Arletta is the Group Account Director for Retail at The Evolved Group. Arletta’s passions are retail, customer experience and driving change within businesses.
I recently connected with Mick Moore, the Founder and Managing Director of Scalene Group – a retail-focused strategy advisory and analytics business.
Like me, Mick is passionate about the application of actionable insights to support retail decision-making. Mick is particularly interested in areas such as store format development, space management, range selection and pricing.
We sat down for a chat on all things retail – covering consumer purchasing behaviour, ranging, the state of the retail sector and more…
Mick: Consumer decisions clearly get influenced by how retailers present products to them. Retailers invest heaps of time in trying to influence consumers to buy, but are often most interested in securing any sale… Swinging consumers from product A to B is often a secondary consideration.
Most good retailers are generally pretty focused on helping consumers make a good purchase decision as they know this will work out for them over the longer term… they’re not as conniving as you might think!
It’s also worth noting that product suppliers are also fighting very hard to win people over to their products vs their competitors’ items using marketing, promotions, battles over shelf space, packaging, etc.
Mick: I think most of my purchases are pretty rationally based… but I’m not necessarily typical!
At Scalene, we spend a lot of time mining data and trialling to find changes that a retailer can make to influence outcomes to achieve a more profitable result. We try to focus mostly on what actually happens when elements of a retail offer are changed… we find this helps us focus on actions that drive tangible value.
For instance, by looking in detail at variations in how stores are setup, we can identify how factors such as space allocations, range selection and pricing changes influence sales and profit outcomes.
Mick: Decisions over where categories sit in store, how much space they have, what items are stocked and how they’re priced and promoted are all hugely influential on the retailer sales outcome. I think it’s less about ‘controlling behaviour’ as most retailers consumer audiences are hugely diverse (unless you’re in an ultra-specific niche or playing at say the super-premium end of a category).
I think about this more in terms of maximising the return you get from limited opportunities to win a sale through using your store space well (bricks & mortar or online). Understanding what the optimal amount of space is for a given category or whether customers see a given SKU as unique or similar to others in the range helps retailers maximise the value they drive from space to boost customer engagement and conversion to sales.
Most retailers make pretty slim profit margins so winning slightly more customers, capturing sales a little more effectively and achieving a little more margin per sale can add up quickly to very significant growth in profit.
Mick: Retailers often plan the same allocation of space across categories to all stores in their network and often use aggregated sales or margin productivity averages to guide how much space each category gets. This results in pockets of poorly performing space that tie up slow turning inventory.
Large retailer networks typically span very diverse local communities and shopping centre types and these variations mean customers purchase a different mix of products across stores. Retailers who can tailor space allocations to the needs of these different store clusters can drive much stronger sales and margin from their network.
Range selection is an area where lots of factors can be considered to make good decisions on how to construct and present an effective, complete customer offer. A few issues I see pretty often include category managers making ranging decisions based on sales or margin without also considering unique product attributes that may be valued by customers; it also surprises me how often the best performing items don’t get ranged to all/most stores.
New lines are often being taken from suppliers with strings attached around how many stores get ranged… these new items need to displace an existing item in the range so it’s important to choose carefully and with an objective eye on how much the new line is actually likely to sell. CMs tend to be an optimistic bunch and this can mean low potential new items displacing proven performers that customers like.
Mick: It’s hard to go past the influence of online retail on shopper behaviour as the standout driver of change over the last few years. Presented with much more choice, price transparency and ways to shop who wouldn’t change where, when and what they purchase?
Mick: For several years, the retail sector in Australia has felt pretty challenged. The combination of online growth and international entrants in several retail categories has put consistent downward pressure on prices while costs have continued to creep up. In this environment, there will continue to be a lot of change, but it’s not all doom and gloom: good retailers keep growing and finding creative ways to manage their costs.
Mick: Get very proactive at eking maximum returns from their store assets through active space, range and price management. Stay focused on delivering strong service (hard given cost pressures). Continue to get better and leverage the rich data retailers capture each day to make better fact-based and customer-led decisions.