I got a call from a former Dominick’s colleague of mine who is responsible for store operations at a 10-store independent chain of supermarkets. He knew I was doing a little consulting after having recently semi-retired from a 10-year run with Sun Pacific and asked me to spend some time in his chain. I was to evaluate the merchandising in the fresh areas of the stores and make recommendations.
With 40 years of retail experience before joining Sun Pacific, I thought this would be a relatively simple project. However, I soon learned that a top-down direction to the stores was preventing good merchandising practices. The President had issued an edict to control shrink.
As I went from store to store, very few merchandising presentations were effective. The stores were afraid to put merchandise out for fear of shrink, and the produce departments looked like a “Going Out of Business” sale.
It was clear that there would be little to no change without buy-in from the President. After a discussion outlining what I wanted to change, he agreed to go along for 90 days and then measure the results. He asked me to prepare a written outline to review with his management staff.
Something I’d like to clarify before moving forward is that there are no revelations for merchants in what follows here, but there might be one or two concepts that fell by the wayside: You don’t control shrink. You reduce it by managing inventory and driving sales.
Good merchandising starts with the right product. Does your assortment in each store align with the neighborhood and the demographics it serves? If not, fix it.
Take a step back, clear your head, and ask yourself if your merchandising strategy is compelling.
With good-quality product, produce shouts “fresh” like no other department. It is a category that offers unique shapes and sizes and vibrant color breaks, but the displays must be fresh and appear bountiful with seasonally correct items that scream “Buy me!”—compelling customers to make a purchase.
Take a step back, clear your head, and ask yourself if your merchandising strategy is compelling. Keeping just one layer of apples on a flat dry table is not compelling and will not lower shrink or drive sales. Cluttering a department with racks and racks of non-perishable items does not lower your shrink dollars. It only serves to take away customer space and detract from making a “fresh” statement.
When merchandising is compelling, the fixtures don’t stand out…the merchandise does. Use just one or two items on a display to make a statement. Keep your lines of sight open so that your customers are surrounded by great merchandising and feel like they are shopping in an open market.
The amount of inventory on a display must align with that store’s volume and rate of sales, and so should the reserve stock. In my experience, this is where good merchandising and art intersect. It takes artistry to build impactful displays in all stores—the low, the medium, and the high-volume ones. In many cases, it’s the art of making a little look like a lot.
Use angles, risers, inserts, multiple elevations, empty cartons, or whatever you need to “dummy up” the amount of inventory on display without sacrificing impact. This is how you manage inventory on the sales floor to your rate of sales. And this is how you promote good rotation practices to ensure freshness while driving sales…and those sales are your best rotation.
When you do this, you won’t be controlling your sales—you will find that the rate of sales increases over time, and you can discover how high that high really is.
If the end game is profitability, you can’t look at shrink as an isolated metric. Certainly, you can’t approach it just as a percentage point. You don’t pay the bills with percentages; you pay them with dollars. To maximize profits, you need to manage topline sales, margin dollars, expenses, and shrink to achieve the best outcome.
You don’t control shrink. You reduce it by managing inventory and driving sales.
Figuratively speaking, the pencil is a powerful tool to help manage inventory and shrink. Ordering the right amount of product is a crucial piece of good merchandising. Do you need to invest in more training or allocate more resources to help store personnel (or buyers) order product just in time? Are you providing any projections, history, or movement data to help? If you are using POS software to generate store orders, do the stores have the ability to adjust up or down for weather, seasonality, or any other elements that affect sales?
We always preach the importance of price signs to promote sales, but this is an area of inconsistency across all retail. Signs sell merchandise. If you issue layouts or plan-o-grams to allocate space for your assortment, I suggest you leave some “flex” space for micro-merchandising the products that meet the needs of the neighborhood and store demographics. One-size-fits-all does not allow individual stores to maximize sales. Flex space can also be used to merchandise excess inventory. For example, don’t stare at the extra two pallets of strawberries in the cooler when you can build a display and sell them now!
As you continue to open stores, at some point you should consider a teacher or mentor to work with store personnel. A produce field specialist who can teach, train, and steer store personnel well on the art of merchandising, as well as the basic blocking and tackling they need to execute for clean, fresh, well-merchandised, and profitable departments is invaluable.
Good merchandising focuses on driving and building sales while at the same time managing shrink, expenses, and margins. It really isn’t rocket science!
As for the end of that story, this particular independent did not have the systems to support analytics or category management. I did discuss the importance of analytics to evaluate and manage assortment, margin, rate of sales, inventory and days on hand, shrink, and other important metrics with the President who, by the way, became a big believer after the first 90 days!
Bob DiPiazza began his retail career with Dominick’s Supermarkets, where he advanced to the position of Group VP of Perishables. A graduate of Loyola University in Chicago and a past Chairman of the PMA, Bob joined Walmart Stores Inc. in 1998 and shortly after was promoted to Senior VP and General Merchandise Manager of Sam’s Club US Perishable Food Operations. Bob retired from Walmart in 2008 to return home to Chicago and his extended family. He continued to remain active in the industry as the Principal for a strategic consulting business specializing in the perishable food supply chain.
In 2008, DiPiazza Consulting entered into an agreement with Roundy’s Supermarkets to develop the Mariano’s Fresh Market stores for entry to the greater Chicago area market and with Sun Pacific Growers for business and marketing development programs and strategies. In 2011, Bob was appointed President of Sun Pacific Marketing, a leading California grower, shipper, and marketer of citrus, grapes, kiwi, and tomatoes. He recently completed a 10-year run and is once again focusing on his consulting business as an industry advisor.