Here are expensive errors found during random store walks, and ideas on how to fix them.
Just got back from walking through several retailers’ frozen food sections, and I’m disappointed but not surprised by what I saw. First, I have always felt that store brands are an alternative to national brands and are needed only to fill a void in the category. Maybe the national brand isn’t offering good value or quality to the customer, or is overlooking a potentially great item.
DOING THE UNTHINKABLE
But adding a store-brand SKU just to add another SKU is unthinkable. We always had standards that any new item had to meet before we set off spending the suppliers’ money on developing it. But on my store tour, I saw packaging of items that I couldn’t believe. The same picture of the item was used on several different flavors and the only way to tell them apart was by a thin color band (red for strawberry, yellow for vanilla, etc.) and the flavor was called out in the matching color.
I’m guessing that neither the buyer nor the packaging design team have actually stocked frozen cases, or even shopped them much. To make a stocking crew take the extra time to figure out where to put the item in the correct place — or to expect the customer to notice that you really have several flavors and not just one — makes no sense to me.
But to make sure, I asked several customers. They agreed with me. One of them said, “Why do some of the packages of store brand items in the same category look so much different and not in a good way?” Another pointed to one SKU that looked almost generic while the one next to it looked like the premium national brand. This was sending out mixed messaging to shoppers on what the quality of the brand actually was.
Then I asked the associates stocking the section for their thoughts and —wow! — they were not shy either. Their comments ranged from, “How many more SKUs do they think we can put in the case as we’re down to one facing on 90% of everything” to, “How do they expect us to put this on the shelf, or have the customer take it off, when there is little to no room to squeeze it in?”
So perhaps it would behoove the buyer(s) and packaging team to spend some time out in the stores talking to the real experts — the associates and customers. By the way, I saw several items on the shelf that had the same retail as the national brand. So while the buyers and packaging team are out there, let them take a look at retails, margins and shelf placement based on volume and size of items.
Asking the customer to get down on their hands and knees or get up on their tippy toes is asking a lot. I had the store manager ask me, “Do they think we only have basketball players that shop with us? I can’t even reach the top shelf!” Here is something I was told by a wise groceryman when I started out in buying: “Think like a customer and not a buyer. Respect customers’ time by making the shopping experience as simple and easy as you can. Buy what the customer wants and not what you like.”
Next, I came across a single frozen dessert SKU specifically designed for Valentine’s Day. Really… one SKU? Stop for a minute and think about the cost and time to develop this cute SKU, which in less than 30 days will be on its way to markdown alley. What real value did it offer? Hopefully there was no packaging stock left over. Did this one item take up space needed in the category? To me this was a perfect example where good category management and store brand integrity was completely overlooked at the expense of the supplier and retailer.
But it gets better (or worse!). Two sections down, I noticed two new SKUs that category data suggested — to me at least — will fail. But what really blew me away was that the item was created not to go against a national or regional brand, but to be a knock off of a specialty one of a kind item, and to make it worse the buyer priced it with the exact same retail as the knock off item! So, there was no brand comparison, no price value relationship and I’m guessing not much of a profit difference either, taking up space on the shelf and in the DC for what purpose?
So once again, why go through the time and expense to develop the item if it has no value? This is not the first time I’ve seen this done. At some point in time the original SKU will disappear from the shelf, leaving only the new store brand SKU. Alone it will sit, not having a national brand to compare its price or quality to, and no other SKU to have to justify its creation or position on the shelf. Just another SKU created outside what I’ve called the rules of store brands.
My last observation is what I’ll call “If one SKU is good, 10 must be better.” The ice cream category has gone way past the Baskin Robbins 31 original flavors (one for each day in a month) to the flavor explosion that exists today. Baskin Robbins flavor library today actually totals 1,400! Perhaps supermarkets feel they have to top that number. “Hmm.. how many can I fit on the shelf, how many pints will the customer pay extra for over the larger size?” So now we’re seeing mac and cheese ice cream and novelties that are, to be kind, “novel.”
And look at the pizza category. According to pizza
recipe.org, there are 687 varieties of pizza in the world today. I know some retailers try to stock them all, but let’s look first at category profit, margin and in-stock rates.
THE 80-20 RULE
Consider how often 80% of the volume comes from 20% of the brands, and how tight space is in frozen. If additional flavors are needed, let the brands do the heavy lifting. Then, take on the successful items for store brands. Again, store brands are an alternative to the national brand, not a replacement.
Remember, store brands must have not only quality (product and packaging) equal to or better than the national brand, (note the key word “national”). They also must retail for less while still producing higher margin and profit than the national brand. If not, these items only damage the store brand while costing the retailer and the supplier a lot of money. n
Bob Anderson is the retired VP/GMM at Walmart, where he worked for 17 years. He can be reached at email@example.com.