Optimizing Checkstand Merchandising - mymbr.org · 2018 Optimizing Checkstand Merchandising Maximizing Shopper Interaction in a New Era of Technology

2018

Optimizing Checkstand Merchandising

Maximizing Shopper Interaction in a New Era of Technology

Research Methods – FEF Relies on Several Methods

Checkout space allocation audits conducted by: – TIR Associates – detailed category measurements for all checkout categories by lane

type – Conducted in August of 2017 – Retailers include:

Consumer Interviews of Front-End checkout buyers – Interviews with 1,500 grocery front-end checkout buyers regarding their shopping

attitudes and purchase habits at the front-end checkstands

Checkout sales performance data provided by IRI for checkout categories in grocery channel – Nationally projected

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Kroger Safeway Giant Eagle Publix Jewel Harris Teeter Hy-Vee

Tom thumb King Soopers Marianos Ralph’s Albertsons Food Lion

Pick-n-Save Brookshire Lowes Foods Price Chopper Vons Woodman’s

Research Methods – FEF Relies on Several Methods (cont’d)

Data from Willard Bishop Super Study 2016 delivered in 2017

Total Grocery COT Department Data for C/O Categories = C/O + Gondola (provided by Nielsen)

In Store Video Observation (conducted by Video Mining)

– Primary Metrics: Conversion Rates, Consumption & Shopping Behavior

– In-store video (including facial recognition) captures consumer behavior

– T-log data matched with video to understand purchase behavior

– N = Front End trips – 4,173,178

– National Sample of Grocery Retailers

Mobile Eye Tracking (in collaboration with Indiana University)

– Mobile Eye Tracking Device (eye glasses mounted) used to capture visual attention

– Exit interviews: Shopability and Attitudes/Shopping Questions

– N = 313

– National Sample of Grocery Retailers and Lab Research

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Seven Key Insights for Checkout Optimization

The checkout power categories of Beverages, Magazines & Confectionery generate over 81% of front-end checkout sales Improving C/O Shopper Conversion by 1% nationwide could add over $65M in Revenue Annually ($1,707 per store)* Merchandising the Power Categories on every lane is critical Shoppers spend more time looking at the Customer Left Arm & ROS top tiers when approaching checkout; Power Categories must be available in these areas Secondary displays detract significantly from primary checkout end-cap displays Most C/O categories are not growing in step with historical growth rates; ensure that quality and amount of space is allocated for those categories/items with the highest sales potential Focus should also be provided on those categories that get a higher percentage of their total store sales from the front-end checkouts; those categories are primarily Magazines & Gum

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6

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* Source: Progressive Grocer 2016, DHC Analysis

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The Front-End Checkout Is A Crucial Area of the Store for Retailers

• A location most every shopper passes

• Represents a significant source of impulse sales – Front-End checkstands generate 0.9% of store sales and 1.04% of store profits

• Major location for immediate consumption items

– Consumable snacks and beverages

– Time Sensitive Products

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Source : U.S Census Bureau, IRI Front-End Sales 2017 – DHC Analysis

$5.3 Billion

Estimated 2016 Front-End Sales

* Statista/U.S. Census Bureau – IRI Front-end Sales Through Mid-July 2017,2016, 2015 – DHC Analysis

Front-End Checkstands Deliver $5.3 Billion in Supermarket Sales

• Front-End Share of Total Store Sales = 0.9%

• The Front-End Check Stand is Growing at a Higher Rate Compared To Total Store Growth Rate over the last 2 years

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Dollar Sales % Change vs. Year Ago Average of 2017 and 2016

Total Store Front-End Check Stand

2.3%

3.0%

Retailers Are Facing a Changing Landscape

• Basket size • Checkout trips • Overall sales decline • Desire for promotion space • Mobile payment • Retailer apps

• Average program life = 4.5 years • Continued space allocation adjustment • Streamlined look • Lower profile fixtures • Reduced number of lanes • Design flexibility for ability to react to market changes • LED Lighting

• Emerging Categories • New item speed to market • Additional & larger beverage coolers • Some experimenting with healthy checkouts • Digital retailer service such as In-Store Pick-up or Home Delivery • Commitment to self checkout • High velocity checkouts • Continued technology improvements

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Increased Retailer Focus

Retail Design &

Style

Front-End Changes

Front-End Checkout Buyers Survey Results - Shopping Behaviors and

Attitudes

Candy, Gum, Carbonated Beverages, Bottled Water, and Salty Snacks Are the Front-End Categories Most Front-End Buyers Have Purchased

• Magazines are purchased by 43% of Front-End Buyers

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43%

83%

73%

56%

65%

58%

32%

47%

38%

34%

56%

37%

42%

30%

Magazines

Candy

Gum

Mints

Carbonated Beverages

Bottled Water

Energy Drinks

Non-Carbonated Beverages

Batteries

Phone/Gift Cards

Salty Snacks

Nuts/Seeds

Meat Snacks

Nutrition/Energy Bars

% of Respondents (Multiple answers allowed)

Source: FEF Online Consumer Interviews 2017 Question: Q6.1 Have you EVER purchased any of the products merchandised at the checkout lanes? N = 500

What Categories Have You Ever Purchased (HH Penetration)

Most Front-End Checkout Categories Are Purchased Frequently

• Categories where over 75% of respondents purchased once a month or more include magazines, carbonated beverages, bottled water, non-carbonated beverages, and salty snacks,

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77%

65%

66%

54%

75%

83%

68%

78%

23%

24%

77%

68%

53%

72%

Magazines

Candy

Gum

Mints


Bottled Water

Energy Drinks


Batteries

Phone/Gift Cards

Salty Snacks

Nuts/Seeds

Meat Snacks


% of Shoppers Buying Frequency at Checkout Once a Month or More (% of Purchasers of Categories)

Source: FEF Online Consumer Interviews 2017 Question Q6.2 Of items purchased from the checkout in the last 6 months, how frequently do you make the purchases? N varies by category purchased

Supermarket Retailers Have an Opportunity to Increase Impulse Levels of Key Front-End Categories

• Changes to front-end merchandising and promotional activities could enhance impulse purchase rates of key categories

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41%

76%

62%

62%

37%

24%

43%

25%

29%

21%

42%

37%

64%

37%

Magazines

Candy

Gum

Mints


Bottled Water

Energy Drinks


Batteries

Phone/Gift Cards

Salty Snacks

Nuts/Seeds

Meat Snacks


% of Shoppers Buying on Impulse (% of Purchasers of Categories)

Source: FEF Online Consumer Interviews 2017 Question Q6.3 Of the items purchased in the last 6 months , was the most recent purchase bought on impulse or planned? N varies by category purchased

After years of research, it is evident that recall of impulse purchases is lower for on-line research than compared to in-store research; current 2017 data is a strong baseline

Front-End Power Categories Are Defined By Key Metrics

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Source: Front-End Focus, DHC Analysis

Front-End Power

Categories

1 Household Penetration

2 Frequency of

Purchase

3 Impulsiveness

of Purchase

4 $ Share of Front-End

Sales

High performing retailers consider 4 essential shopper demand criteria when allocating space

A Number of Key Front-End Categories Score Highly And Are Considered Power Categories

• High scores are generated by household penetration, frequency of purchase, and impulsiveness of purchase

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Source: FEF Study, DHC Analysis

Lower Scores Mixed Scores High Scores

Batteries Non-Carbonated Beverages Candy

Phone/Gift Cards Energy Drinks Gum

Nuts/Seeds Carbonated Beverages

Nutrition/Energy Bars Mints

Salty Snacks

Meat Snacks

Magazines

Bottled Water

Focus on key categories which Have high Household Penetration Have high Purchase Frequency Provide higher Impulse Sales

Many Categories Are Viewed to Be Important to Merchandise at Front-End Checkouts

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41%

48%

58%

51%

49%

61%

39%

44%

46%

43%

50%

43%

32%

36%

Magazines

Candy

Gum

Mints


Bottled Water

Energy Drinks


Batteries

Phone/Gift Cards

Salty Snacks

Nuts/Seeds

Meat Snacks


How Important Is It to Have These Categories Available at Checkout? % of Respondents Answering Somewhat, Very, Extremely Important

Source: FEF Online Consumer Interviews 2017 Question Q7 Thinking about your personal shopping habits at the grocery store, how important to you for the listed products be available at the checkout lanes? N = 1500

46% of Front-End Buyers Only Look at Certain Items Displayed at the Front-End Checkstands

• Perhaps changes to front-end merchandising of key front-end categories can get front-end buyers to “shop” more front-end categories

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63%

49%

46%

39%

45%

45%

22%

I use my shopper loyalty card when I shop

I prefer to use self-checkout lanes whereverpossible

I only look at certain items to be displayedin the checkout lanes

I often buy products on impulse when I seethem at checkout

I use my mobile device while waiting in lineat checkout

I will purchase promoted items whendisplayed at the checkout lanes

I would like to pay for my purchase with myphone/mobile device

% of Respondents that agree completely/somewhat

Source: FEF Online Consumer Interviews 2017 Question Q9. Please indicate how much you agree or disagree with each statement regarding how you shop in the grocery store/supermarket. N = 1,500

Almost 50% of Respondents Were Not Looking for New or Promoted Items at the Checkout

• As mentioned before, perhaps changes to front-end merchandising and promotion can get buyers to look for new or promoted front-end items

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49%

19%

16%

12%

3%

I am not sure, I was not looking for any newor promoted items

I did see new/different items displayed inthe checkout lane since the last time I

shopped

I did not see any new items, but I wasshopping the area

I did not "shop" the front-end checkout

I purchased an item which was notdisplayed at the front-end previously

When completing your shopping trip were you aware if there were new items displayed in or around your checkout lane?

(% of Respondents)

Source: FEF Online Consumer Interviews 2017 Question: Q10 Were you aware if there were new items displayed in or around your checkout lane? N = 1,500

Over Two-Thirds of Respondents Felt It Was Somewhat/Very Important to Have All Lanes Merchandising the Same

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82%

79%

77%

69%

52%

Displaying a "sale of the week" or hot item at thefront-end checkouts

Changing the selection of items at the front-endcheckout lanes seasonally

Advertising items displayed at front-end

Having all the checkouts have the samemerchandise displayed

Keeping the checkout lanes the same year-round

How important is it to you regarding the products displayed at front-end checkouts? (% of Respondents Shopping The Front-End Answering Somewhat/Very Important)

Source: FEF Online Consumer Interviews 2017 Question: Q11 Please rate how important it is to you regarding the products displayed at the front-end checkouts N varies by statement

Checkout Category Space and Profit

Performance

Regular Lanes Account for Almost 60% of Total Front-End Checkstand Space

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Source: TIR Retail Audits, August/September 2017

Share of Front-End Linear Space by Lane Type

Regular Lanes, 58.2%

Express Lanes, 28.5%

Self-Checkout Lanes, 13.3%

Confectionery Products Account for 45% of Total Front-End Space Across All Lanes

• Magazines and beverages account for 28% of front-end space

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16.0%

45.4% 26.6%

13.6% 5.1%

12.2% 6.2%

2.4% 1.5% 2.0%

1.9% 6.0%

4.2% 1.3% 0.7% 1.3%

Magazines

Total ConfectioneryCandy

GumMints

Total BeveragesCarbonated Beverages

Non-Carbonated BeveragesBottled WaterEnergy Drinks

BatteriesPhone/Gift Cards

Salty SnacksMeat Snacks

Nuts/SeedsNutrition/Energy Bars


Share of Front-End Linear Space – All Lanes Front-End Checkstands

In Regular Lanes, Confectionery Items Have Over 47% of Front-End Space

• Magazines and beverages have 25% of front-end space

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16.4%

47.1% 28.0%

14.4% 4.8%

9.0% 4.3%

2.0% 1.4% 1.4%

2.3% 6.9%

4.0% 1.3% 0.6% 1.7%

Magazines


GumMints







Share of Linear Space – Regular Lanes Front-End Checkstands

*Less than 0.1%

In Express Lanes, Confectionery Represents 44% of Front-End Space

• Magazines and Beverages have 27% of front-end space in express lanes

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15.3%

44.4% 25.3%

14.0% 5.1%

12.1% 4.0% 3.3%

1.6% 3.2%

2.0% 5.4%

5.6% 1.5% 0.7% 1.2%

Magazines


GumMints







Share of Linear Space – Express Lanes Front-End Checkstands

In Self-Checkout Lanes, Confectionery Accounts for Almost 40% of Front-End Space

• Beverages have 26% of front-end space in self-checkout lanes

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16.0%

39.6% 23.5%

9.4% 6.7%

26.1% 19.7%

2.4% 2.0% 2.0%

0.1% 3.6%

2.0% 1.0% 1.5%

0.0%

Magazines


GumMints







Share of Linear Space – Self-Checkout Lanes Front-End Checkstands

Profit: A Better Indicator of Checkout Departmental Health and True Category Contribution

• Front End Focus has been enhanced by the addition of a detailed True Profit model fueled by the WBC Super Study

– Major Innovation = Data availability for the development of the FEF profit model

• Is Profit a better indicator of how space should be allocated?

– Yes, many items may be present on a POG but are not profitable which is a drain on retail resources

– Retailers may argue that items are carried for Customer Convenience but every square inch of retail space should be profitable in order to allow a retailer to compete more effectively with other brick-and-mortar as well as on-line retailers

o Warehousing/Receiving

o Transportation/Loading

o Inventory

o Store Occupancy

o Direct/Indirect Labor

o Shelf Facing/Stocking

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Source : U.S Census Bureau, IRI Front-End Sales 2017 – DHC Analysis

Included Activity Based Cost (ABC) Elements Included Profit Model Elements

o Adjusted Cost of Goods

o Slotting Fees

o Value of Scan Based Trading (SBT)

o Performance Based Trade Funds ‒ Off Invoice Trade Funds

‒ Bill-Backs

‒ Scan-Downs

‒ Temporary Price Reductions (TPR)

In Many Categories, the Front-End Checkstand Is Growing Faster Than the Rest of the Store

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Source: *Nielsen All Grocery Store Sales, 52 weeks ending Sept. 30, 2017 #IRI Front-End Sales, 52 weeks ending July 16, 2017 - Magazine sales data comes from Magnet data 3 quarters ending Q3-2017

9.8%

41.1%

91.1%

21.6%

69.0%

16.2%

1.6%

19.4%

15.7%

CarbonatedBeverages

Candy

Gum

Energy Bars

Magazines

Bottled Water

Salty Snacks

Batteries

Razors/Blades

Meat Snacks N/A

% of Total Store Sales Generated by Front-End Checkstands*

2.9%

2.5%

-1.4%

7.6%

-7.2%

2.6%

3.0%

-2.8%

5.8%

17.8%

Front-End Total Store*

SALES % CHANGE

Focus attention on front-end checkstands on magazines, gum and candy since most of the total store sales come from the front-end checkstands

The information contained herein is based in part on data reported by IRI through its Market Advantage service as interpreted solely by Time Inc and/or Dechert-Hampe & Co. (Copyright© 2013), Information Resources, Inc.). The information is believed to be reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI.

88.6%

-2.7%

1.2%

-2.4%

-4.5%

-8.3%

1.3%

0.3%

4.6%

-13.1%

N/A

Beverages, Confectionery, and Magazines Drive Front-End True Profit Dollars

• 86% of total checkstand true profit dollars come from the 3 Power Categories : Confectionery, Beverages, and Magazines

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True Profit Dollar Shares of Front-End Checkstand True Profit Dollars

Energy Bars

Meat Snacks

Razors/Blades

Batteries

Salty Snacks

Magazines

Non-Chocolate Candy

Mints

Gum

Chocolate Candy

Confectionery

Bottled Water


Energy Drinks


Total Beverages

Source: The information on this page comes from the Willard Bishop 2016 SuperStudy along with analysis from Dechert-Hampe. Note: For some categories in the Willard Bishop SuperStudy, there was not a front-

end measurement for categories like Salty Snacks, Batteries, Razors/Blades, Meat Snacks, and Energy Bars. In those cases the profit and true margin numbers used were for the total category across the store.

True Profits Are the Best Measure of the Success of the Front-End Categories

Beverages are under spaced while many other categories are over spaced and in need of rationalization

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Source: *IRI 52 weeks ending July 16, 2017, DHC Analysis; #TIR Audits, Sept. 2017, ‡ Standard B-Sized Pockets Willard Bishop Super Study 2017, Note: For some categories in the Willard Bishop SuperStudy, there was not a front-end measurement for categories like Salty Snacks, Batteries, Razors/Blades, Meat Snacks, and Energy Bars. In those cases the profit and true margin numbers used were for the total category across the store.

Share of Front-End Linear Space (All Lines)#

Best Practice

Space to True Profits

The information contained herein is based in part on data reported by IRI through its Market Advantage service as interpreted solely by Time Inc Sales & Marketing and/or Dechert-Hampe & Co. (Copyright© 2013), Information Resources, Inc.). The information is believed to be reliable at the time supplied by IRI but is neither all-inclusive nor guaranteed by IRI. Without limiting the generality of the foregoing, specific data points may vary considerably from other information sources. Any opinions expressed herein reflect the judgment of Time Inc Sales & Marketing and/or Dechert-Hampe & Co. and are subject to change. IRI disclaims liability of any kind arising from the use of this information.

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604

146

122

96

270

47

86

41

35

Share of True Profits

Beverages

Candy

Gum

Mints

Magazines

Salty Snacks

Batteries

Razors/Blades

Meat Snacks

Energy Bars

Average Facings on Regular Lanes

40

40

41

12

18‡

9

8

12

4

N/A

Research provided additional consumer/shopper insights

TIR Recently Conducted Eye Tracking and Video Mining Research

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Checkout lane hot spots and influence of secondary

displays at checkout

Conversion rates

Eye Tracking Video Mining

Source: Eye Tracking Research, 2013

Eye Tracking Can Help Identify Visual Hotspots in Checkout Displays

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Make sure that the top tiers are carrying top selling magazines

Source TIR/Indiana University Multi Year Eye Tracking Research 2013-2015 * % of shoppers viewing tier & amount of time spent viewing same

Shoppers Spend Time Looking at All Areas of an Endcap

• Generally the top 3 or 4 tiers of the end cap get the most viewing time

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1.73 sec 95 %

3.01 sec 97 %

3.02 sec 97 %

2.45 sec 98 %

1.39 sec 63 %

Left Customer End Cap*

1.94 sec 87 %

3.89 sec 95 %

1.75 sec 92 %

2.02 sec 84 %

0.95 sec 45 %

Right Customer End Cap*

Best Practice

2.27 sec 84 %

4.19 sec 81 %

2.45 sec 82 %

Customer Left*

Most Viewing Time Is Spent Viewing Items Before the Belt Upon Entering the Lane

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Make sure top selling items are merchandised in these hot spots Best Practice

Source: TIR/Indiana University Multi Year Eye Tracking Research 2013-2015 * % of shoppers viewing tier & amount of time spent viewing same

Many Retailers Block Highly Productive End Caps with Secondary Display Merchandising

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Source :TIR/Indiana University Multi Year Eye Tracking Research 2013-2015

Secondary displays hamper the efficiency of end caps and can compromise front-end sales

4.99 sec 99 %

0.7 sec 27 %

0.9 sec 1 %

6.73 sec 100 %

4.69 sec 98 %

6.12 sec 100 %

4.16 sec 97 %

1.81 sec 67 %

3.88 sec 100 %

9.63 sec 100 %

0.6 sec 28 %

0.84 sec 7 %

1.04 sec 87 %

2.89 sec 96 %

Secondary Displays Significantly Reduce Time Spent Viewing the Primary Display

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No Blockage* Blockage: 5-Hour Energy* Blockage: Kind Bar*

Are secondary displays important enough to distract from primary displays? Consider

Total Primary Display Viewing: 21.94 sec₮

Total Primary Display Viewing: 13.2 sec ₮

Total Primary Display Viewing: 10.6 sec₮

Source: TIR/Indiana University Multi Year Eye Tracking Research 2013-2015 * % of shoppers viewing tier & amount of time spent viewing same; ₮ Includes Visual Attention allocated to the endcap and arm rack segments on Customer Right

Total Checkout Sales Were Impacted by Secondary Displays

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TIR/Indiana University Multi Year Eye Tracking Research 2013-2015

Total Checkout Unit Sales % Change

Secondary Display:

5-Hour Energy

Secondary Display: Kind Bar

-19%

-41%

Secondary displays can & DO have a negative effect on total checkout sales

Summary

• When a secondary display is present, it attracts almost 40% of shoppers’ visual attention away from the primary display

• The negative impact is greatest for the blocked tiers, but there is also an effect on the unblocked tiers

• The secondary display is often the first area shoppers examine as they approach the checkout and may be the only thing they see when they don’t have to wait in line

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* Source: Progressive Grocer 2015, DHC Analysis

2

3

Fanned / Tiered Display

Some Retailers Use a Fanned/Tiered Magazine Display

• Displaying Magazines in a tiered configuration significantly reduced attention to Magazine covers partially obscured

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4.04 sec 89 %**

1.92 sec 79 %

1.48 sec 44 %

0.23 sec 8 %

2.87 sec 92 %

2.72 sec 85 %

0.82 sec 45 %

2 sec 87 %

2.3 sec 82 %

1.56 sec 35 %

6.35 sec 94 %

6.38 sec 94 %

2.81 sec 81 %**

1.64 sec 76 %

1.04 sec 45 %

0.27 sec 13 %

2.73 sec 82 %*

2.58 sec 79 %**

4.36 sec 90 %**

2.26 sec 80 %*

1.45 sec 77 %**

2.16 sec 81 %**

3.38 sec 88 %

Conventional Display (Control) Fanned/Tiered Display

Source: TIR/Indiana University Multi Year Eye Tracking Research 2013-2015

1,680 60%

2,804 24%

11,724 44% 26,684

60% of Active Front-End Shoppers Become Buyers

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*$ sales assuming each buyer purchased 1 item at Front End. Traffic – Store visitors who passed by category; Shoppers – Traffic that stops to interact with category; Buyers – Shoppers who make a purchase from category

Converting more of the front-end traffic into shoppers can drive greater incremental sales

11% of consumers become Active Shoppers

Overall Front-End Path to Purchase**

Front-End Traffic Glance Shoppers Active Shoppers Buyers

*Source: Videomining Research, 4th Quarter 2014 **Data represented per store per week

Leverage High Shopper Conversion at Front-End by Engaging More Traffic

• Improving Traffic to Shopper Conversion by 1% nationwide could add over $65M in Revenue

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Shopper Conversion - % of shoppers who made a purchase *Approximately 38,015 Grocery stores. http://www.fmi.org/research-resources/supermarket-facts 2015 *Source: Videomining Research, 4th Quarter 2014

Front-End Growth Opportunity: What If Analysis

Shopper Metrics/Week/Store Current Scenario Traffic to Shopper

Conversion Increased by 1%

Net Change

Front-End Traffic to Shopper Conversion 44% 45% 1%

Shoppers 2,804 2,882 78

Buyers 1,680 1,729 49

Weekly Sales $3,283.62 $3,316.46 $32.84

Annual Front-End Sales $170,745 $172,452 $15,348.11

Nationwide Annual Category Sales Increase:

$65M

$1,707

http://www.fmi.org/research-resources/supermarket-facts





Front-End Shopping & Purchasing Incidence Distribution

Traffic – Store visitors who passed by category; Shoppers – Traffic that stops to interact with category; Buyers – Shoppers who make a purchase from category Source: Videomining Research, 4th Quarter 2014

While 15% of Consumers Shopped Multiple Categories, the Majority of Shoppers Bought Only 1 Item from the Checkstands

• There is an opportunity to build baskets and drive front-end sales by enticing shoppers to purchase more than one item

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85%

13% 2%

95%

4% 1%

1 2 3

% Buyers % Shoppers

# of Categories

*$ sales assuming each buyer purchased 1 item at Front End. Traffic – Store visitors who passed by category; Shoppers – Traffic that stops to interact with category; Buyers – Shoppers who make a purchase from category *source: Videomining Research, 4th Quarter 2014

Converting Active Shoppers to Active Buyers Is High Across All Lanes

• Self-Checkout lanes do a better job of converting Glance Shoppers to Active Shoppers

40

820

56%

1,470

21%

7,035

75% 9,355

Overall Front-End Path to Purchase by Lane Type


321

50%

642

24%

2,696

36% 7,454

539

78%

693

35%

1,993

20% 9,853

Traditional Lane

Express Lane

Self-Checkout Lane

What merchandising techniques can be used on all three types of lanes to convert more Glance Shoppers into Active Shoppers?

Consider

Conversion Rates Vary by Category and Type of Shopper

• Magazines, Candy & Beverages have a higher conversion rate of Glance Shoppers • Beverages convert the highest percentage of Glance Shoppers into Active Shoppers followed by Magazines • Beverage converts 88% of Active Shoppers into Buyers followed by Candy (76%) & Gum/Mints (60%) • Magazines have a higher average unit price compared to other categories listed

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60% 24% 44% 26,684

Conversion Rates of Front-End Category


Total Front-End Checkstand

Avg $/Unit

$1.98

88% 30% 17% 20,001 Beverages $1.51

76% 11% 18% 17,469 Candy $1.32

60% 12% 16% 26,684 Gum & Mints $1.76

33% 5% 13% 7,664 HBC $1.53

13% 14% 27% 23,419 Magazines $3.82

Source: Videomining Research, 4th Quarter 2014

Recommendations

• Research re-confirms the importance of the power categories (Beverages, Confectionery, and Magazines) to front-end checkstands – Retailers need to focus on

– The appropriate merchandising strategies should be implemented across all types of lanes for these key categories to drive the highest incremental sales

– Those categories that get a higher percentage of their total store sales from the front-end checkouts (primarily Magazines and Gum/Mints)

• Temporary Displays in front of the check stand endcaps do not drive incremental sales – find other locations for temporary displays

• Make sure key products are carried in the check stand hotspots

• Try new/different merchandising approaches to drive higher conversion rates and increase front-end basket size – efforts will be rewarded; potential best practice could yield +$1,707 (incremental sales per store)

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FEF: Top Checkstand Best Practices

Checkout is a massive department representing $5.3B in retail sales and 0.9% of Grocery Retailer $ which should be managed as a distinct department/category

Power Categories are defined as products that are High Impulse, Frequently Purchased and have High HH penetration

Power Categories = Beverages, Magazines, Candy, Gum and Mints

Beverage Coolers should be located on 80% or more of Checkout Lanes

Magazines should be located on 100% of Checkout Lanes to maximize sales

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5

2

3

4

1

FEF: Top Checkstand Best Practices

Maximize Checkout Sales by placement of Magazines both In-Line and on End-caps

OTB Space Productivity is maximized when Magazines, Gum, Candy and GM are merchandised in this area

Beverage Coolers should be located In-Line at Checkout Lanes to maximize C/O Sales & Profits on Regular Lanes

Optimal Magazine merchandising techniques differ by lane type (e.g., Regular, Express and Self-Scan), but make sure that Magazines and the other Power categories are stocked on every lane.

44

7

8

9

6

Implications/Recommendations – Magazines

• Magazines get 69% of their total store sales from the front-end checkouts so retailers should focus on getting key titles on every lane

• Magazines should be located on 100% of Checkout Lanes to maximize sales Maximize Checkout sales by placement of Magazines both In-Line and on End-caps

• OTB Space Productivity is maximized when Magazines, Gum, Candy and GM are merchandised in this area

• 41% of shoppers rate Magazines as somewhat, very, and extremely important to carry on the front-end so once again, make sure that key titles are available on all lanes

• Secondary displays in front of Magazine endcaps significantly reduce viewing time of the primary display and negatively impact total sales of the checkout

• The Magazine Category exhibits one of the highest True Profit (22.4%) Metrics at Checkout

45

Appendix

46

Candy, Gum, Carbonated Beverages, Bottled Water, and Salty Snacks Are the Front-End Categories Most Front-End Buyers Have Purchased – Expanded List

• Magazines are purchased by 43% of Front-End Buyers

47

43%

83% 73%

56%

65% 58%

32% 47%

56% 37%

42% 44%

30%

37% 39%

30%

Magazines

CandyGum

Mints

Carbonated BeveragesBottled WaterEnergy Drinks


Salty SnacksNuts/Seeds

Meat SnacksCookies/Crackers


Baked GoodsGrocery Products

Other Snacks

% of Respondents (Multiple answers allowed)

Source: Time Inc. Retail Online Interviews Question: Q6.1 Have you EVER purchased any of the products merchandised at the checkout lanes? N = 500

38%

21%

42% 29% 31% 31%

24%

34% 20%

21%

20%

18% 23% 25%

8%

Batteries

Energy Shots

Lip CareOral Care

Beauty CareHealth Items

Razors/Blades

Phone/Gift CardsAudio/Video/CD/DVD

Maps/Heroscopes/Puzzles

Concentrated Drink Mix

Books - Non-ChildrenChildrens Items

Other Household ItemsOther Items

What Categories Have You Ever Purchased

Most Front-End Checkout Categories Are Purchased Frequently – Expanded List

• Categories where over 75% of respondents purchased once a month or more include magazines, carbonated beverages, non-carbonated beverages, salty snacks, cookies/crackers, grocery products

48

77%

65% 66%

54%

75% 83%

68% 78%

77% 68%

53% 78%

72%

75% 93%

69%

Magazines

CandyGum

Mints







Other Snacks

% of Shoppers Buying Frequency at Checkout Once a Month or More (% of Purchasers of Categories)

Source: Time Inc. Retail Online Interviews Question 6.2 Of the items purchased in the last 6 months from the checkout, how frequently do you make the purchases? N is dependent on category purchase, thus varies

23%

36%

30% 48%

54% 57%

36%

24% 31%

33%

37%

31% 51%

76% 57%

Batteries

Energy Shots

Lip CareOral Care


Razors/Blades






Supermarket Retailers Have an Opportunity to Increase Impulse Levels of Key Front-End Categories – Expanded List

• New Merchandising and Promotion approaches towards key front-end categories could improve impulse levels

49

41%

76% 62% 62%

37% 24%

43% 25%

42% 37%

64% 39%

37%

41% 12%

41%

Magazines

CandyGum

Mints







Other Snacks

% of Shoppers Buying on Impulse (% of Purchasers of Categories)

Source: Time Inc. Retail Online Interviews Question 6.2b And of the items purchased in the last 6 months, was the most recent purchase bought on impulse or planned? N is dependent on category purchase, thus varies

29%

58%

43% 13%

23% 14%

20%

21% 43%

60%

33%

64% 66%

14% 26%

Batteries

Energy Shots

Lip CareOral Care


Razors/Blades






Many Categories Are Viewed as Being Important to Merchandise at Front-End Checkouts – Expanded List

50

41%

48% 58%

51%

49% 61%

39% 44%

50% 43%

32% 42%

36%

37% 45%

41%

Magazines

CandyGum

Mints







Other Snacks

How Important Is It to Have These Categories Available at Checkout? % of Respondents Answering Somewhat, Very, Extremely Important

Source: Time Inc. Retail Online Interviews Question 7 Please indicate how important it is to you for each of the listed products to be available at the checkout lanes? N= 1500

46%

17%

46% 32%

30% 38%

28%

43% 15%

22%

19%

19% 19%

33% 37%

Batteries

Energy Shots

Lip CareOral Care


Razors/Blades






Confectionery Products Account for 45% of Total Front-End Space Across All Lanes – Expanded List

• Magazines and beverages account for 28% of front-end space

51

16.0%

45.4%

26.6%

13.6%

5.1%

12.2%

6.2%

2.4%

1.5%

2.0%

4.2%

1.3%

0.7%

Magazines

Total Confectionery

Candy

Gum

Mints

Total Beverages



Bottled Water

Energy Drinks

Salty Snacks

Meat Snacks

Nuts/Seeds


Share of Front-End Linear Space – All Lanes Front-End Checkstands

2.3% 1.3%

0.3% 0.6%

1.9% 1.3%

0.3% 3.0%

6.0% 0.9%

0.0% 0.4% 1.8%

Cookies/CrackersNutrition/Energy Bars

Drink DropsEnergy Shots

BatteriesRazors/Blades

General MerchandisingHealth/Beauty Aids

Phone/Gift CardsGreeting Cards

DVD/CDComputer Accessories

All Other

In Regular Lanes, Confectionery Items Have Over 47% of Front-End Space – Expanded List

• Magazines and beverages have 25% of front-end space

52

16.4%

47.1%

28.0%

14.4%

4.8%

9.0%

4.3%

2.0%

1.4%

1.4%

4.0%

1.3%

0.6%

Magazines

Total Confectionery

Candy

Gum

Mints

Total Beverages



Bottled Water

Energy Drinks

Salty Snacks

Meat Snacks

Nuts/Seeds


Share of Linear Space – Regular Lanes Front-End Checkstands

1.0% 1.7%

0.3% 0.8%

2.3% 1.0%

0.5% 2.9%

6.9% 1.2%

* 0.3% 2.6%







All Other

*Less than 0.1%

In Express Lanes, Confectionery Represents 44% of Front-End Space – Expanded List

• Magazines and Beverages have 27% of front-end space in express lanes

53

15.3%

44.4%

25.3%

14.0%

5.1%

12.1%

4.0%

3.3%

1.6%

3.2%

5.6%

1.5%

0.7%

Magazines

Total Confectionery

Candy

Gum

Mints

Total Beverages



Bottled Water

Energy Drinks

Salty Snacks

Meat Snacks

Nuts/Seeds


Share of Linear Space – Express Lanes Front-End Checkstands

3.9% 1.2%

0.2% 0.6%

2.0% 1.7%

0.0% 3.1%

5.4% 0.5%

0.1% 0.9% 0.8%







All Other

In Self-Checkout Lanes, Confectionery Accounts for Almost 40% of Front-End Space – Expanded List

• Beverages have 26% of front-end space in self-checkout lanes

54

16.0%

39.6%

23.5%

9.4%

6.7%

26.1%

19.7%

2.4%

2.0%

2.0%

2.0%

1.0%

1.5%

Magazines

Total Confectionery

Candy

Gum

Mints

Total Beverages



Bottled Water

Energy Drinks

Salty Snacks

Meat Snacks

Nuts/Seeds


Share of Linear Space – Self-Checkout Lanes Front-End Checkstands

5.1% 0.0%

0.0% 0.1%

0.1% 1.8%

0.0% 2.8%

3.6% 0.0%

0.1% 0.1% 0.2%







All Other

Additional Measurement Definitions

55

Source: Willard Bishop Super Study 2016.

Measure Group /

Individual Measure Measure Definition

Measure Calculation for

New Aggregates and/or Notes

Additive or

Calculative

Warehouse ABC Details

Labor ABCs Per-Unit Sold

Weighted average labor cost to handle one consumer unit

in the warehouse. Cost drivers include pallet configuartion,

case pack size, and selection method.

Some of the activities that build up to this cost include:

receive, inspect, put away, let down, select, load, etc. Calculative

Transport ABCs Per-Unit SoldWeighted average cost to ship one consumer unit to the

store

Cost drivers include transportation cost per mile, cubic feet

per truck , case cube and case pack sizeCalculative

Inventory ABCs Per-Unit SoldWeighted average inventory carrying cost at warehouse

level for one consumer unit

Cost drivers include cube and turnsCalculative

Storage ABCs Per-Unit SoldWeighted average occupancy cost to store one consumer

unit in the warehouse

Each segment pays its fair share of the retailer's overhead

costs to run the warehouse (mortgage, utilities)Calculative

Sub-Total ABCs Per-Unit SoldSum of all warehouse ABCs at the consumer unit level

(cost per case / case pack size)

Sum of Labor + Transport +

Warehouse Inventory + StorageCalculative

Measure Group /




Additive or

Calculative

Share

Weekly SalesShare of "parent" segment's sales. (i.e., cheese category's

share of dairy department sales)Child Sales / Parent Sales = % Calculative

Weekly True ProfitShare of "parent" segment's true profits. (i.e., cheese

category's share of dairy department true profits)Child True Profit / Parent True Profit = % Calculative

Adjusted Gross Profit

Share of "parent" segment's adjusted gross profit after

trade and terms are factored in. (i.e., cheese category's

share of dairy department adjusted gross profit)

Child Adjusted Gross Profit /

Parent Adjusted Gross Profit = %Calculative

Product Cash Flow

Share of "parent" segment cash flow (profit after covering

only variable ABCs) (i.e., cheese category's share of dairy

department product cash flows)

Child Product Cash Flow /

Parent Product Cash Flow = %Calculative

# SKUs

Share of weighted average number of SKUs across the

"parent" segment (i.e., cheese category's share of dairy

department # of SKUs)

Child # SKUs / Parent # SKUs = % Calculative

Weekly MovementShare of "parent" segment's weekly movement. (i.e.,

cheese category's share of dairy department weekly

Child Weekly Movement /

Parent Weekly Movement = %Calculative

Square Foot FacingShare of "parent" segment's square foot of facing (space)

(i.e., cheese category's share of dairy department sq. ft.)Child Sq. Ft. / Parent Sq. Ft. = % Calculative

Store ABC Details

Direct Labor ABCs Per-Unit SoldWeighted average direct ("touch") labor cost to handle one

consumer unit in the store

Some of the activities that build up to this cost include:

order, receive, inspect, put away, sort, load, move, stock,

rotate, face, clean up, tender, bag, etc.

Calculative

Indirect Labor ABCs Per-Unit Sold

Weighted average indirect labor cost to handle one

consumer unit in the store. Costs are allocated on a SKU

basis.

Some of the activites included are salaried managers, etc.

Calculative

Inventory ABCs Per-Unit SoldWeighted average inventory carrying cost at store level for

one consumer unit

Cost drivers include days-of-supply at the store and cost of

moneyCalculative

Occupancy ABCs Per-Unit Sold

Weighted average occupancy cost for one consumer unit

at the store. Cost drivers include the amount of shelf

space a product has, how fast it turns, and if it uses more

utility costs, e.g. freezer and refrigeration.

Each segment pays its fair share of the retailer's overhead

costs to run the store (mortgage, utilities)Calculative

Sub-Total ABCs Per-Unit Sold Sum of all store ABCs at the consumer unit levelSum of Direct Labor + Indirect Labor +

Store Inventory + OccupancyCalculative

Additional Measurement Definitions

56

Source: Willard Bishop Super Study 2016.

Measure Group /




Additive or

Calculative

ABCs (Activity-Based Costs)

Store ABCs as % of Sales Total store ABCs as a percent of sales(Store ABCs Per-Unit Sold x

Weekly Movement) / Weekly Sales = %Calculative

Transport ABCs as % of Sales Transportation ABCs to the store as a percent sales(Transportation ABCs Per-Unit Sold x

Weekly Movement) / Weekly Sales = %Calculative

Warehouse ABCs as % of Sales Total warehouse ABCs as a percent of weekly sales (Warehouse ABCs Per-Unit Sold) / Weekly Sales = % Calculative

Total ABCs as % of Sales Total ABCs as a percent of sales ABCs / Weekly Sales = % Calculative

Total ABCs Per-Unit Sold Total ABCs per-unit (weekly movement) ABCs / Weekly Movement = $ Calculative

Inventory & Turns

Average Days-of-Supply Average number of days-of-inventory on hand at the shelf Average of All Segment's Days-of-Supply Calculative

Average TurnsAverage number of times the inventory turns annually (with

current days-of-supply / weekly movement)Average Days-of-Supply / 365 = # Calculative

Average Units on Shelf Average number of consumer units on shelf per storeStraight Average of the Capacity (Units on Shelf)

for All UPCs in Category / GroupCalculative

Average Units Per Shipping Case Average units per shipping case (case pack)Straight Average of the Case Pack Count for all

UPCs in Category / GroupCalculative

Capital Cost as a % of SalesAverage cost of inventory carrying ABCs as a percent of

sales

(Warehouse Inventory ABCs +

Store Inventory ABCs) / Unit Price = %Calculative

Product Cash FlowAverage cash flow (profit after covering only variable ABCs,

i.e., labor and interest) reported as a percent of sales

True Profit + Fixed Costs

(Warehouse Storage + Store Occupancy)Calculative

Shelf Inventory (net cost)

The annual value of the retailer-held inventory (backroom

and shelf), based on the net cost of goods (adjusted for

terms and trade). Regardless of how much a retailer sells,

the retailer invests in inventory for the shelf.

Based on annual investment Additive

% SKUs Generating 95% SalesThe percent of SKUs that is required to reach to

95% of segment sales

Calculated behind the scenes (cannot be recreated in the

tool)Calculative

Measure Group /




Additive or

Calculative

Margin Performance

Adjusted Gross MarginThe product's adjusted gross profit as a percent of sales,

after trade and term moniesAdjusted Gross Profit / Weekly Sales = % Calculative

True MarginWeighted average profit margin after trade and terms and

retailer ABCsTrue Profit / Weekly Sales = % Calculative

Merchandising Space

# Facings A single merchandising shelf position for the productIf a product is stocked on the shelf two positions wide and

three high, the product has two facingsAdditive

# SKUs Number of SKUs in / out distribution throughout 52 weeksWill be larger than the average on shelf at a given time

since it includes ALL SKUs for all retailers included in the Additive

Linear (Shelf) FeetThe amount of linear (horizontal) shelf space occupied by

the product in the store

This measure is based on the product width and number of

facingsAdditive

Square Foot FacingThe amount of square feet of merchandising shelf space

occupied by the product in the store

This measure is based on the product width, number of

facings, and shelf heightAdditive

Per Facing KPIs

Weekly Sales $ Per Facing Average weekly sales per facing Weekly Sales / Facing = $ Calculative

Weekly AGP $ Per Facing Average weekly profit including trade and terms per facing Adjusted Gross Profit / Facing = $ Calculative

Weekly TP $ Per FacingAverage weekly true profit (after trade, terms and retailer

ABCs) per facingTrue Profit / Facing = $ Calculative

Average Inv. $ Per Facing Average inventory dollars on the shelf per facing Shelf Inventory Cost / Facing = $ Calculative

Weekly Movement Per Facing Average weekly consumer units sold per facing Weekly Movement / Facing = $ Calculative

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