Thursday, September 13, 2007

Retailers cut back on POP displays causing a merchandising crisis

A crisis, eh? Those aren't my words, but those of Information Resources, Inc (IRI), who report that, "consumer packaged good (CPG) companies are facing a merchandising crisis as retailers have cut back significantly on point-of-sale display space at a time when manufacturers need it most, given the declining effectiveness of traditional advertising vehicles." It's certainly surprising to hear that research indicates retailers are scaling back their efforts to market effectively in-store, especially when NBC U, Nielsen, POPAI and MARI have been working on massive in-store media tracking, measuring, planning and buying projects for some time now. But apparently as floor space becomes more valuable and limited, retailers are becoming more strict about what kinds of POP displays they'll allow CPG manufacturers to use. Likewise, retailers increasingly concerned with the in-store experience have also indicated that they want more involvement in the creative process for 3rd party POP, helping to ensure that it fits well into the overall store environment. Thus, IRI notes,
"CPG companies are buffeted by the twin problems of advertising ineffectiveness, combined with the loss of in-store display options as retailers are taking charge of branding the consumer shopping experience,” said IRI Retail Solutions and Strategic Consulting President Thom Blischok.

"'CPG companies must demonstrate that their products and merchandising programs fit into the retailer’s comprehensive growth strategies. In addition, we envision manufacturers aggressively stepping up experimentation with new in-store technologies, such as in-store TV networks, digital signage and intelligent carts to expand consumer reach in store.'"
IRI's study also points out a few other trends, including:
  • An increase in trip-based merchandising (marketing towards shoppers on a particular kind of shopping trip, e.g. a quick "fill in" trip at the supermarket versus a larger weekly whole-store trip);
  • Experiments with solutions-based merchandising that cross-sell multiple items (sometimes from multiple brands and manufacturers) to create an entire solution (for example, putting all parts of a meal together in a single display);
  • Sustainable merchandising, which favors the use of more recycled resources and fewer non-renewable items for use in displays and promotional materials;
  • Educational merchandising, where in-store pitches use an educational approach instead of a purely sales-based approach to appeal to a shopper's sense of reason; and
  • High-tech merchandising, including the use of self-service kiosks and digital signage networks to engage shoppers and deliver information and promotions in a non-intrusive way.
The study also notes that the overall amount of CPG merchandising activity is declining, with more CPG companies reducing the number of displays they use, possibly because the overall lift delivered by merchandising techniques seems to be declining (the report suggests that, "nearly three-quarters of CPG categories experienced a reduction in the average volume lift achieved through merchandising versus last year.") That's pretty alarming when you consider that aside from the Internet most other advertising media are reporting the same overall trend, with consumers both actively and passively tuning out promotional material as it becomes ever more pervasive.

To solve this problem stores are not only going to have to take a more active role in getting good POP displays (and other merchandising technologies) onto the sales floor, they're also going to have to find new ways of surprising and delighting (in P&G-speak) customers. Whether this means more personalized promotions, a more elaborate in-store experience using a/v and digital signage, or something altogether different remains to be seen (and will probably vary from retailer-to-retailer).

If you're interested in the study, you can download it here.

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Anonymous said...

So....traditional ad spends have declined (3% this year alone so far) or been heavily shifted by the major brands, Retail merchandising is supposedly down X% and P&G is still up 6% on sales in the same timespan?

Seems to make a strong case for eliminating ads altogether! :)

In all seriousness, this is interesting but very counter to a number of the big POP guys I know. They all seem to be ridiculously busy (as a small sample set) and the discussions they're having with major brands are such that plans are getting bigger and bigger and more money is lined up for projects in 2008

One of the biggest problems with retail POP/merchandising when it's uniquely and purely guided by the retailer is it means that the Brands might have to create 20 different merchandisers for 20 different large retailers. The costs and management alone are astronomical. Add to that the idea that ~75% of all disposable or semi-permanent displays are never even INSTALLED by the retailer (they really should be penalized for this) and you've got a significant problem.

This is part of the reason P&G has been so forceful about standardization in the business and part of the birth or PRISM and PRISM II. The idea, beyond having a measurement standard to buy from/on) is to provide some common language and standards for both Brands and Retailers

Bill Gerba said...

Hi Rob,

I was also pretty surprised by the stats, but I think the key here is that they measured the number of displays per store per week, so if a bunch of large chains suddenly started enforcing their "clean floor" policies more strictly (and say, didn't install 80% of those POP displays instead of 75%) that would probably account for most of the decline. Likewise, if supermarkets are shunning numerous shelf toppers in favor of fewer, more elaborate endcap displays, the raw number would still go down, even though the spend per store might actually be increasing.

Long story short, I don't think that the quantity of displays in a store is anywhere near as important a measure as the amount of money being spent on the sector (which we know is increasing). Sadly, we don't yet have a better proxy for quality right now.