Keep up the Upkeep
Focused Retail Maintenance = Sharpened Profits

By James Francis, Vice President, Retail Detail Merchandising, Inc.

Regardless if you are a retailer or manufacturer, are you executing the retail coverage necessary to maximize your sales and profits? Deficient retail coverage can lead to a loss of brand loyalty, forecasting errors and most importantly, lost sales opportunities.

It is estimated that 65% of commercials are skipped in households with Digital Video Recorder (DVR). With today’s busy body having less exposure to traditional advertising, in-store retail conditions are more important than ever. The store has become the new sales medium.

JUSTIFYING THE COST OF A MERCHANDISING SERVICE ORGANIZATION

To justify the expense of retail service, results must include better shelf presence, increased warehouse pulls, increased allocation of space and fully stocked shelves. Point-of-sales (POS) only shows what was sold at the register. It does not reflect other issues like non-compliant sets, missed opportunities from out of stocks and insufficient man-hours.

RETAIL MAINTENANCE BY STORE PERSONNEL

Store associate support is insufficient to meet retail maintenance requirements. Many times, they are slow to execute resets and do not have the time to keep planograms maintained. Store personnel’s main concern is to take care of the customer but a Merchandising Service Organization (MSO) is there to take care of the shelf.

Retailers tend to rely upon vendor-supplied merchandising assistance. However, the retailers need to better manage the work performed by the MSO. MSO retail reps average about 3 years experience and earn an average wage of $12.00 an hour. On the other hand, store personnel average 1 year experience and a median wage of $9.69 an hour.

OUT OF STOCKS

Out-of-stocks (OOS) are a constant problem, averaging around 8%. In other words, for every 13 items the shopper wants, there is 1 item missing. A P&G study indicates retailers lose 4% of their sales due to OOS.

The manufacturer’s set teams’ priority is to ensure their products are set correctly. An MSO’s goal is to execute in the best interests of the retailer, assuring that the entire section is set correctly.

Some mega brokers have more work than they can handle to the point where many projects are not completed on time. Small niche merchandising companies have better focus to execute and complete in a timely manner.

NEW ITEMS

Speed to shelf is critical for new items. Therefore, all new items must get quick on-shelf presence. Competition is fierce! In 2006, over 100,000 UPCs were introduced to the market.

New items are graded on syndicated data as the items roll out. In many cases, new items are not set in time for the manufacturer’s national ad campaigns. New items are an enormous investment due to TV ads and newsprint, so their timing on the shelf is crucial to capturing a consumer’s purchase.

EXPECTATIONS

MSOs are equipped with the tools necessary to get the job done efficiently and effectively. Retailers should assign a Retail Captain that constructs all materials and captures information from the field. It is important that the MSO quickly communicate results to its clients.

The most important aspect of retail service is to take accountability and make a difference on every call. All field reps should be trained to ensure they fully understand all aspects of any particular project. They should also make contact with store management on all calls.

A tracking system and scorecard assures that the job has been completed correctly and on time. This tracking should include weekly updates across all projects from the field to the supervisors and daily updates on progress via website data entry.

COMPENSATION

All MSO compensation should be activity based (e.g. $100 per set). In this manner, the retailer or vendor only pays for the work that was completed correctly and on time. When MSOs are compensated by commission, it is harder to track and ensure the vendor receives the contracted services. Additionally, there is no fixed cost.

Utilizing an MSO to keep the shelves full and tidy is a necessity to ensuring all parties are satisfied and profits are generated. With consumers pressed for time and store associates focusing on their customers, it is left to the MSO’s to manage the products on the shelf. Put more dollars in your pocket and less down the drain: hire an MSO to get the job done right!

James Francis is the Vice President of Retail Detail Merchandising, Inc. Should you have any questions on this article or any other retail service needs, please feel free to contact James at (407) 774-6664, ext. 225 or james.francis@rdmerchandising.com.

SOURCES:

Information Resources, Inc. 2007 Merchandising Service Organization ROI Research Study
2008 MSO Operational Benchmark Survey