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EXECUTIVE
SUMMARY
Prepared for NARMS
by Willard Bishop Consulting, Ltd.
March 2000
DOCUMENTING THE
VALUE OF MERCHANDISING
NARMS
National Association for Retail Merchandising Services
Retailers and brand marketers are struggling with the issue of efficient implementation of
retail merchandising activities. They understand the direct impact that these activities
have in providing consumers with the right products, in the right place at the right time.
In fact, there are already a number of studies being conducted in this area. However,
until now, there have not been any studies that focus on documenting the value of
professional merchandising service organizations.
The National Association for Retail Merchandising Services (NARMS) recently
conducted an extensive study with Willard Bishop Consulting, Ltd. (WBC) entitled,
Documenting the Value of Merchandising. NARMS commissioned this study to help
retailers and brand marketers understand the importance of getting it right at retail and
how the skills of professional merchandising service organizations can be used to
enhance planogram implementation and new product introductions. This executive
summary highlights the most significant findings of that study.
NARMS conducts and publishes ongoing industry research as well as offering
educational networking forums. NARMS members provide quality professional
merchandising services to all classes of trade, such as: grocery, drug, discount,
department, hardware, home and building centers, computer/office supply, electronic,
specialty, and convenience retailers.
NARMS can be accessed on the world wide web at: http://www.narms.com.
Executive Summary 1
Background & Objectives
Background
Evolutionary market pressures are affecting the way brand marketers and retailers conduct
business.
! Brand marketers are downsizing and, in some cases, shifting away from a direct
field sales force.
! At headquarters, retailers are moving to centralized buying.
! At stores, retailers are increasing customer service.
! Both brand marketers and retailers are experiencing the effects of an unprecedented
labor shortage.
In this environment, many retailers are devoting less attention and fewer resources to
merchandising their stores, while category management and the surge in new product
introductions are increasing retail labor demands. Therefore, stores are systematically
losing sales because of inadequate attention to inventory and display issues. Professional
merchandising service organizations have a significant opportunity to supplement current
n
merchandising activities in a way that benefits brand marketers, retailers—a d most
important—consumers.
Many brand marketers and retailers are, however, unaware of the advantages that can be
achieved by using merchandising service organizations. This study is designed to measure
the sales impact of merchandising service organizations and provide retailers and brand
marketers with an indication of the benefits that can be achieved by using the services of
merchandising service organizations.
Objectives
The objective of this study is to document the increased sales potential and enhanced
shelving efficiencies of using merchandising service organizations. Specifically, the study
documents the benefits achieved from merchandising in two critical areas.
Merchandising Activity Benefit Measures
1. Implementing & maintaining ! Percent of planogram compliance
planograms ! Sales lost because of slower implementation
2. Cutting-in new items ! Speed to shelf
! Sales lost due to slower speed to shelf
These two areas were chosen because of the increased demand for these activities brought
about by category management and the increase in new product introductions.
Executive Summary 2
Approach
Design
This research project features a 13-week test/control store study at two leading retailers. A
group of study stores were chosen and divided into two matched panels.
Control-Test Study
Control Store Panel Test Store Panel
Baseline
No Change period No Change
(13 wks)
Merchandising
Store Test
service
Gradual Immediate organizations
responsible period
Change (13 wks) Change responsible for
for shelf
shelf
Difference Difference
% Change
Execution
As soon as decisions about new planograms and new product cut-ins were made at retail
headquarters, merchandising service organizations conducted a scheduled planogram reset,
cut in selected new products, and revisited these test stores every week to maintain the reset.
Control stores practiced busi ness as usual, wi th the store responsible for any resets or new
product cut-ins.
On a weekly basis, merchandisers tracked planogram compliance and new product cut-ins
across 17 categories at both test and control stores. Additionally, WBC collected POS data
for each test and control store.
! Baseline—13 weeks of hi
storical scan data from the period immediately preceding the
start of the study.
! Test—13 weeks of scan data from th study timeframe.
e
The information from the in-field reports and retailer POS data was analyzed to quantify the
impact of merchandising compliance. Additionally, WBC interviewed retailers participating
in the study to further substantiate the findings of this study.
Executive Summary 3
Key Findings: Planogram Implementation
There are three key findings in this executive summary that will demonstrate to retailers
and brand marketers the significant benefits that can be achieved by using professional
merchandising service organizations for planogram implementation.
1. Merchandising service organizations implement planogram resets faster
than retailers current methods.
Merchandising service organizations implemented new planograms in the test stores
within two weeks after the introduction of the new planogram. However, the majority of
the control stores did not complete the reset within the same two-week time frame. In
fact, a large portion of the control stores were unsuccessful in implementing the reset
during the entire 13-week study time frame.
Length of Time to Implement Planogram Reset
(% of Stores Implemented)
100%
100%
90%
80%
70%
60%
56%
50% Test Stores
40% (Supported by
Merchandising
30% Service
Organizations)
20%
11% Control Stores
10% (No Merchandising
Service Organization
0% Support)
1 2 3 4 5 6 7 8 9 10 11 12 13
Weeks
Traditional in-store support is stretched so thin that planogram implementation may not
occur as often as retailers would like. This is demonstrated by the fact that 44% of the
control stores were unable to complete the reset within the study timeframe. Professional
merchandising service organizations were able to implement the resets quickly, because
they could focus all their attention on the job at hand.
Executive Summary 4
Key Findings: Planogram Implementation
2. Merchandising service organizations had a higher quality of initial
planogram compliance than retailers current methods.
All the test stores serviced by merchandising service organizations implemented the reset
to 100% compliance with the planogram (i.e., the shelf perfectly matched the planogram).
However, the average rate of planogram compliance among the control stores that
implemented the planogram reset was only 78%.
Initial Planogram Compliance
(% of Compliance)
100%
78%
Test Stores Control Stores
(Supported by (No Merchandising Service
Merchandising Service Organization Support)
Organizations)
The high level of planogram compliance achieved by merchandising service organizations
is a clear demonstration of one of their core competencies. This competency is further
enhanced by the fact that merchandising service organizations also maintained the
planogram at a compliance rate of 98% during the 13-week test period. In fact, the only
reason merchandising service organizations were not able to maintain a rate of 100%
compliance was due to out-of-stocks.
Since merchandising service organizations can focus on efficiently conducting and
maintaining the reset, they not only implement planograms quickly, but maintain them at
an optimal level of compliance.
Executive Summary 5
Key Findings: Planogram Implementation
3. Faster, more accurate planogram implementation and maintenance
provided by merchandising service organizations boosts sales and
profits.
While the lift in sales can vary by category, it is clear that the efficient planogram
implementation and maintenance provided by merchandising service organizations can
increase sales.
Sales & Profit Lift* in
Typical Test Category
7.8% 8.1%
Sales Profits
Faster, more accurate planogram impl ementation and maintenance provided by
merchandising service organizations resulted in a typical category sales lift of 7.8%.
This lift in sales also provided the retailer with an 8.1% increase in profits. It is
important to keep in mind, however, that the amount of lift can vary by category, as
well as:
! the condition of shelf prior to the reset.
! the impact of the new planogram.
* Lift is the incremental increase in test stores over and above changes in the control
stores.
Executive Summary 6
Key Findings: New Product Cut-Ins
New items are being introduced at record rates, and securing immediate shelf distribution is
paramount to the success of a new item. However, speed-to-shelf isn t alway s emphasized at
store level. Since new items build category sales and increase consumer satisfaction, getting
new products to the shelf quickly is key, and the following three key findings demonstrate
the effectiveness of merchandising service organizations in new item speed-to-shelf.
1. Many retailers have difficulty cutting in new products, but merchandising
service organizations get new products on the shelf in a fraction of the time.
With so many demands placed on the retailer, cutting in new products is not happening as
quickly as retailers would like. Here are two quotes from retailers.
! W e have 100 things to do and only enough time to get to 50 of them. When we
have time available, we ll cut in new items.
! It can take us weeks or months to cut in a new item.
Unfortunately, cutting in new items is frequently not at the top of the retailer s m any
priorities.
To illustrate this, fully 85% of the cut-ins completed by merchandising service organizations
were done within two weeks of the date the product was authorized, while only 28% of the
new cut-ins were completed in the control stores.
New Product Cut-Ins
(% Completed Within Two Weeks of Authorization)
85%
28%
Test Control
(Supported by (No Merchandising Service
Merchandising Service Organization Support)
Organizations)
Importantly, the primary reasons that merchandising service organizations were unable to
complete 100% of the new product cut-ins are:
! product did not arrive in the store.
! product was not entered into the POS system.
By contrast, in some of the control stores, it s li kely that new product had been delivered and
was in the POS system, but had not been shelved.
Executive Summary 7
Key Findings: New Product Cut-Ins
2. During the study, merchandising service organizations eventually
implemented 98% of the new product cut-ins, while retailers could only
implement 60%.
New Product Cut-Ins
(% of Cut-Ins Completed During the 13-Week Test)
Test Stores Control Stores
(Supported by (No Merchandising Service
Merchandising Service Organization Support)
Organizations)
Cut-In Not
Cut-In Implemented
Completed 40%
Cut-In Not
98%
Implemented
Cut-In
2% Completed
60%
Merchandising service organizations achieved a new product cut-in rate of 98%. This
rate would have been 100% if the retailer had been able to enter all the new product cut-
in items into the POS system within the timeframe of the study. This modest shortfall
highlights the importance of not only focusing on speed-to-shelf, but also putting
attention on properly coordinating each new item introduction with all involved parts of
the business.
The results show how merchandising service organizations improve the speed-to-shelf
opportunity for new item cut-ins. So, if speed-to-shelf and enhancing the consumer
shopping experience is important, merchandising service organizations can play a critical
role in ensuring that consumers can find the new products they want.
Executive Summary 8
Key Findings: New Product Cut-Ins
3. Faster implementation of new product cut-ins can provide substantial
increases to the bottom line.
In a period of less than two months, faster implementation of new product cut-ins by
merchandising service organizations provided the test stores with 45% more sales dollars
from new items than the control stores, where there was slower speed-to-shelf.
Sales from New Product Cut-Ins
(8 SKUs/8 Weeks)
$1,031
$711
45%
Control Stores Test Stores
(No Merchandising Service (Supported by Merchandising
Organization Support) Service Organizations)
Typically there are an average of 20,000* new item introductions each year, and
merchandising service organizations can get these products to the shelf faster, providing an
increase in sales dollars of approximately 45% from the sale of these new products.
Retailers and brand marketers cannot afford the risk of not getting new products to the shelf
quickly, especially when:
! Retailers are striving to be fi rst to shelf wi th new item initiatives to please their
consumers.
! Brand marketers want consumers to be able to find their new products, particularly
after making a significant investment to develop and promote new products.
Using merchandising service organizations to implement new product cut-ins gives retailers
and brand marketers a way to increase their share of market while also enhancing the
shopping experience for their customers.
*New Product News
Executive Summary 9
Summary and Conclusion
It is becoming increasingly difficult to meet consumer needs, as changing demographics and
lifestyles give rise to an increasingly complex consumer base. Consumers are more
sophisticated and are demanding more from brand marketers and retailers, expecting to have the
right products, in the right place at the right time.
This evolving and increasingly more sophisticated marketplace has created a need for retail
execution systems that are accurate, timely and disciplined. Merchandising service
organizations were created to fulfill the unmet needs of the marketplace and have emerged as the
logical choice to provide effective retail execution solutions for both retailers and brand
marketers.
Planogram Implementation
In the area of planogram implementation, merchandising service organizations have
demonstrated their superior ability to implement planograms.
! Merchandising service organizations implement planogram resets faster than retailers
current methods.
! Merchandising service organizations have a higher quality of initial planogram compliance
than retailers c urrent methods.
! Planogram implementation and maintenance services provided by merchandising service
organizations can provide a typical category sales increase of 7.8%.
Merchandising service organizations eliminate the retailer s current dil emma of struggling to
find the time and resources necessary to conduct category resets. The services supplied by
merchandising service organizations are applicable across the store and are more productive than
current retail practices.
To realize the full potential of effective retail implementation by merchandising service
organizations, retailers and brand marketers need to focus more management attention on the
process. The three key steps are:
1. Evaluate current planogram implementation processes and identify opportunities for
improvement.
" Is implementation complete and timely?
" Does the implementation process make efficient use of resources?
2. Prior to scheduling a reset, make sure planogram is:
" expected to produce a significant sales increase.
" covers most or all of the actual store conditions.
Executive Summary 10
Summary and Conclusion
3. For each reset, provide the implementation team with the tools necessary to get the
job done.
" Detailed planogram (color preferred) and supporting documentation
" New product and discontinued product lists
" Shelf tags
" Equipment and supplies
New Product Cut-Ins
Regarding the introduction of new items, merchandising service organizations improve
speed-to-shelf, which in turn has a meaningful sales impact for retailers and brand marketers.
Merchandising service organizations:
! get new products to the shelf faster than retailers c urrent methods.
! implement 98% of the new product cut-ins, compared with the retailers abi lity to
implement only 60% of the new product cut-ins.
Faster implementation of new product cut-ins has tremendous sales potential and can provide
a boost in sales of approximately 45%.
Brand marketers and retailers understand that new items build categories, and improving
speed-to-shelf of new products brings a lift that much sooner. Until now, however, they did
not know there was a lag.
Merchandising service organizations bring the urgency to speed-to-shelf and provide brand
marketers and retailers with other benefits through their enhanced services.
To help ensure fast, accurate new product speed-to-shelf by merchandising service
organizations, retailers and brand marketers should make sure that each store has:
! the new product available.
! entered the new product into the POS system.
! plans for where the new product will go on the shelf.
! shelf tags available.
The space crunch, exacerbated by consumer demand for increased variety, makes it
mandatory that retailers and brand marketers find effective methods to achieve speed-to-
shelf. In fact, the future health of the retail and consumer products industries depends largely
on the creation of new retail execution programs that provide timely, accurate, efficient, and
disciplined implementation of category plans and new product introductions.
Executive Summary 11
Acknowledgments
NARMS thanks its Board Members for their dedicated guidance and participation in this
study.
Pat Blackwell Jim Hall
A.I.M. Field Service Advanced Retail Merchandising
Alex Yakulis Lori Sakorafis
CROSSMARK Sales & Marketing Kelly Merchandising Resources
Leslie Gorman Ralph Bartolotta
Merchandising Specialists Gage Merchandising Services (PIMMS)
Vincent N. Willis Chuck Belding
Storecast Merchandising Corporation Team Management, Inc.
Brian Ferris Gary Ebben
Total Merchandising Services Executive Director - NARMS
NARMS would also like to thank the participating retailers for their cooperation in this
important study. This study would not have been possible without their support.
Additionally, the Association acknowledges Willard Bishop Consulting for their
leadership on the project. The firm has been a leader in improving shelf planning and
retail implementation. This experience and expertise is reflected in the study results.
The National Association for Retail Merchandising Services and its 190 member
companies represent the Professional Merchandising Service Industry on a national basis.
Its members perform well over $1 billion in merchandising services each year. The
association promotes the benefits associated with professional merchandising service
organizations, and establishes industry standards for merchandising performance. Its
membership includes: brand marketers/suppliers with i n-house m erchandising
divisions, sales and marketing companies with merchandising companies or divisions,
independent professional merchandising service organizations, and fixture and assembly
companies. NARMS members are the industry.
For more information, or to order a copy of the study contact:
National Association for Retail Merchandising Services
P.O. Box 906
Plover, WI 54467
715-342-0948
Or, visit our web site at: http://www.narms.com.
Executive Summary 12
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