Study: Cross-Merchandising Drives Sales
A study by researchers at Texas A&M University confirms
the power of cross-merchandising to drive incremental product sales in a wide
variety or retail categories.
"In general, placement can lift the sales of different items," Venky
Shankar, professor of marketing at the Mays Business School at Texas A&M
University, told United Press International (UPI). "It’s
true across the board but the amount depends on categories."
A case in
point is the combination of chips and soft drinks. When displayed across from
one another, soft drink sales increased up to nine percent while chips remained
the same.
"If you are shopping for chips, you may remember you get thirsty when
you eat them, so you buy soda," Prof. Shankar told UPI. "But
if you stop at a gas station because you’re thirsty, you probably aren’t going
to buy chips."
The most surprising cross-merchandising result came from
the successful placement of disposable diapers near beer and wine, highlight
the fact that local preferences can be a bit peculiar.
(In a somewhat similar
vein, RetailWire came
across a photo of an intriguing pairing reportedly found in a Kroger store.
See: Interesting
Concept in Cross Merchandising)
Discussion Questions: How developed are retail cross-merchandising programs?
Are there still significant upside opportunities associated with cross-merchandising
programs? Have you seen any odd pairings that work well?
So many experts in merchandising have left the biz at the same time “LOWEST PRICES” have become the mantra on the sales floor. Smart merchants will take the time to drive average ticket by looking at such results.
Two of my most interesting cross-merchandised items? The vodka next to the diapers–fun–and toy handcuffs by the Shredded Wheat–odd to say the least.
Cross merchandising definitely is effective when merchandised thoughtfully and adequately. The example of soft drinks and chips is a great example of what works well. Do it! However, don’t stop there either! You can do this more profitably rather than to sell two commodities together.
Think about HBC/OTC and semi-seasonal opportunities. Cough and Cold remedies go together not only with facial tissues but also with cans of chicken soup! Specialty mouthwash can be merchandised with foods that cause bad breath. What I recommend is to cross merchandise an everyday item with a profitable unplanned purchase.
Its sort of like retailing 101 and merchandising 101 together. Sadly, most retailers miss the obvious opportunities. It’s the easiest way to incremental sales, but….
I used to cringe when I saw suction-cup-mounted clear plastic trays of everything from toppings to toys to shoe horns mounted on the doors of frozen food cases. I felt they blocked the view of products inside the cases and were just plain, well, stupid. But I’ve talked to enough store managers about this in my travels to learn that these things really work and are very profitable. Go figure.
Cross-merchandising is a terrific way to increase average ticket, build productivity, and simplify the shopping experience. The key first step (which most retailers fall down on) is to think like the customer and offer a complete solution to the reason they came into the store in the first place. The classic example is offering batteries next to any place that you sell small electronics. As obvious as this sounds, I am yet to go into a grocer that offers batteries next to the flashlights.
This is a huge opportunity for all retailers, particularly grocers, but it requires a lot of thought and cross-category coordination with areas like order quantities and plannograms if it is to be successful. Too often, items are purchased as “pick-ups and/or margin builders” and then left to the store team to figure out where to put them. As amusing as the example of vodka and diapers, this most likely is due to the fact that the store had no other place to display the diapers.
If you want to see the masters of this technique, go to the nearest Bed, Bath, & Beyond. They don’t waste an inch of space.
Walmart was, once upon a time, very very good at cross merchandising and exploiting seasonal merchandising opportunities, often combining them to create powerful merchandising statements and driving additional sales.
While Walmart took a three year hiatus, they seem to be returning to their roots under Bill Simon’s leadership.
Cross merchandising most assuredly has upside opportunity and this incremental sales potential loses nothing in this down economy.
Companies like Walmart, Target, and others have found that narrowing assortments and decreasing inventories have done much to drive cost reduction but little to drive sales. This obviates the need for a return to a merchandising focus that goes after sales from a number of aspects rather than just low pricing.
Cross merchandising can be accomplished within modular layouts or seasonally within dedicated seasonal spaces, through the use of race track merchandising and finally with clip strips and side kick merchandising.
Cross-merchandising begins and ends with the customer in mind. I like to think of cross-merchandising as an opportunity to address customer compromises. As noted in the article, chips go with soft drinks. Why should the customer have to navigate different parts of the store to satisfy this need?
I don’t have any particularly odd pairings but have seen some tremendous meal cross-merchandising. Three come to mind: 1. Everything necessary to make Fajitas in one place: tortilla shells, cheese, sauce, peppers, and onions; 2. Everything necessary to make a pasta dinner: pasta, sauce, olive oil, cheese, bread, and wine; 3. Everything necessary to make a BLT merchandised together: bacon, lettuce, tomato, mayonnaise, and bread all displayed on an end cap.
Let’s change one end cap from the soft drinks, paper towels or cookies and cross-merchandise tonight’s dinner. The only limit is on one’s imagination of how to eliminate customer compromises.
Cross merchandising is an underdeveloped opportunity in retail because retail organizational structures aren’t designed to robustly support it (although that is changing). Cross-category collaboration is still mostly executed as an event (with everyone returning to their category silos post-event) rather than institutionalized as an ongoing practice. Target and a few other retailers have put dedicated cross-category structures in place and I think that should be standard practice.
I have no interesting cross merchandising examples that I can recall. But this did make me think about the potential for the wise merchandiser.
If they know the demographics of their shoppers and can predict coming events the opportunities are endless. For example, this is football season and tail gating is a huge sales driver between now and the end of the year (depending on the success or lack of for your favorite team). So putting tail gating items and tools together is a driver. Put toiletries across from them as a reminder to buy shaving cream, deodorant, aspirins, etc. Add to that, you put the beer and chips across from an item your children may have been asking you to buy (certain cereals?).
Cross merchandising is under-utilized and holds tremendous potential to increase market basket. The very fact that two consumers will shop for items differently suggests that logical placement alongside related (or in the case of diapers and beer, unrelated) categories will attract new purchases. Not to suggest tricking consumers through foolish tactics, it is my belief that consumers will be thankful that the merchant took the time to “link” items in a convenient arrangement for fast and informed decision making.
Ah…as expected, the consultants to the industry have started to out do each other with “can you top this” ideas that end up going too far.
Remember, when a store is first laid out, if done correctly, it should have a consumer friendly flow–Pasta sauce adjacent to pasta, grab and go meal solutions together and up front….
A few cross-merchandised displays add excitement; too many and all you are adding is confusion.
We have seen cross-merchandising work wonders in fresh produce, i.e. tomato and pasta, but a lot of the produce directors you talk to don’t especially like to see grocery or other department’s products in their prime real estate. With retailers tightening on vendor SKUs and margin competition between departments, it’s up to the latter to present a compelling case for cross-displays these days.
Cross-merchandising is worthless without solid, sustainable execution. Sadly, store associates have little, if any incentive to maintain cross-merchandising locations.
This falls in line with the most basic category management practices I can think of. Any store that is currently scanning has all the tools it needs to effectively cross-merchandise the store. Running reports and conducting regular market basket analysis will yield hot trends and should spur some new ideas for product pairings. But this should be second nature to any operator by now, and I’d say it is the norm at all successful chains.
When I was Intergalactic Ad Mgr. for Southland Corp (7-Eleven), we found that the items most connected in customer purchases were diapers and beer. You’ve all heard that one, and it’s true. And yet, you never see them cross-merchandised. Whassup with that? It’s this: One is refrigerated and the other is not. Fresh strawberries and frozen pound cake? One is frozen and the other is not. Not to mention the whipped cream from the dairy aisle.
Cross-merchandising is too much work for most store/category/aisle/department managers, not to mention minimum wage drones. And therein lies the basic flaw in cross-merchandising: Those entrusted to execute (perform) it actually execute (kill) it. It works great when it’s done right and shepherded. That’s, like, 2% of the time?