Optimizing Checkstand Merchandising

Optimizing Checkstand
Merchandising
FMI Connect 2016
0
Speaker Introductions
Bill Dusek
Managing Director, Dechert Hampe & Co.
Ron Hughes
Sr. Manager Shopper Strategy & Innovation, Coca-Cola
William Romollino
VP, Shopper Insights, Time Inc
1
Retailers Face a Changing Environment
Changing Shopping
Patterns Evolving
Purchase Behaviors
Consumers
Range of Categories
Stocked Changed
Dramatically
Checkout
Channels & Formats
Compete for Limited
Number of Shopping
Occasions
Retailers
Growing at Some
Retailers –
Declining at Others
Technology
Changing the
Transaction Process
Self-Checkout
2
A Lot Is Happening In The Checkout Line
3
The Checkout Area is Essential for
Incremental Sales
Profits
Customer Satisfaction
4
Front-End Checkstands Deliver $6.5 Billion in Supermarket Sales
2015 US Supermarket Sales
Estimated 2015 Front-End Sales
$649.1 Billion
$6.5 Billion
*
Front-End Share of Total Store Sales = 1%
*FMI Supermarket Facts 2015
**Front-End Focus
**
5
Beverage, Confectionery and Magazines Drive Front-End Sales
Dollar Shares of Front-End Checkstand Sales
Beverages
Carbonated
Energy Drinks
Non-Carbonated Drinks
Bottled Water
Confectionery
Candy
Gum
Mints
4.0%
3.5%
11.3%
13.9%
11.3%
Magazines
Salty Snacks
Batteries
Razors/Blades
Source: IRI 52 weeks ending July 12, 2015; DHC Analysis
44.6%
17.0%
12.2%
12.5%
6.3%
2.5%
0.2%
33.2%
90% of total check
stand sales comes
from 3 Power
Categories
The information contained herein is based in part on data reported by IRI through its
Market Advantage service as interpreted solely by Time Inc and/or Dechert-Hampe &
Co. (Copyright© 2013), Information Resources, Inc.). The information is believed
to be
6
reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI.
Dollar Sales Importance Does Not Match the Amount of
Linear Space Front-End Categories Receive
SharesofofFront-End
Front-End
$$Shares
CheckstandSales*
Sales*
Checkstand
Over
164
Over
114
Correct
3.4%
54
Under
2.8%
112
Correct
150
Over
24.2%
12.5%
Magazines
6.3%
Salty Snacks
Razors/Blades
164
30.4%
14.8%
Gum/Mints
2.5%
0.2%
Best Practice
Sources:
*IRI 52 weeks ending July 12, 2015, DHC Analysis
**TIR Audits, June, 2015
Over-/
Under-spaced
Under
18.5%
Candy
Space to Sales
Index
23
10.3%
44.6%
Beverages
Batteries
Share of Front-end Linear
Space (All Lines)**
14.2%
0.3%
Beverages are underspaced while Confectionery is over-spaced
The information contained herein is based in part on data reported by IRI through its
Market Advantage service as interpreted solely by Time Inc and/or Dechert-Hampe &
Co. (Copyright© 2013), Information Resources, Inc.). The information is believed to be
reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI. 7
Consumer Insights Indicate
that Power Categories are the
Heart of Immediate
Consumption Demand Patterns
8
It Is Important to Have the Assortment Across Each Lane Optimized
What would you most likely do if the item was not available?*
1 in 3 shoppers
WALK AWAY
If the item they want
is not available
Find Item Elsewhere, Return To Original Lane
To Checkout
25.8%
Buy Nothing Or Delay Purchase
16.6%
Change Lane To Purchase Item In New Lane
Switch To Alternative Item Located In Current
Checkout Lane
Stop At Another Store To Find Item
* Percentage of Respondents
Source: Front-End Focus Study
42.2%
11.4%
4.1%
9
Front-End Power Categories Defined By Key Metrics
1
Household
Penetration
4
$ Share of
Front-End Sales
Front-End
Power
Categories
2
Frequency of
Purchase
3
Impulsiveness
of Purchase
10
Confectionery, Beverages and Magazines Have
the Greatest Buyer Penetration at the Front-End
% Shoppers Buying at Checkout in 6 Months
(% of all Respondents)
55.4%
Candy
51.6%
Gum
44.8%
Carbonated Beverages
40.1%
Bottled Water
30.7%
Magazines
27.6%
Mints
Salty Snacks
Non-carbonated Beverages
20.5%
12.4%
Other Snacks
12.4%
Razors/ Blades
12.1%
Other Household Products
11.8%
Grocery Products
11.8%
Lip Care
11.3%
Health Items
11.2%
Phone/ Gift Cards
10.6%
10.6%
Energy Drinks
18.6%
Tobacco Accessories
Nuts/Seeds
18.4%
Film/ Camera/ Photo Supplies
Cookies/Crackers
18.3%
Nutrition/ Energy Bars
Batteries/Flashlights
18.0%
Children's Items
Baked Goods/Snack Cakes
Meat Snacks
Oral Care
Source: Front-End Focus
24.9%
Beauty Care
15.2%
14.2%
12.7%
8.9%
7.8%
6.9%
Books Non-Children's
4.6%
Audio/ Video/CD/ DVD
4.5%
Maps/ Horoscopes/ Puzzles
3.8%
11
Manage Front-End Based on Consumer Buying Behavior
Focus Categories:
High Household Penetration
High Purchase Frequency
High Impulse Sales
High Front-End Sales
 Confectionery
 Beverages
 Magazines
•
•
•
•
•
•
•
Salty Snacks
Batteries/Flashlights
Cookies/Crackers
Nuts/Seeds
Meat Snacks
Gift/Phone Cards
Tobacco Accessories
•
•
•
•
•
•
•
•
•
•
•
•
•
Health Items
Razors/Blades
Baked Goods
Lip Care
Oral Care
Household Products
Audio/Video/DVD
Other Snacks
Beauty Care
Grocery Products
Film/Camera Supplies
Children’s Items
Nutrition/Energy Bars
12
Self-Checkout Is the Small Basket
Checkout Method of Choice
Impulse Merchandising Remains
a Challenge
13
Self-Checkouts Continue to Evolve
Impulse merchandising is very important
Many retailers have embraced self-checkouts
Some retailers have removed self-checkouts (Albertsons LLC, Big Y, Jewel)
14
Millennials Use Self-Checkout Significantly More Than Older Shoppers
Half of Millennials use Self-checkout almost all or every time at grocery
1 in 3 older grocery shoppers are frequent Self-Checkout users
Frequency of Using Self-Checkout*
Total
(n=1175)
T2B
32%
47% 
Every time (100%)
12%
18%
Almost every time (75%)
20%
29%
About half the time (50%)
23%
26%
Less than half the time (25%)
28%
19%
Never
17%
8%
B2B
45%
27%

Source: Coca-Cola K&I Research March 2016
Millennials
(Aged 19-35; n=433)
*Q.34. When checking out at the grocery store, how often
do you use self-checkout? Base: Monthly+ Grocery
Shoppers; / T2B/B2B Significantly higher/lower 15
than Total at 90% C.L.
Large Majority of Consumers Prefer Self-Checkout for ≤10 Items
Preference shifts to cashiers at 11+ items
Millennials lag the total population, with preference at the 11 to 15 items
Frequency of Using Self-Checkout*
Millennials
Total
(n=831)
1 to 4 items
5 to 10 items
11 to 15 items
16 to 20 items
21 or more items
Source: Coca-Cola K&I Research March 2016
Cashier Checkout
(Aged 19-35; n=318)
9%
91%
Self-Checkout
Cashier Checkout
25%
Self-Checkout
Cashier Checkout
38%
Self-Checkout
Cashier Checkout
Self-Checkout
15%
Cashier Checkout
Self-Checkout
9%
75%
11%
89%
19% 
62%
81% 
55% 
45% 
85%
91%
18%
12%
82%
88%
Q.35. When checking out at the grocery store, how does the quantity of
items you’re purchasing impact which checkout method you choose? Base:
Monthly+ Grocery Shoppers who use Self-Checkout 25-75% of the
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time; / Significantly higher/lower than Total at 90% C.L.
Payment Preference Changes at 5 Items
Cash is the typical payment for baskets with <5 items
Debit cards are the top payment choice for baskets of ≥5 items
Typical Payment Methods by Quantity of Items*
No. of
Items
* Top 2 Mentions Shown
Source: Coca-Cola K&I Research March 2016
Total
Millennials
(n=1175)
(Aged 19-35; n=433)
1–4
40%
Cash
31%
Debit Card
41%
Cash
29%
Debit Card
5 – 10
41%
Debit Card
23%
Cash
40%
Debit Card
25%
Cash
11 – 15
46%
Debit Card
25%
Credit Card
44%
Debit Card
22%
Credit Card
16 – 20
45%
Debit Card
27%
Credit Card
42%
Debit Card
25%
Credit Card
≥ 21
45%
Debit Card
28%
Credit Card
42%
Debit Card
25%
Credit Card
Q.36. When checking out at the grocery store, how does the quantity of items you’re
purchasing impact which payment method you choose? For each range of items below,
please select which payment method you typically choose when purchasing those items.
Please select one response below for each range. Base: Monthly+ Grocery
17
Shoppers; / Significantly higher/lower than Total at 90% C.L.
Many Front-End
Merchandising Practices
Are Suboptimal
18
While Some Merchandising May Have Improved, It Is Still Questionable
5 Years Ago
1 Month Ago
19
Front-End Merchandising Within A Retailer Will Differ
20
Secondary Displays and Costly Distractions
A male-dominated category
A closed lane
Right in front of a cooler
What is the value of this display?
21
The Role of Healthy
Snacks at Checkout
22
A Number of Retailers Are Experimenting with Healthy Checkout Lanes
Sales results of changes due to Healthy Checkout lanes have not been reported
Launch
Geographic Region
Phrasing
Notes
2010
CA, NV
Family Friendly Lane
• 1 checkout lane/store
2011
WV, CA (2011), WI (2012)
Healthy Checkout Aisle
• Limited stores/state
• In partnership with local health campaigns
2012
Midwest US
Healthy Bites
• 1 or 2 lanes/store
2012
Mid-Atlantic
Healthy Ideas
• 8 stores with 2 aisles
2013
UT
Healthy Checkout Lane
• 2 lanes/store
2015
Minneapolis, Dallas, Denver
NA
• 30 store pilot program
• Shelves have both options
2016
32 states
Healthier Checklanes
• All 1500 stores
Source: RNG - Evaluating the Evolution of the Healthy Checkout, 2/18/2016
Yet a Number of Concerns Exist for Many Retailers
Many retailers, especially in the US, are
hesitant to deploy healthier checkout
lanes for fear of customer backlash
Customer expectation of checkout candy
can be difficult to break
“Well, sometimes my kids ask for a sweet
snack at checkout and I buy it as a treat
because they are good kids.”
Retailers have reported concerns that removing
sweets from checkouts and marketing a
“healthier lifestyle” at checkouts will be
perceived as too forceful
“And who anointed them as the guardians of my
health? I can take care of myself, thank you.
Sometimes I’m in the store without my kids and I
look forward to something sweet at the end of the
shopping trip. I don’t want tofu balls wrapped in
seaweed or whatever.”
Though many retailers may aspire to
participate, they may be faced with the decision
to prioritize either the healthy association or
sales and brand partnerships
Source: RNG - Evaluating the Evolution of the Healthy Checkout, 2/18/2016
Mobile Payment
Automated Checkout
Shopping Apps
25
Mobile Is Here Now?
How are shoppers using Smart Phones?
What merchandising approaches work as
Smart Phones become integrated into how
shoppers check out?
* Are Smartphones Making Us Less Impulsive, priceconomics.com, Sept 2013;
Shoppers’ ‘Mobile Blinders’ Force Checkout-Aisle Changes, bloomberg.com, Mar 2013
26
Emailing/Texting or Browsing Social Media Is More Important Than
Downloading Coupons or Researching Products on Smartphones
Checkout Lane Smartphone Behaviors*
Total
Millennials
(n=951)
(Aged 19-35; n=404)
Check email / text messages
52%
Browse social media
61% 
44%
58% 
Download discounts/coupons from the store app or website
21%
25%
Research pricing of products I'm about to purchase
19%
27% 
Open the retailer app for the cashier to scan my loyalty card
17%
22% 
Scan products to check for available discounts/coupons
16%
22% 
Open mobile payment app in preparation of paying using my mobile device
Other
None of these
Q44. Which of the following activities do you usually do on a smartphone while waiting in
the checkout lane?
Base: Monthly+ Grocery Shoppers who Own a Smartphone; / Significantly
higher/lower than Total at 90% C.L.
Source: Coca-Cola K&I Research March 2016
17% 
12%
2%
1%
30%
17% 
27
Millennials Are More Interested Than Older Shoppers in New Apps
to Enhance/Streamline the Checkout Experience
Over half of Millennials are interested in scan-and-pay (bypassing checkout)
6 in 10 Millennials are interested in automatic promotional/discount alerts
Interest in New Smartphone Features/Abilities for Shopping*
Total
(n=951)
Millennials
(Aged 19-35; n=404)
Scan and pay for items without
having to use a Cashier or Selfcheckout
Extremely / Very Interested
44%
56%
Not Very / At All Interested
32%
20%
Receive alerts or notifications
with promotions or discounts
at certain points in the store or
checkout
Extremely / Very Interested
50%
61%
Not Very / At All Interested
25%
16%
Source: Coca-Cola K&I Research March 2016

* Q.46. How likely are you to give a store’s mobile app permission to track your activity
while you’re in the store for the benefit of providing relevant store and product
information to you as you shop? Base: Monthly+ Grocery Shoppers who Own a
28
Smartphone; / Significantly higher/lower than Total at 90% C.L.
Over Half of Millennials Are Willing to Allow Store Apps to Track Their
In-Store Activities in Exchange for Relevant Shopping Information
Just 4 in 10 non-Millennial shoppers are willing to do so
Likelihood of Allowing Store Mobile App to Track Location While Shopping*
Total
(n=951)
T2B
41%
55% 
Extremely likely
18%
23%
Very likely
23%
32%
Somewhat likely
25%
22%
Not very likely
18%
14%
Not at all likely
16%
9%
B2B
34%
23%

* Q.34. When checking out at the grocery store, how often do you use selfcheckout? Base: Monthly+ Grocery Shoppers; / T2B/B2B Significantly
higher/lower than Total at 90% C.L.
Source: Coca-Cola K&I Research March 2016
Millennials
(Aged 19-35; n=404)
29
Privacy and Security Concerns Form the Top Barriers to
Granting Access to In-Store Mobile Tracking
Reason for NOT Allowing Store Mobile App to Access Location*
Total
Millennials
(n=325)
Privacy concerns
(Aged 19-35; n=99)
61%
Don't like the idea of my location being tracked
58%
55%
52%
Don't like the idea of my data being used
52%
47%
General security concerns
51%
45%
Feels too much like someone is watching me
48%
Worried my personal information/data can be stolen
46%
Location services and notifications drain my phone/tablet battery
* Q47. Why are you unlikely to grant a store’s mobile app access to your location while
you’re shopping in that store? Base: Monthly+ Grocery Shoppers who Own a
Smartphone and Are Not Very / Not At All Likely to Enable Location Tracking; /
Significantly higher/lower than Total at 90% C.L.
Source: Coca-Cola K&I Research March 2016
29%
46%
42%
32%
30
Strategy for the
Maximization of Sales Potential
and
Customer Satisfaction
at Checkout
31
Recommendations
Research reconfirms the importance of the power categories (Beverages, Confectionery and Magazines)
to front-end check stands
 Retailers need to focus on the appropriate merchandising efforts, across all types of lanes, for these key categories
to drive the highest incremental sales
Continually upgrade your consumer insights to keep track of emerging consumer trends

Consult Front End Focus for current and future immediate consumption trends
Temporary Displays in front of the check stand endcaps do not drive incremental sales
Find other locations for those temporary displays
Explore the role of “Healthy Items/Choices” in limited doses as a compliment to the Power Categories
Self-Checkouts are still many times under-merchandised
Refocus merchandising efforts at these checkouts
Use of smartphones will continue to expand to more applications including product and offer marketing
32