Conclusion Game-Changing Retail: A Manifesto In the seven years since we published the first edition of this book, retailers around the world have practiced and proven the scientific retailing principles summarized below. Here is a distillation of critical action points that will lead to double-digit sales and profit increases. Some retailers have achieved as much as five times more sales over the past many years by deploying these principles. The single greatest update to the first edition of this book is our analysis of the relative strengths and weaknesses of both bricks-and-mortar retailers and online retailing. Both modes have inherent strengths, but 100 years of successful bricks retailing with little change in the rules of competition have imbedded weaknesses and unrealized strengths in that mode. The emergence of online and the entirely new set of rules it brings poses both opportunity and risk for the bricks retailer. Amazon is not the only competition for bricks retailing that is winning by the new rules. Globally, all of the Big Head stores are knocking the ball out of the park. Costco has now climbed to the #2 global position, behind only Walmart. Lidl and Aldi are also thriving with Big Head stores, as has Stew Leonard's for many years. In spite of this, Long Tail stores like Walmart continue to disastrously manage their Big Heads and are a long way from posing any serious long-term competition to Amazon. In Chapter 1 , we outline the problem in more detail, including an outline plan for the way forward. Here we again outline a manifesto, with distinguishing programs for retailers and their brand suppliers. The adage "The good is the enemy of the great," is possibly nowhere more applicable than in retailing. With a global population nearing seven billion, the world demand for goods and services is swelling. The movement from developing societies using traditional retailing to highly developed societies adopting modern retailing continues apace. Demand alone has been the driving force behind good retailing, globally. A striking feature of good retailing has been an almost single-minded focus on matching the right selection of merchandise to the customer base, with little or no regard to the time it costs shoppers to acquire the merchandise. Good retailers, with their suppliers' complicity, regularly squander 80% of their shopper's time. Great retailers will make productive use of that lost time. This is the dominant advantage of Amazon's selling: Amazon can match specific products with specific shoppers with incredible efficiency that bricks retailers largely ignore (see Chapter 3 ). A new movement in retailing will change the global game. The principles outlined next are listed roughly in terms of urgent priority for those who aspire to survive and thrive when their competition is not simply good, but great! In most cases, the advance is one of recognizing important distinctions, and responding appropriately and distinctly, rather than leaving it to shoppers to sort it out for themselves. Although all of these principles are relevant to both retailers and their brand suppliers, the first five deserve the greatest attention by retailers, whereas the last five are most relevant to suppliers: Focus on the short trip. For supermarkets around the world (the same principle applies to all classes of trade), half of all shopping trips result in the purchase of five or fewer items, with one item being the most common. These short trips typically account for one-third of store sales. The new strategy is to increase the size of each of those baskets by one or two items. Quick trippers spend money very fast, and getting them to buy one or two more items is far easier than motivating stock-up shoppers to buy ten or twenty more items. This focus on the quick trip could deliver an easy 30% sales lift and a lot more when the synergies with other types of trips become apparent. Focus on the vital few items that drive success. Fewer than 1,000 items, and perhaps as few as 100 , make the difference between good retailing and great retailing. Which ones are they? Just as the store transaction log tells how many items are in each shopper's basket (Focus 1), it also identifies the exact items. Dump all the baskets together, sort them by item (SKU, UPC, EAN, PLU, and so on), count each item, and rank them from the highest-selling to the least-sold. Your shoppers vote every day for what they want to buy. Good retailers don't know or don't care about this, but great retailers do. Good retailers are obsessed about what they and their suppliers want to sell to shoppers. Great retailers are obsessed about what shoppers want to buy! Display the vital few (or the Big Head) along the Dominant Path your shoppers take. Good retailers expect shoppers to find the merchandise they want. Great retailers learn all they can about what the shoppers want and take it to them! This, of course, presupposes a modicum of understanding about the shopper's Dominant Path. Good retailers are unsure. Great retailers have this down pat. Points #2 and #3 are components of the new science of item management, a far sharper instrument than the category management used by all good retailers. Point #3 distinguishes high-value real estate within the store from the rest. The most important promotion is place, not price. In a typical store, retailers promote 2% of the total items in the store at any one time on end-of-aisle displays or other secondary promotional displays. This 2% of items may constitute a full 30% of all the sales in the store. However, half the shoppers who purchase an item from one of these promotional displays are unaware that it is at a reduced price. Of the half of the shoppers who are aware, half of them do not care about the price. Good retailers are locked in a mindset that price considerations dominate shopping. Great retailers realize that there are other currencies that matter to shoppers in addition to money: time and angst. Great retailers focus on value and convenience. Convenience means fast. Using less of the shopper's time will lead to more sales. Hence, Sorensen's primary principle of retail sales: The faster you sell, the more you will sell. Open space attracts! Shoppers compete with products for space in the store. Good retailers might be oblivious to this competition, and freely tip the balance in favor of the products over the shoppers. Jamming the store with products creates lots of narrow aisles and psychic discomfort for shoppers. Great retailers refuse to sacrifice shopper space, and use wide promenades to lead crowds of shoppers through a speedy, efficient, high-dollar trip. The allocation of open space is of paramount importance in store design, but there is no single recipe for success. The following five principles are more closely aligned with the concerns of brand suppliers: Balance the role of your store's vital few with the rest of your extensive line. Keep offering the Long Tail, but make it easier for the shopper to reach the vital few items they want to buy: the Big Head. Although sales of the other 30,000 plus items, the Long Tail, do add up to significant sales and profits in aggregate, on an individual basis they are not consequential in total sales. They play a far different and distinct role. The Long Tail attracts shoppers to the store, but when they get there, they buy a habitual, predictable, select few items from the Big Head. Amazon's reputation as the "Everything Store" reassures me that I can always find the few books I want to purchase each month among the 50 million they have in stock. But Amazon would go out of business if every time I logged onto their site I was forced to spend hours searching through thousands of books that did not interest me in order to find the one or two I wanted to buy. Amazon has reached the pinnacle of retail (conceptually) by quickly and efficiently delivering to its shoppers exactly what they want, exactly when they want it. This is the challenge for all retail stores, online or offline: How do they maintain the huge product selection that assures shoppers the store has anything they might desire without suppressing sales by burying the vital few items they will buy from that massive selection? The key is distinction, so that the shopper can immediately reach and recognize the vital few. Paying to get your own vital few into favorable placement within the store makes sense, depending on the "reach" of the location. To make a sale, you must reach the shopper with the product, then the product must stop shoppers, and then you close the sale. As noted in point #4, place is more important than price. In fact, charging cut prices at high-value promotional locations devalues both the real estate and the brand. Selective price promotion would be more appropriate for Long Tail items displayed inaisle, and particularly for those items that are closest in sales rank to the vital few. Focus on the vital few within your brand and that of your competition. Some of your own vital few will not make it into the retailers' vital few. Just as retailers can more readily obtain double-digit sales increases for their vital few, so you can more easily turn your top few sellers into super performers than bring up the laggards. Again, Long Tail principles apply-the Long Tail attracts, and the vital few sell. Maintaining a reasonable Long Tail is essential both for purposes of attraction, as well as for the competitive imperative. Make clear distinctions in your planning and thinking on these issues. Reach you can buy, but stopping power and closing power are inherent to the product, primarily through the package. Both stopping power and closing power can be measured for individual products, as well as for categories. The significance is that some products are good at attracting attention but poor at closing the sale, whereas others are good at closing, but can't seem to stop the traffic. Besides remedial package design, appropriate shelf management and promotional strategies can increase the stopping and closing power of existing products. Stores are excessively verbose. Products and packaging are a significant part of the clutter. Using iconic images, colors, shapes, and appropriate emotional totems is a better way to connect to shoppers than more words. Using category reinvention, you can upgrade the emotional feel of an entire aisle or department. The coffee aisle, for example, can be redesigned to give it a caf ambiance. Remember, the goal is to make your winners win bigger. This will be more easily done with large displays that you can dominate-appropriate to your vital few. And now on the near and far horizon, digital media, even interactive media, is a tool of greatest value to you as the brand owner. This means that you can win even in good retailers. Great retailers will expect and appreciate your cooperation with game-changed retailing! The Package is the Brand's Ambassador In general, there are two types of research: laboratory and real-world (or natural). The laboratory variety typically consists of conducting experiments in a carefully controlled environment, where everything except the factors being studied are held constant. This type of research presumes that the researcher knows what needs to be studied, and can hold all factors not being studied constant. Then one factor is varied systematically, to see its impact on another factor. The vast majority of my retail studies have been conducted in stores, where controlling things is nearly impossible. Not all of my research, but a large share of it, is real-world. Here's a small study with large implications-the evolution of four brand images over time, varying over anything from a few weeks to a century. You'll see why, and hopefully learn some valuable things about brand value and the use of packaging for communication. Consider the four examples in Figure 11.1. Figure 11.1 After potentially billions of impressions to the subconscious of millions of your customers, make changes to your identity with fear and trembling! In every case, the reality is that the package on the top was much more successful than the one on the bottom. In general, the images on the top seem simpler, cleaner, with the images on the bottom being more cluttered, and therefore actually poorer in communicating with shoppers. Without going into confidential detail on any of these, the first example (the two gums on the left) illustrates an Olympic promotion that actually suppressed sales, just as the third example (the two orange juices) seriously suppressed sales when shoppers actually could no longer find their familiar orange juice. The second example (the two soaps) had two things going for it in raising sales of soap. Obviously the top image (and text) is much simpler and cleaner. But it also makes use of the "crowd-social marketing" we highly applaud. That is, why wouldn't anyone, unless totally committed to something else buy something that is "America's favorite?" And sure enough, the simpler, cleaner package delivers more sales. The fourth example (the two soup labels) illustrates the "evolution" of a label over a 100 -year period! Actually, it is more like non-evolution, given how slight the changes. But this is brilliant marketing, fully leveraging the massive investment in the brand-by shoppers-over a very long period. This is habitual marketing at its best. The first three are not total disasters on this point-well, maybe #3 is. Remember Neale Martin's "Habit: The 95% of Behavior Marketers Ignore?" #2 Makes a change by replacing a complicated statement with a simple statement, whereas #3 virtually obliterates anything that might be associated with the brand at the habitual, subconscious level, built up over probably billions of exposures. These are just a few of the principles that can be extracted from the research that informs this book. Although these general principles hold across many retail settings and types of products, precise solutions need to be tailored to the specific context. Above all, great retailers and brand owners continue to experiment. They test to find out what works, and what doesn't, so they can continue to improve their strategies. This rigorous investigation and testing is how we arrived at the principles discussed previously. Good retailers and brand suppliers, on the other hand, stick with the tried-andtrue conventional wisdom. But as the world changes through new technologies, consumer shifts, and new competitors, the great retailers and brand suppliers create the new conventional wisdom and tailor it precisely to their own situations. In that context, the preceding ten points represent an initial hypothesis for this process of ongoing experimentation. Review Questions 1. Why should an active retailer focus on short trips? 2. How do you identify the few critical items of the Big Head? 3. What is the role of the Big Head and Dominant Path in item management? 4. Discuss why price discount might not be as important to promoting a product in a store as the prime location in-store. 5. What is the role of open space in shopper navigation and directing shopper traffic to achieve better reach? 6. Consider the role of the Long Tail. How do you manage it more effectively? 7. What can brand managers negotiate with retailers to increase reach to their products/brands? 8. What can retailers and brand managers do to reduce in-store clutter and streamline shopper environment in a category? In an aisle? In the entire store? 9. What is the role of packaging in shopper navigation? What principles should be used in packaging design to make it work in-store in the long term? Conclusion Game-Changing Retail: A Manifesto In the seven years since we published the first edition of this book, retailers around the world have practiced and proven the scientific retailing principles summarized below. Here is a distillation of critical action points that will lead to double-digit sales and profit increases. Some retailers have achieved as much as five times more sales over the past many years by deploying these principles. The single greatest update to the first edition of this book is our analysis of the relative strengths and weaknesses of both bricks-and-mortar retailers and online retailing. Both modes have inherent strengths, but 100 years of successful bricks retailing with little change in the rules of competition have imbedded weaknesses and unrealized strengths in that mode. The emergence of online and the entirely new set of rules it brings poses both opportunity and risk for the bricks retailer. Amazon is not the only competition for bricks retailing that is winning by the new rules. Globally, all of the Big Head stores are knocking the ball out of the park. Costco has now climbed to the #2 global position, behind only Walmart. Lidl and Aldi are also thriving with Big Head stores, as has Stew Leonard's for many years. In spite of this, Long Tail stores like Walmart continue to disastrously manage their Big Heads and are a long way from posing any serious long-term competition to Amazon. In Chapter 1 , we outline the problem in more detail, including an outline plan for the way forward. Here we again outline a manifesto, with distinguishing programs for retailers and their brand suppliers. The adage "The good is the enemy of the great," is possibly nowhere more applicable than in retailing. With a global population nearing seven billion, the world demand for goods and services is swelling. The movement from developing societies using traditional retailing to highly developed societies adopting modern retailing continues apace. Demand alone has been the driving force behind good retailing, globally. A striking feature of good retailing has been an almost single-minded focus on matching the right selection of merchandise to the customer base, with little or no regard to the time it costs shoppers to acquire the merchandise. Good retailers, with their suppliers' complicity, regularly squander 80% of their shopper's time. Great retailers will make productive use of that lost time. This is the dominant advantage of Amazon's selling: Amazon can match specific products with specific shoppers with incredible efficiency that bricks retailers largely ignore (see Chapter 3 ). A new movement in retailing will change the global game. The principles outlined next are listed roughly in terms of urgent priority for those who aspire to survive and thrive when their competition is not simply good, but great! In most cases, the advance is one of recognizing important distinctions, and responding appropriately and distinctly, rather than leaving it to shoppers to sort it out for themselves. Although all of these principles are relevant to both retailers and their brand suppliers, the first five deserve the greatest attention by retailers, whereas the last five are most relevant to suppliers: Focus on the short trip. For supermarkets around the world (the same principle applies to all classes of trade), half of all shopping trips result in the purchase of five or fewer items, with one item being the most common. These short trips typically account for one-third of store sales. The new strategy is to increase the size of each of those baskets by one or two items. Quick trippers spend money very fast, and getting them to buy one or two more items is far easier than motivating stock-up shoppers to buy ten or twenty more items. This focus on the quick trip could deliver an easy 30% sales lift and a lot more when the synergies with other types of trips become apparent. Focus on the vital few items that drive success. Fewer than 1,000 items, and perhaps as few as 100 , make the difference between good retailing and great retailing. Which ones are they? Just as the store transaction log tells how many items are in each shopper's basket (Focus 1), it also identifies the exact items. Dump all the baskets together, sort them by item (SKU, UPC, EAN, PLU, and so on), count each item, and rank them from the highest-selling to the least-sold. Your shoppers vote every day for what they want to buy. Good retailers don't know or don't care about this, but great retailers do. Good retailers are obsessed about what they and their suppliers want to sell to shoppers. Great retailers are obsessed about what shoppers want to buy! Display the vital few (or the Big Head) along the Dominant Path your shoppers take. Good retailers expect shoppers to find the merchandise they want. Great retailers learn all they can about what the shoppers want and take it to them! This, of course, presupposes a modicum of understanding about the shopper's Dominant Path. Good retailers are unsure. Great retailers have this down pat. Points #2 and #3 are components of the new science of item management, a far sharper instrument than the category management used by all good retailers. Point #3 distinguishes high-value real estate within the store from the rest. The most important promotion is place, not price. In a typical store, retailers promote 2% of the total items in the store at any one time on end-of-aisle displays or other secondary promotional displays. This 2% of items may constitute a full 30% of all the sales in the store. However, half the shoppers who purchase an item from one of these promotional displays are unaware that it is at a reduced price. Of the half of the shoppers who are aware, half of them do not care about the price. Good retailers are locked in a mindset that price considerations dominate shopping. Great retailers realize that there are other currencies that matter to shoppers in addition to money: time and angst. Great retailers focus on value and convenience. Convenience means fast. Using less of the shopper's time will lead to more sales. Hence, Sorensen's primary principle of retail sales: The faster you sell, the more you will sell. Open space attracts! Shoppers compete with products for space in the store. Good retailers might be oblivious to this competition, and freely tip the balance in favor of the products over the shoppers. Jamming the store with products creates lots of narrow aisles and psychic discomfort for shoppers. Great retailers refuse to sacrifice shopper space, and use wide promenades to lead crowds of shoppers through a speedy, efficient, high-dollar trip. The allocation of open space is of paramount importance in store design, but there is no single recipe for success. The following five principles are more closely aligned with the concerns of brand suppliers: Balance the role of your store's vital few with the rest of your extensive line. Keep offering the Long Tail, but make it easier for the shopper to reach the vital few items they want to buy: the Big Head. Although sales of the other 30,000 plus items, the Long Tail, do add up to significant sales and profits in aggregate, on an individual basis they are not consequential in total sales. They play a far different and distinct role. The Long Tail attracts shoppers to the store, but when they get there, they buy a habitual, predictable, select few items from the Big Head. Amazon's reputation as the "Everything Store" reassures me that I can always find the few books I want to purchase each month among the 50 million they have in stock. But Amazon would go out of business if every time I logged onto their site I was forced to spend hours searching through thousands of books that did not interest me in order to find the one or two I wanted to buy. Amazon has reached the pinnacle of retail (conceptually) by quickly and efficiently delivering to its shoppers exactly what they want, exactly when they want it. This is the challenge for all retail stores, online or offline: How do they maintain the huge product selection that assures shoppers the store has anything they might desire without suppressing sales by burying the vital few items they will buy from that massive selection? The key is distinction, so that the shopper can immediately reach and recognize the vital few. Paying to get your own vital few into favorable placement within the store makes sense, depending on the "reach" of the location. To make a sale, you must reach the shopper with the product, then the product must stop shoppers, and then you close the sale. As noted in point #4, place is more important than price. In fact, charging cut prices at high-value promotional locations devalues both the real estate and the brand. Selective price promotion would be more appropriate for Long Tail items displayed inaisle, and particularly for those items that are closest in sales rank to the vital few. Focus on the vital few within your brand and that of your competition. Some of your own vital few will not make it into the retailers' vital few. Just as retailers can more readily obtain double-digit sales increases for their vital few, so you can more easily turn your top few sellers into super performers than bring up the laggards. Again, Long Tail principles apply-the Long Tail attracts, and the vital few sell. Maintaining a reasonable Long Tail is essential both for purposes of attraction, as well as for the competitive imperative. Make clear distinctions in your planning and thinking on these issues. Reach you can buy, but stopping power and closing power are inherent to the product, primarily through the package. Both stopping power and closing power can be measured for individual products, as well as for categories. The significance is that some products are good at attracting attention but poor at closing the sale, whereas others are good at closing, but can't seem to stop the traffic. Besides remedial package design, appropriate shelf management and promotional strategies can increase the stopping and closing power of existing products. Stores are excessively verbose. Products and packaging are a significant part of the clutter. Using iconic images, colors, shapes, and appropriate emotional totems is a better way to connect to shoppers than more words. Using category reinvention, you can upgrade the emotional feel of an entire aisle or department. The coffee aisle, for example, can be redesigned to give it a caf ambiance. Remember, the goal is to make your winners win bigger. This will be more easily done with large displays that you can dominate-appropriate to your vital few. And now on the near and far horizon, digital media, even interactive media, is a tool of greatest value to you as the brand owner. This means that you can win even in good retailers. Great retailers will expect and appreciate your cooperation with game-changed retailing! The Package is the Brand's Ambassador In general, there are two types of research: laboratory and real-world (or natural). The laboratory variety typically consists of conducting experiments in a carefully controlled environment, where everything except the factors being studied are held constant. This type of research presumes that the researcher knows what needs to be studied, and can hold all factors not being studied constant. Then one factor is varied systematically, to see its impact on another factor. The vast majority of my retail studies have been conducted in stores, where controlling things is nearly impossible. Not all of my research, but a large share of it, is real-world. Here's a small study with large implications-the evolution of four brand images over time, varying over anything from a few weeks to a century. You'll see why, and hopefully learn some valuable things about brand value and the use of packaging for communication. Consider the four examples in Figure 11.1. Figure 11.1 After potentially billions of impressions to the subconscious of millions of your customers, make changes to your identity with fear and trembling! In every case, the reality is that the package on the top was much more successful than the one on the bottom. In general, the images on the top seem simpler, cleaner, with the images on the bottom being more cluttered, and therefore actually poorer in communicating with shoppers. Without going into confidential detail on any of these, the first example (the two gums on the left) illustrates an Olympic promotion that actually suppressed sales, just as the third example (the two orange juices) seriously suppressed sales when shoppers actually could no longer find their familiar orange juice. The second example (the two soaps) had two things going for it in raising sales of soap. Obviously the top image (and text) is much simpler and cleaner. But it also makes use of the "crowd-social marketing" we highly applaud. That is, why wouldn't anyone, unless totally committed to something else buy something that is "America's favorite?" And sure enough, the simpler, cleaner package delivers more sales. The fourth example (the two soup labels) illustrates the "evolution" of a label over a 100 -year period! Actually, it is more like non-evolution, given how slight the changes. But this is brilliant marketing, fully leveraging the massive investment in the brand-by shoppers-over a very long period. This is habitual marketing at its best. The first three are not total disasters on this point-well, maybe #3 is. Remember Neale Martin's "Habit: The 95% of Behavior Marketers Ignore?" #2 Makes a change by replacing a complicated statement with a simple statement, whereas #3 virtually obliterates anything that might be associated with the brand at the habitual, subconscious level, built up over probably billions of exposures. These are just a few of the principles that can be extracted from the research that informs this book. Although these general principles hold across many retail settings and types of products, precise solutions need to be tailored to the specific context. Above all, great retailers and brand owners continue to experiment. They test to find out what works, and what doesn't, so they can continue to improve their strategies. This rigorous investigation and testing is how we arrived at the principles discussed previously. Good retailers and brand suppliers, on the other hand, stick with the tried-andtrue conventional wisdom. But as the world changes through new technologies, consumer shifts, and new competitors, the great retailers and brand suppliers create the new conventional wisdom and tailor it precisely to their own situations. In that context, the preceding ten points represent an initial hypothesis for this process of ongoing experimentation. Review Questions 1. Why should an active retailer focus on short trips? 2. How do you identify the few critical items of the Big Head? 3. What is the role of the Big Head and Dominant Path in item management? 4. Discuss why price discount might not be as important to promoting a product in a store as the prime location in-store. 5. What is the role of open space in shopper navigation and directing shopper traffic to achieve better reach? 6. Consider the role of the Long Tail. How do you manage it more effectively? 7. What can brand managers negotiate with retailers to increase reach to their products/brands? 8. What can retailers and brand managers do to reduce in-store clutter and streamline shopper environment in a category? In an aisle? In the entire store? 9. What is the role of packaging in shopper navigation? What principles should be used in packaging design to make it work in-store in the long term