e. core, cluster and local item determination, adherence to core/cluster/local disciplines, new item speed to market)
- Display disciplines (i.e. display placement, signage, vendor POP usage, special event execution)
- Pricing disciplines (i.e. pricing integrity, correct shelf tags, private label pricing)
- Determine functional roles and responsibilities
- Develop the processes necessary to support the standards
- Create operating procedures
- Design the performance measurement to ensure that standards deliver the desired results
- Design the required compliance processes to maintain the level of standards
What We Do- Organization Structure
Once processes are in place we review changes required in the organization structure to include both the senior level position in Operations to coordinate with Merchandising and test restructuring of the store. These steps include:
- Conduct a discovery process to understand how the Merchandising and Operations functions interact.
- Gather organization charts for Merchandising and Operations, down to the structure of a typical store
- Develop recommendation on process for interaction between Merchandising and Operations.
- Revise job descriptions if required
- Create job description for new position of Manager, Merchandising Solutions and Execution at store level
- Assess current “quality” of store execution
- Determine measures of success
- Present recommendations on process and responsibilities to VPs of Merchandising and Operations for approval
- Determine count of stores for test
- Determine control stores for comparison
- Determine candidates to fill new role in test stores
- Conduct orientation for new people on their role
- Establish benchmark level for measures in test and control stores
- Monitor merchandising execution on key activities and measure results
- Present results to Leadership
What We Do- Tools
Finally, is the need for tool’s. WWA has a proven experience in assessing retailer’s tool kits. We suggest that the tool kit should include:
- Ability to capture merchandising standards
- Ability to transmit requirements to decision makers, store personnel and field merchandising teams
- Ability to capture, maintain and report current information about store conditions
- Ability to capture real time feedback from the field
- Method to display implementation score cards
- Method to track and identify store-level implementation issues