Consumers can be influenced at the point of purchase. Retailers believe this is the key opportunity to convince them to buy. Some people shop with a list, but many people walk into stores looking for ideas. When they see products merchandised close together that can be combined to make a meal, they get inspired. Inspired to make the meal, but more importantly to retailers, inspired to buy.
Cross merchandising is the building of displays with products from different categories and different departments to inspire consumers to buy more. Almost every item in the store has a spot on the shelf in its own category. Cross merchandising is an incremental display of products, created to drive sales and/or deliver margin.
Cross merchandising is usually planned in advance by retailers to ensure there is sufficient inventory and to support a category strategy. Stores receive a merchandising plan with items that should be cross merchandised. Suppliers need to get their items into these merchandising plans to get the chance at some of these incremental sales.
Merchandising is art and science
When I was at Loblaw, we used to say merchandising was a combination of art and science. Cross merchandising really does require both. The science is related to the numbers and management of inventory. The art is the building of displays and inspiring consumers to buy.
Retailers have sales and margin targets to hit. Cross merchandising is one of the tactics they can employ to deliver these numbers. When an item like flour is advertised, they know a certain amount of flour will sell through. They will use history and recent activity in the category (competitor’s ads, in store specials etc.) to forecast this number. If the flour is a real deal on the front page, chances are it will be advertised for close to the product cost. Yes, the supplier probably funded part of the discount but the retailer is also investing margin. The challenge for the merchandising team is to find a path back to the budgeted margin dollars and even better, the store margin.
Cross merchandising is one opportunity. Bring consumers in with the flour in the ad and sell them other complementary items that deliver better margin. Driving more sales on complimentary items gives them a better chance to get to the budgeted dollars. If the complimentary items deliver more than their category margin, then they get more excited.
Category managers look out for themselves first, so they will try to find items in their own category. If we continue with our flour example the baking category manager might choose sugar, baking powder or chocolate chips to tie into the flour display. Once they have exhausted their own category, they will offer some space to other items. Cross merchandising happens when the display includes fresh produce for pies and for better retailers refrigerated items like butter or frozen fruit.
The art comes with picking the right items and building a great display. With very few category managers now having retail experience, this is one area where retailers struggle. Picking items from a screen is one thing, having a sense of what works in the store is another. Once the items are selected stores receive a merchandising plan. At Loblaw they call it a DMAP. This is one area where retailers like Walmart are superior. Stores are very similar so it is easy to plan displays. Our Canadian retailers have many models, with so many configurations. It is a challenge to plan where to put displays, when there are so many variables.
Most of this work happens weeks in advance to coordinate inventory and work at store level. When the store takes over to build a display there are so many opportunities. The great ones build end caps and off shelf displays that make consumers want to buy. They almost paint the picture of the pie, chocolate chip cookie or the meal. The weak ones put a bunch of cases of products together. You can tell the difference when the art is there.
Cross merchandising is an opportunity for suppliers
Space in an off-shelf display can deliver incremental sales. Often you are not required to invest in significant discounts. Retailers do like to see some savings to compliment the lead items but they are not deep discounts. Remember, they want to deliver margin to offset the investment they are making in the traffic building ad item.
If your product is a great complimentary item, you need to get it planned into cross merchandising. You have the best chance of getting the space if:
1. Your product is above your category margin
2. The product displays well in floor displays or end caps
3. You have a labour saving case pack that is easy to merchandise
4. Consumers are likely to buy your product with the lead item
5. Your social media is promoting a recipe that encourages people to use the lead item
6. Your in-store special calendar or multi buy calendar lines up with the lead item you compliment
7. You have provided the category manager with a great cross merchandising idea you saw when you were travelling in other markets
8. Your service level has been above the target. They will not plan items when they are concerned about inventory
9. Your product sells. They do not want to put inventory in the stores for displays that will not turn. Then they have to find a home for it and inventory costs money.
10. Your product performed well the last time it was planned for off shelf merchandising.
You do not need to meet all of these criteria but you do need to meet some.
Watch the ads and work with your customers to be a part of cross merchandising. There are many ideas and do not assume your customers will figure them out. Suppliers need to work in advance to try to coordinate some of these initiatives.
If you sell BBQ sauce, how can you get into the meat department the week ground beef is on sale?
If you sell avocadoes, how can you become part of the Cinco the Mayo display with tortilla chips and taco kits?
If you sell cheese, how do you get beside the pizza dough on sale?
You must work in advance and ask about the planning. Some retailers believe they know more than everyone and others are always looking for ideas. Focus where you can make a difference. When your sales deliver at one retailer where you are in these displays find the opportunity to mention it to another, without giving away the actual sales.
You will not get every cross merchandising opportunity but you will get some. If you have employees working in retail, supporting your items, they can play an important role in helping stores. Send them photos and wherever possible improve the execution at retail.
Cross merchandising sounds great but it can be a challenge to execute. Ketchup with the French fries, buns with hot dogs all seem obvious. The issue is in the planning and the coordination. Retailers are territorial within departments and fresh with grocery causes friction. It will take work but there are great benefits when it happens.
If you want to see great cross merchandising visit Trader Joe’s. They have several points in the store where the items to create great meals are merchandised together.
If you have any questions or require help being part of cross merchandising, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
HBC announces the comeback of Zellers
HBC, who operates the Bay, Saks Fifth Avenue and Off 5th has announced they have plans to resurrect the Zellers brand in Canada. With an e-commerce presence first and physical locations in 2023. Many Canadian consumers will remember Zellers having close to 350 stores, prior to the debacle that was Target in Canada.
Hopefully they understand success in retail is much more than a logo. If Zellers is to be positioned as a discounter mass merchant, they will need to buy for this and price it appropriately. If they just take merchandise from the Bay and discount it, they will likely struggle. This will require an investment in inventory and a unique pricing strategy. Watch and see how much food they decide to put in these stores and for some brands it could be an opportunity if they figure out the right retail model.
U.K. retailers reducing number of items with best before dates
Waitrose is the most recent retailer in the U.K. to eliminate best before dates on several fresh items. They believe these dates are contributing to food waste as products are discarded just because of the date, not because the food is actually bad or harmful to consumers. There is no doubt in our house products getting close to or at the best before date get more scrutiny and in some cases, they aren’t consumed when they are probably fine.
This puts more onus on consumers to make the decision. It is interesting to read Morrisons have eliminated dates from milk. Relying on consumers to do the ‘sniff test’. Watch for Canadian retailers to explore some of these ideas. Everyone wants to reduce food waste and the cost of shrink in the value chain.
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FCC Peer groups in fall of 2022
It has been a real privilege to work with FCC in 2021/22 to launch the pilot program for their food and beverage industry peer groups. We had some incredible discussions with processors about our industry and they really did learn some very valuable insights from each other. We discussed so many topics from customers to ecommerce to distributors to co-packers and so much more.
We are excited to let you know FCC plan to continue with the program and if you are interested this could be a great program for you in the fall of 2022. Check out the details and if you have any questions just let me know!
