RBM Technologies, RIS News, Mannequins

Optimizing In-Store Merchandising – Part 3: Measuring the Costs and Making the Change

RIS News recently issued a custom research report (available here) tackling the issues surrounding in-store merchandising. The research uncovered compelling evidence that suggests now is time for retailers to tackle the problem. Over the course of this series, we will examine a number of issues currently preventing retailers from becoming more compliant, and the situational factors bringing about changes for the better.

In this post, we look at the costs associated with improving in-store merchandising and solutions to making that change.

To get at the heart of what is clearly a challenging problem for retailers, RIS News asked senior-level retail merchandisers to estimate the percentage of lost annual sales they attribute to non-compliance of in-store merchandising.

RBM Technologies, RIS News, Mannequins

Thirty-seven percent said that up to three percent of annual sales are lost due to non-compliance. That means, for a company with a billion dollars in annual sales, up to $30 million is lost as a result of holes in in-store merchandising practices, and a key factor in justifying a corrective investment. The scariest part is that for nearly 15 percent of respondents, the percentage lost was upwards of 14 percent.

In addition to lost sales, waste is another problem that arises from inaccurate in-store merchandising practices. For the purposes of the research report, waste was defined as over shipping of product, over printing of materials, and cost of shipping materials that can’t be used in some stores. Nearly half of all respondents estimated their waste to be between six – 16 percent annually.

When you add the amount of loss incurred from waste to the dollar figure associated with lost sales caused by non-compliance, it is apparent that a great deal of corporate revenue is within grasp for those retailers willing to reach for the low-hanging fruit.

In the five-year period from January 2008 to January 2013, retail store sales have grown 8.5 percent while online sales have grown 72 percent. Yet brick-and-mortar stores continue to be the centerpiece of the retail industry and source of the lion’s share of revenue.

As a result, many retailers are focusing on customer-centric strategies that put digital capabilities inside stores, converting them into omnichannel hubs that expand and improve the shopping experience to attract and keep customers.

However, this strategy is only half of the solution. The other half is to solve known problems in the store that produce a measurably negative impact on sales. Chief among these is the low-hanging fruit of inaccurate in-store merchandising campaigns.

Today, the bulk of the retailing industry is operating with known data gaps, inaccuracies at the store level and workaround tools that are sorely in need of upgrading. Merchandising plans and forecasts are based on historical or aggregated averages that are essentially guesswork instead of hard science.

The ultimate solution is to tie customer-centric improvements in the store with in-store merchandising improvements that increase sales, conversions and customer satisfaction while enabling efforts to reduce waste and lost opportunities.

Does your company currently implement visual merchandising solutions to ensure campaign compliance at the fixture level? We would love to hear from you in the comments section below. Please feel free to also reach out to us on @Merch_Matters.

A free copy of the full RIS News research report is available here.