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.

Tags: digital signage, in-store advertising, marketing at retail