“Variety” remains a hugely important attribute for a successful retailer. Shoppers are magnetized to retailers in which they have the confidence that theirs stores carry a depth of items and categories, even if the shopper rarely buys them.
However, for the supermarket, the bottom half of the inventory behaves very differently than the top half, delivering only, collectively, about 5% of the total store sales. Simply, this means that all that merchandise is spending a lot of time sitting around doing a whole lot of nothing, in terms of going home with shoppers. Don’t overlook that those 18,000+ items at the bottom of the sales curve, deliver from 0.0007% of sales, more or less steadily down to 0.0000% of sales – less than 0.0003% of total store sales, on average!
These “Long Tail” items do play a role in attracting shoppers to the store, but as far as economics are concerned, it is “parked capital.” But for the retailer, variety comes the burden of carrying “parked capital”, that is the inventory holding costs of tens of thousands of items, many of which sell more than a case or two a year.
In stark contrast, Amazon and other e-commerce players are using its “no physical store” approach to great advantage, not having to deal with the burdensome holding costs of this “parked capital”
What to Do
Most retailers have intuitively placed higher demand, more frequently purchased items throughout the store in hopes that this positioning would “stretch” their shopper’s trips down aisle and parts of the store they would not necessarily have to visit, especially if their short and moderate trip’s needs were met in a more efficient layout. The neighboring chart indicates a fairly normal distribution of highly purchased categories sprinkled throughout the entire store. While some shoppers take the bait, most become frustrated and leave without many of the items that would have purchased had they been more convenient to find.
Accelerated Merchandising™ brings items that shoppers buy to the shopper. In that process shoppers are not forced to shop the entire store, but only the store they need to meet their needs. “Long Tail” items are still made available to the shoppers, but in such a manner than does not impede the purchase of the Big Head, that is the items that shoppers buy over and over again, week after week.
Not all items can be placed on the shopper’s dominant path. Those items that are less frequently purchased and are not permanently located in high traffic areas are candidates for cross merchandising and secondary placement in higher traffic areas.
Ultimately, Accelerated Merchandising™ offers a way forward for the retailer to transition many of its slower moving items out of the physical store but available to order via kiosk (in-side the store) for either home delivery or pick up in store on the shopper’s next visit.
Reorganizing and re-merchandising the store for shopper expediency allows the retailer to begin the transition of reducing the “parked capital” that slow moving inventory represents, without impairing the retailer’s “variety image”. In this process, shoppers have more time to buy as they have reduced their wasted time, traveling all over the store to find what they need. The results are impressive. Transactions size and trip frequency increases are only the tip of the iceberg when the items they want are presented to them on their “habitual path” through the store.