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Optimizing

Maximizing Shopper Interaction In A New Era Of Technology

Front End Checkout Merchandising

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Front-End Focus Leadership Sponsors

The Front-End Focus Leadership sponsors are committed to providing continued front-end merchandising insights and

integrated solutions to improve store performance & enhance customer satisfaction

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The Front-End Situation

A location most every shopper passes

The Front-End checkout is a critical location in the store

Major location for immediate consumption snacks and other impulse items

It represents a significant source of impulse sales

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Emerging Front End Checkout Trends

Increased retailer focus on checkout trips, basket size and sales performance

Retailers increasingly want to reduce design and style complexity

Lower profile fixtures – streamlined look – category segmentation

Average program life – 4.5 years

Additional and larger beverage coolers

Self-checkout transactions continue to grow – more stores & lanes/store

Growing desire by some retailers to add space for promotions

Emerging categories & speed to market of new items

Role of the Power Categories

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Sales of Front-End Items

Annual Supermarket

Front-end items generate $5.85 Billion for Supermarkets

Improving Front-End Checkout Merchandising could yield an additional $1.76 Billion in sales

The Front-End Represents About 1.0% of Grocery Store Sales and 1.3% of Profits

* Source: Front-End Focus, Progressive Grocer 2012 5

Grocery Front-End Checkstand

Store Sales Store Profits

1.0%

1.3%

$7.61 Billion

$5.85 Billion

$1.76 Billion

$ Opportunity For Improvement Of

Front-End Merchandising

Annual Supermarket Sales* =

$585 Billion x 1.0% of Sales =

$5.85 Billion

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Incremental Sales Driven By Impulse Buying Are Key

Percent of Decisions Made In-Store

Magazines and Consumables drive incremental sales and those purchase decisions are generally made in store

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* Source: Front-End Focus

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Beverages, Magazines, & Confectionery Generate Over 80% of Checkout Sales & Are Purchased Frequently

Percent of Total Checkout Dollar Sales

And they are the power categories across all lane types

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* Source: TWR Checkout Research, 2011 (eight retailers and over 1,400 stores), 52 weeks through 2010 to 2011, Impulse Marketing

Percent of Consumers Buying At Checkout Once a Month or More

(% of Purchasers of Category)

84%

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Front-End Power Categories

$ Share of Front-End Sales

Impulsiveness of Purchase

Front-End Power Categories Are Defined By Key Metrics

Frequency of Purchase

Household Penetration

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* Source: Front-End Focus, DHC Analysis

High performing retailers consider four essential shopper demand criteria when allocating space

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Best Practice: Manage The Front-End Based On Consumer Buying Behavior

Focus on key categories that: • Have high Household

Penetration

• Have high Purchase Frequency

• Provide Higher Impulse Sales

• Generate higher Front- End Sales

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

Books Maps/Horoscopes/Puzzles

Low Scores

Salty Snacks Batteries/Flashlights

Cookies/Crackers Nuts/Seeds

Meat Snacks Gift/Phone Cards

Tobacco Accessories

Mixed Scores

Confectionery Beverages Magazines

High Scores

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* Source: Front-End Focus

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Magazines And Confectionery Should Be On ALL Lanes

Consumers tend NOT to shop across checkout lanes so retailers must have key consumer front-end categories available on every lane

“I don’t select a checkout lane based

on the items displayed there.”

67%

60% “I rarely take items from one checkout and wait in line at

another.”

60%

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* Source: Front-End Focus, Envirosell

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Visual Attention is Focused on the Power Categories Resulting in Incremental Sales

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* Source: TWR, Indiana University

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Visual Attention is Focused on the Power Categories Resulting in Incremental Sales

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* Source: TWR, Indiana University

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Visual Attention is Focused on the Power Categories Resulting in Incremental Sales

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* Source: TWR, Indiana University

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Self-Checkout

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Penetration Of Self-Checkout Usage Has Reached A Critical Level, Similar To ATMs

Self-Service Devices used in Last 6 Months

5%

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* Source: Self-Service Consumer Study

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Cashier Lanes

$34.50$31.71

Basket WithoutCheckout Item

Basket With CheckoutItem

Checkout Purchases Make A Big Difference In Profitability

+8.8%

…Especially at self-checkout where there is a 13% increase in basket size

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* Source: Front-End Focus, TWR Checkout Research, 2011

Self-Checkout Lanes

$23.40$20.61

Basket Without Checkout Items

Basket With Checkout Items

+13.5%

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Inspiration

Simplicity

Shoppers Choose to Use a Self-Checkout Lane Based Upon 4 Core Shopper Needs:

Speed, Control, Simplicity, & Inspiration

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Source: Coca-Cola SEI Qualitative Concept Optimization: Grocery Self Checkout, Gongos Research, 10/2011.

I want to get in and out as quickly as possible

I want control of the check-out process Control

I want it organized and clutter-free

I want shopping to be more fun than a chore

Speed

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Front-End Merchandising Can Dramatically Effect The Value Of The Lane, Especially At Self-Checkout

Lack of merchandising at self-checkout dramatically hurts sales

Merchandising of self-checkout is generally an afterthought

Without merchandising self-checkout, the potential lost sales is almost $100,000 per store

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* Source: Front-End Focus

Average Annual Front-End Dollars

$8,772

$25,900$23,671

Regular Express Self-Checkout

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Audits Suggest That 50% Of Self-Checkouts Are Not Merchandised

Self-Checkout Merchandising Conditions % of Stores Where Self-Checkout Has…

Good Merchandising

11%

Average/Less Than Average

Merchandising 39%

No Merchandising

50%

Lack of merchandising has a pronounced effect on impulse sales

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* Source: Industry Audit

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Self-Checkout Lane Today Vary Dramatically in Layout & Merchandising

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Self-Checkout Merchandising Today Tends to Fall into One of Three Broad Categories

Incongruent SCO areas with items or categories that have little shopper relevance, but appear to generate some revenue and/or liquidate inventory

Tacked-On Quick-fix solutions that simply position merchandising next to a SCO

Cluttered Disorganized, bazaar-like environments that are congested with fixtures, creating queuing confusion and hindering SCO checkout access

Poor Merchandising

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Incomplete Solutions that lack key categories shoppers seek and buy everyday from regular checkout lanes

Inconsistent SCO environments with merchandised categories that vary greatly by SCO lane

Disconnected Solutions that were designed with little regard to shopper needs and behavior/ checkout process

Uninspired Functional, transactional solutions that still have opportunity to better inspire impulse purchases

Good, Not Great Merchandising

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Empty SCO environments that sacrifice profitable front end sales for operating efficiency

Zero Merchandising

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50% of SCOs have NO

Merchandising

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Maximize Sales at Self-Checkout Lanes With More Complete Merchandising

Front-End sales at Self-Checkouts improve significantly with more complete merchandising

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* Source: FEF Study, DHC Analysis.

Self-Checkout Sales Per $ MM ACV Index by Level of Merchandising

10997

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Low Merchandising (<200 Inches)

Limited Merchandising

(400 Inches)

Most Complete Merchandising (>400 Inches)

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Beverages, Magazines, & Confectionery Are The Sales Drivers Of The Self-Checkout Lanes

Strategy: Focus on these key categories on self-checkout to drive incremental sales

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* Source: Front-End Focus

% of Front-End Dollar Sales in Self-Checkout Lanes

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There Are Many Incomplete Approaches To Merchandising The Self-Checkout Lanes

But none of them are integrated … until now

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Innovative solutions that leverage both new technology and

checkstand best practices...

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Front End Solutions Collaborative Team Best Practice Fixture Designs

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Front End Solutions Collaborative Team Best Practice Fixture Designs

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Front End Solutions Collaborative Team Best Practice Fixture Designs

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Front End Solutions Collaborative Team Best Practice Fixture Designs

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An integrated solution of technology and merchandising that is installed simultaneously

Sponsors of the Front-End Solution Center are looking to test front-end merchandising concepts with retailers that want to improve their check-out sales.

Working Together To Provide Integrated Merchandising Solutions For Self-Checkout Lanes

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Optimizing

Maximizing Shopper Interaction In A New Era Of Technology

Front End Checkout Merchandising

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