BrainTrust Query: Why In-Store Implementation Is the Next Frontier
Through a special arrangement, presented here for discussion is a summary of a current article from the Tenser’s Tirades blog.
I call it the Paradox of Scale: grocery chains keep getting bigger, but industry profit performance remains stagnant.
It’s been a doggedly persistent trend. Between 1992 and 2009, the top 20 U.S. grocery retailers increased their cumulative market share from 39 percent to 64 percent, according to the U.S. Economic Research Service. Meanwhile from 1996 to 2010, industry net profits have hovered consistently around one percent of sales, according to the Food Marketing Institute.
These facts seem to run counter to intuition. After all, bigger chains are supposed to have top-of-the-line executive talent, fine-tuned supply chains, advanced IT systems, greater buying clout and economies of scale. A deeper look reveals the paradox: bigger chains also suffer from intensified store operational complexity, larger assortments and poorer visibility from the home office.
Bottom line — as chains expand, store performance management gets much, much harder. This begins to explain why out-of-stocks continue to run at 8.2 percent, unchanged in 15 years, yet 78 percent of items sell fewer than three units per week. It begins to explain why as many as half of all authorized in-store display promotions are never erected or erected late. It begins to explain why most retailers have no effective process in place to ensure or even monitor everyday planogram compliance.
Where some may find darkness and frustration in these statistics, others identify a golden opportunity. The In-Store Implementation Sharegroup identified tens of billions of dollars at stake — a rich prize indeed. Bold retailers and marketers who commit to improve retail compliance practices in the next few years should gain a distinct performance advantage over their less nimble competitors.
With these issues in mind, a select group of industry thought leaders will participate in a pre-conference workshop at the LEAD Marketing Conference in Rosemont, IL, on Sept. 19.
In-store implementation is not an isolated solution; it’s a multi-threaded initiative that incorporates improved in-store sensing and measurement; better inputs into planning processes; a performance-oriented culture; and alignment of trading partner resources. Many of the enabling practices and tools already exist, ad hoc. Still needed is an organizing principle that can tie them together into an effective set of best practices for the industry.
- Workshops at LEAD Marketing Conference
[Note: For a 15% registration discount, enter code RETAILWIRE 2011]
- Why In-Store Implementation Is the Next Frontier – Tenser’s Tirades
Discussion Questions: Why has the consolidation of grocery retail not led to productivity gains? How much do in-store implementation challenges have to do with it?