Cutting the assortment Global learnings - ECR Baltic · Wall Street Journal –26 th June, 2009...
Transcript of Cutting the assortment Global learnings - ECR Baltic · Wall Street Journal –26 th June, 2009...
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Cutting the assortment
Global learningsHow retailer can collaborate
with manufacturer in
assortment decisions?
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Agenda
• Historics
• Importance of incrementality
• Cutting the assortment : a risky choice– Some examples of rationalization across the world.
• Keys for success– A moderate cut
– An adapted development for the PL offering on some categories.
– Don’t neglect the innovations
– The right space for each segment
• Conclusion
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How to study the
assortment?
Historical Approaches
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Evolution of the assortment
1900’s 1980’s 2000’s
Sources:
1 Nielsen Retailer Interviews January 2010
Cartoon: Tom Fishburne, Brand Camp, 2009
1950’s 1990’s
The grocerThe grocerThe grocerThe grocer
Ritz, wheat
thins, Triscott,
Carr’s and Tonn
house brands
FOR SALE
HypermarketHypermarketHypermarketHypermarket
The Ritz section
(150 varieties)
I just want a cracker
HypermarketHypermarketHypermarketHypermarket
The Ritz section
(150 varieties)
ButIt has to be MYcracker
Crackers
FOR
SALE
The hawkerThe hawkerThe hawkerThe hawker
Whole Meal, rye
and table water
crackers
FOR SALE
The merchantThe merchantThe merchantThe merchant
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If they don’t find the product they want to buy:
� 4% of the consumers don’t delay their purchases. They leave the store.
*Source: Nielsen PanelViews Survey janvier 2010 USA
When assortment cuts:
� 30% of shoppers think it has increased.
� 6% think it drops.
Arguments for simplification are challenged by consumers.
For
simplification
For a broad
and
differentiated
offering
�
�
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‘Project Impact’
Retailers cut back on variety, once the spice of marketingWall Street Journal – 26th June, 2009
‘Project Impact’
Retailers cut back on variety, once the spice of marketingWall Street Journal – 26th June, 2009
‘Less is More’
Asda clears the clutter by cutting back brandsThe Grocer – 21st February, 2009
‘Less is More’
Asda clears the clutter by cutting back brandsThe Grocer – 21st February, 2009
Cut range, not choice
Take risks
15-30% less lines
The recent history of retail assortment: 2009A common retailer message across countries...
In the earliest stage of rationnalisation
In the earliest stage of rationnalisation
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How to study the
assortment?
Importance of
incrementality
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Incrementality allows us to estimate the sku impact
on the category size.
To set the best assortment strategy
How to estimate the consumers’ answer?
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Rationalization
A risky choice
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Some examples
of rationalization
across the world
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At a category level, Walmart correctly take account of future growth potential...albeit in a subjective manner
Source: Walmart company reports,
Nielsen Analytic Consulting
Play – Sustain
Balance growth
& profit
Win
Gain
share
Show
Drive
efficiency
Play – Grow
Capture growth
opportunity
Future potential(subjective)
low high
low
high
Current
importance
Walmart’s ‘Win Play Show’ matrix
Fix the mix
Reduce overlap
Differentiate
Develop
Increase range
Consider NPD
Squeeze
Reduce range
Cut marketing
Nurture
Preserve range
Grow awareness
£ incrementality(objective)
low high
low
high
£RoS
Assortman diagnostic matrix
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Assortment rationalization in Europe 2009 –Some key announcements
Announcement: “In some categories, we shall reduce the assortment by 20% to 30%,
freeing space for the key skus…“ Chief Merchandising Officer Darren Blackhurst (Feb 09)
Reality: Asda has cut the assortment in 2009 but by an average 2.9% – only – with
contrasted results accross categories
Announcement: “Tesco has an assortment 40% broader than the main competitors, but
the objective is to cut the assortment by 10 to 15% across categories in 2009…“ Marketing
Manager Rob Schofield (IGD conference 09)
Reality: average 0.6% in 2009… 2010 to confirm…
Announcement: “Mercadona has announced an assortment cut of 12% in 2009…“ Exactly as
Wall Mart
Reality: - 12% - mainly on manufacturers’ brands. Mercadona as WM does not hesitate to
come back on certain categories and relist skus. Has lost like WM 4% of market share for the
constant stores has too divided margins by 50%..
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Wal-Mart in U-turn on Project Impact initiativesjust-food.com – 17th August, 2010
Wal-Mart in U-turn on Project Impact initiativesjust-food.com – 17th August, 2010
Asda sales fall as shoppers feel pinchreuters.com – 17th August, 2010
Asda sales fall as shoppers feel pinchreuters.com – 17th August, 2010
The recent history of retail assortment: 2010Retailers are under pressure
Preserve choice
Supplier input
welcomed
??????????????????????????????
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It depends what you want ‘More’ of...Project Impact has delivered on some fronts
Sales
growth
�
Customer
satisfaction
�
Less
complexity
�
“An easier shopping
experience for customers ... ”
Space for
Non-Food
�
“Provide access and visibility to
departments that were previously
difficult to shop... ”
Retail
margin
�
“5.2% increase in
operating income...”
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What are the global trends?
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Why to cut the assortment in a given country?
• Global influence
• To position the country relatively
to Europe or the US
• Has the country a negative
incrementality?
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
US
UK
Fran
ce
China
Méx
ico
Brazil
Arg
entin
a
0
5000
10000
15000
20000
25000
30000
35000
Number of active skus Nielsen IMDB
Average Number of Items per Store
10
15
20
25
30
35
40
45
50
CHINA US France
%INCREMENTALITY
% incrementality =
Direct incrementality at the category level /
rate of sales
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INN MF+ MF- PL
+5% +2%
-20%
-3%
What is listed ( retailer’ strategy ).
-14% +7%
-4%
What has been made by the manufacturer
( manufacturers’ strategy )
New
products
Basic
manufacturers’
brands
Premium
manufacturers’
brands
Number of skus made per year Number of skus per store week
HM
All categoriesSao Paulo : A typical way of managing assortment. Global retailers cut the assortment.Innovations pay the highest price…
2008 2009
PL INN MF+ MF- PLNew
products
Premium
manufacturers’
brands
Basic
manufacturers’
brands
PL
+11%
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Baltic countries : cutting the assortment has been the rule in 2009.
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Baltic Countries Through Crisis Page 19
Average number of items has decreased the most ingroceries
Dark
and
White
Bread
Milk Yogurt
Fermen-
ted
Cheese
HamSau-
sages
Salted
Snacks
Choco-
late
Can-
diesCSD
Juice/
Nectar/
Still
Drink
Mineral
WaterCoffee Vodka Beer
Pet
Food
Ciga-
rettes
Laun-
dry
Deter-
gents
Sham-
poo
Face
Care
Tooth-
paste
Hypermarkets
>2500 -3,5 -5,5 -6,5 6,3 -7,3 -9,5 -8,8 -13,8 -11,6 0,1 -12,4 5,1 -7,1 -1,2 -14,4 0,3 -10,2 -2,5 3,0 5,0 -0,2
Large
Supermarkets -0,3 4,2 -2,4 5,1 -0,5 -7,2 -9,7 -4,4 -2,7 12,4 9,5 1,0 -2,9 6,3 1,8 5,2 9,0 7,7 5,0 6,6 2,1
Small
Supermarkets/
Discounters9,1 12,3 -3,9 11,6 -3,5 -7,7 -13,2 -3,6 -3,8 16,8 12,4 3,2 -6,8 10,2 8,1 9,5 -4,4 -6,0 -2,7 28,2 -2,7
Superettes -5,8 25,0 -6,8 -1,3 4,3 -22,9 -9,4 -4,5 1,7 17,7 5,4 1,3 1,6 0,7 8,1 2,5 -4,2 -16,8 -22,2 21,6 -0,2
Groceries -9,5 -6,2 -15,3 -2,3 -12,8 -11,6 -6,4 -5,5 -7,5 -6,4 -6,7 -11,0 -11,6 -2,5 -7,8 -3,8 -17,4 -13,5 -13,7 52,9 -3,0
Average number of items +/-% same period last year – Estonia – Food Feb/Mar09, Non-food Mar/Apr09
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Baltic Countries Through Crisis Page 20
Average number of items is decreasing in all channels
Dark and
White
Bread
Milk Yogurt HamSau-
sages
Salted
Snacks
Cho-
colateCandies CSD
Juice /
Nectar/
Still
Drinks
Mineral
WaterCoffee Vodka Beer
Pet
Food
Ciga-
rettes
Laundry
Deter-
gents
Sham-
poo
Face
Care
Tooth-
paste
Hypermarkets
>2500 7,0 -1,9 -2,5 -8,1 7,5 -7,5 -1,9 -1,9 12,6 -15,3 9,0 -3,7 -7,6 -7,5 15,7 -4,6 -11,6 1,8 -3,8 0,1
Large
Supermarkets -12,3 3,8 -11,1 -3,1 0,1 -4,4 -5,1 -11,8 2,1 -14,9 -1,8 -11,2 -10,7 -3,5 6,9 -7,0 -15,4 -9,3 -21,0 -3,7
Small
Supermarkets/
Discounters-4,0 10,9 0,5 -9,2 11,5 4,3 1,7 -0,7 1,1 -12,6 7,5 -6,2 2,2 3,8 7,1 -5,6 -3,6 -3,2 -19,6 7,5
Superettes -8,8 9,4 -7,9 -0,8 17,2 -0,7 -2,5 -4,8 -11,7 -16,2 -4,2 -17,9 0,4 -7,1 0,8 -18,4 -17,0 -20,6 -23,4 -17,2
Groceries -4,1 5,1 -16,0 12,2 7,5 1,2 -9,7 -16,0 -16,2 -17,9 -12,6 -18,8 -3,6 -17,8 6,4 -20,3 -20,5 -26,9 -21,6 -37,2
Average number of items +/-% same period last year – Latvia – Food Feb/Mar09, Non-food Mar/Apr09
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Baltic Countries Through Crisis Page 21
Average number of items has decreased in almost all categories ingroceries
Dark and
White
Bread
Milk Yogurt HamSau-
sages
Salted
Snacks
Cho-
colateCandies CSD
Juice /
Nectar/
Still
Drinks
Mineral
WaterCoffee Vodka Beer
Pet
Food
Ciga-
rettes
Laundry
Deter-
gents
Sham-
poo
Face
Care
Tooth-
paste
Hypermarkets
>2500 29,7 -1,7 -8,1 -8,1 6,6 7,5 3,6 -9,0 -2,1 9,9 -3,4 3,2 -4,7 1,6 -10,0 0,1 -11,4 -8,5 -4,7 -1,6
Large
Supermarkets 26,2 5,9 -16,7 -14,1 5,1 20,6 10,1 -9,1 8,2 6,9 3,1 2,2 -4,3 4,2 -3,2 7,5 -8,2 3,9 13,5 5,9
Small
Supermarkets/
Discounters13,1 5,7 -1,5 -9,2 7,5 21,1 14,9 -7,6 -0,6 -3,6 4,8 -1,9 -6,6 3,8 1,9 8,2 -15,5 -1,2 -4,2 -2,6
Superettes 6,9 3,1 -2,5 -12,3 0,6 -4,1 -5,9 -11,2 -5,5 -7,8 1,8 -11,8 -7,6 3,3 2,0 -0,8 -17,3 -13,4 -16,9 -14,0
Groceries -1,3 5,6 -11,0 -27,6 -7,1 2,7 -9,9 -8,7 -6,7 -24,7 -7,0 -11,4 -10,9 -8,2 -8,9 -6,9 -9,5 -13,2 -47,4 -22,8
Average number of items +/-% same period last year – Lithuania – Food Feb/Mar09, Non-food Mar/Apr09
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What is the link between
assortment cut and sales?
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US : What happened at Walmart is expected –it’s what happens when you take an average approach to the puzzle
Variation
-2,3
-0,4
1,3
-2,6
-0,4
1,2
-6,3
-1,2
3,5
-8
-6
-4
-2
0
2
4
theoretical sales
actual sales
items
SALES VARIATION PER LEVEL OF ASSORTMENT VARIATION
STORES CUTTING THEIR
ASSORTMENT BY MORE
THAN 5%
STORES CUTTING THEIR
ASSORTMENT
BETWEEN 0 AND 5
STORES INCREASING
THEIR ASSORTMENT
Source : Etude Nielsen Assortman 2010
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Rationalization
Key successes
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A moderate reduction
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Examples of categories that have cut their assortment in HM without penalizing the category
Whisky
+ bourbons
Number
of skus evolution
Revenue
evolution
Beer
Pet food
Champaigne
Chocolate
tablets
Number of skus
evolution
Revenue
evolution
Aniseed
aperitives
Shower gels
French dishes
-2%-2% +8%+8%
-4%-4%
-4%-4%
-4%-4%
-0.5%-0.5%
-4%-4%
-5%-5%
-3%-3%
+4%+4%
+5%+5%
+1%+1%
0%0%
+10%+10%
+3%+3%
+14%+14%
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A relevant PL
development
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Need to develop PL is different across countries
• France : Developing PL is less and less incremental, but still pushed a lot.– Already a high level
– Crisis less important than in the US
•US : In a strong crisis, PL are more and more requested by the consumers.
• Emerging countries : PL are not to be developed in most of the channels even if the level is low.– Reason : no substantial gap between low price manufacturers brands and PL price.
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Confidential & Proprietary Copyright © 2010 The Nielsen Company2008 2009
Store Brand
Economy
Premium
New ItemHIGH
MARKETED
2008 2009 2008 2009
MEDIUMMARKETED
LOWMARKETED
US : strong progression of PL demand.They progress the most in high marketed categories.Only in low marketed categories they are the first in incrementality.
Consumer Response to Assortment
Want more Variety
Want less Variety
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Total China hypermarkets... : movement towards premium and new products. New products to be more developed if high marketing…
2008 2009 2008 2009 2008 2009
Incremental in value sales of adding
one more item
Premium Basic New Product Private Label
Source: Nielsen l Assortman Benchmark – Total China Hypermarkets – 2009 vs 2008
Want more
variety
Want less
variety
High
MarketingMedium
Marketing
Low
Marketing
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Don’t neglect
innovations
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The right space
for each segment
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Liquors on several countries : a focus on the additive segments. France example :
What were the keys to drive the success on this assortment reduction?
� A squeeze in the less additive segments :�-3 skus on the less additive segments : fruits liquors
� An offering stability on the modern liquors : the most additive segment.
� An assortment rationalization for each brand� A focus on the strong skus
� 3 main brands have been preserved, keeping the best items for them.
Modern liquor
Traditional liquor
Fruits liquor
*en nombre totale de réf hors promo en HM
**CAM à fin mars 2010 vs CAM n-1 en HM
-5%Ref*
-5%Ref*
+6%CA**
+6%CA**
Incrementality ranking
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Rationalization
Conclusion
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What does the consumer want ?���� Simplification and dependence/addiction to a specific product
Simplification Simplification Simplification Simplification
The Ritz section
(150 varieties)
I just want a cracker
Dependence on a Dependence on a Dependence on a Dependence on a
very differentiated very differentiated very differentiated very differentiated
productproductproductproduct
The Ritz section
(150 varieties)
But It hasto be
MY cracker