Cutting the assortment Global learnings - ECR Baltic · Wall Street Journal –26 th June, 2009...

Confidential & Proprietary Copyright © 2010 The Nielsen Company

Page 1

Cutting the assortment

Global learningsHow retailer can collaborate

with manufacturer in

assortment decisions?


Page 2

Agenda

• Historics

• Importance of incrementality

• Cutting the assortment : a risky choice– Some examples of rationalization across the world.

• Keys for success– A moderate cut

– An adapted development for the PL offering on some categories.

– Don’t neglect the innovations

– The right space for each segment

• Conclusion


Page 3

How to study the

assortment?

Historical Approaches


Page 4

Evolution of the assortment

1900’s 1980’s 2000’s

Sources:

1 Nielsen Retailer Interviews January 2010

Cartoon: Tom Fishburne, Brand Camp, 2009

1950’s 1990’s

The grocerThe grocerThe grocerThe grocer

Ritz, wheat

thins, Triscott,

Carr’s and Tonn

house brands

FOR SALE

HypermarketHypermarketHypermarketHypermarket

The Ritz section

(150 varieties)

I just want a cracker

HypermarketHypermarketHypermarketHypermarket

The Ritz section

(150 varieties)

ButIt has to be MYcracker

Crackers

FOR

SALE

The hawkerThe hawkerThe hawkerThe hawker

Whole Meal, rye

and table water

crackers

FOR SALE

The merchantThe merchantThe merchantThe merchant


If they don’t find the product they want to buy:

� 4% of the consumers don’t delay their purchases. They leave the store.

*Source: Nielsen PanelViews Survey janvier 2010 USA

When assortment cuts:

� 30% of shoppers think it has increased.

� 6% think it drops.

Arguments for simplification are challenged by consumers.

For

simplification

For a broad

and

differentiated

offering

�

�


‘Project Impact’

Retailers cut back on variety, once the spice of marketingWall Street Journal – 26th June, 2009

‘Project Impact’

Retailers cut back on variety, once the spice of marketingWall Street Journal – 26th June, 2009

‘Less is More’

Asda clears the clutter by cutting back brandsThe Grocer – 21st February, 2009

‘Less is More’

Asda clears the clutter by cutting back brandsThe Grocer – 21st February, 2009

Cut range, not choice

Take risks

15-30% less lines

The recent history of retail assortment: 2009A common retailer message across countries...

In the earliest stage of rationnalisation

In the earliest stage of rationnalisation


Page 7

How to study the

assortment?

Importance of

incrementality


Page 8

Incrementality allows us to estimate the sku impact

on the category size.

To set the best assortment strategy

How to estimate the consumers’ answer?


Page 9

Rationalization

A risky choice

Some examples

of rationalization

across the world


At a category level, Walmart correctly take account of future growth potential...albeit in a subjective manner

Source: Walmart company reports,

Nielsen Analytic Consulting

Play – Sustain

Balance growth

& profit

Win

Gain

share

Show

Drive

efficiency

Play – Grow

Capture growth

opportunity

Future potential(subjective)

low high

low

high

Current

importance

Walmart’s ‘Win Play Show’ matrix

Fix the mix

Reduce overlap

Differentiate

Develop

Increase range

Consider NPD

Squeeze

Reduce range

Cut marketing

Nurture

Preserve range

Grow awareness

£ incrementality(objective)

low high

low

high

£RoS

Assortman diagnostic matrix


Assortment rationalization in Europe 2009 –Some key announcements

Announcement: “In some categories, we shall reduce the assortment by 20% to 30%,

freeing space for the key skus…“ Chief Merchandising Officer Darren Blackhurst (Feb 09)

Reality: Asda has cut the assortment in 2009 but by an average 2.9% – only – with

contrasted results accross categories

Announcement: “Tesco has an assortment 40% broader than the main competitors, but

the objective is to cut the assortment by 10 to 15% across categories in 2009…“ Marketing

Manager Rob Schofield (IGD conference 09)

Reality: average 0.6% in 2009… 2010 to confirm…

Announcement: “Mercadona has announced an assortment cut of 12% in 2009…“ Exactly as

Wall Mart

Reality: - 12% - mainly on manufacturers’ brands. Mercadona as WM does not hesitate to

come back on certain categories and relist skus. Has lost like WM 4% of market share for the

constant stores has too divided margins by 50%..


Wal-Mart in U-turn on Project Impact initiativesjust-food.com – 17th August, 2010

Wal-Mart in U-turn on Project Impact initiativesjust-food.com – 17th August, 2010

Asda sales fall as shoppers feel pinchreuters.com – 17th August, 2010

Asda sales fall as shoppers feel pinchreuters.com – 17th August, 2010

The recent history of retail assortment: 2010Retailers are under pressure

Preserve choice

Supplier input

welcomed

??????????????????????????????


It depends what you want ‘More’ of...Project Impact has delivered on some fronts

Sales

growth

�

Customer

satisfaction

�

Less

complexity

�

“An easier shopping

experience for customers ... ”

Space for

Non-Food

�

“Provide access and visibility to

departments that were previously

difficult to shop... ”

Retail

margin

�

“5.2% increase in

operating income...”

What are the global trends?


Why to cut the assortment in a given country?

• Global influence

• To position the country relatively

to Europe or the US

• Has the country a negative

incrementality?

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

US

UK

Fran

ce

China

Méx

ico

Brazil

Arg

entin

a

0

5000

10000

15000

20000

25000

30000

35000

Number of active skus Nielsen IMDB

Average Number of Items per Store

10

15

20

25

30

35

40

45

50

CHINA US France

%INCREMENTALITY

% incrementality =

Direct incrementality at the category level /

rate of sales


Page 17

INN MF+ MF- PL

+5% +2%

-20%

-3%

What is listed ( retailer’ strategy ).

-14% +7%

-4%

What has been made by the manufacturer

( manufacturers’ strategy )

New

products

Basic

manufacturers’

brands

Premium

manufacturers’

brands

Number of skus made per year Number of skus per store week

HM

All categoriesSao Paulo : A typical way of managing assortment. Global retailers cut the assortment.Innovations pay the highest price…

2008 2009

PL INN MF+ MF- PLNew

products

Premium

manufacturers’

brands

Basic

manufacturers’

brands

PL

+11%


Baltic countries : cutting the assortment has been the rule in 2009.


Baltic Countries Through Crisis Page 19

Average number of items has decreased the most ingroceries

Dark

and

White

Bread

Milk Yogurt

Fermen-

ted

Cheese

HamSau-

sages

Salted

Snacks

Choco-

late

Can-

diesCSD

Juice/

Nectar/

Still

Drink

Mineral

WaterCoffee Vodka Beer

Pet

Food

Ciga-

rettes

Laun-

dry

Deter-

gents

Sham-

poo

Face

Care

Tooth-

paste

Hypermarkets

>2500 -3,5 -5,5 -6,5 6,3 -7,3 -9,5 -8,8 -13,8 -11,6 0,1 -12,4 5,1 -7,1 -1,2 -14,4 0,3 -10,2 -2,5 3,0 5,0 -0,2

Large

Supermarkets -0,3 4,2 -2,4 5,1 -0,5 -7,2 -9,7 -4,4 -2,7 12,4 9,5 1,0 -2,9 6,3 1,8 5,2 9,0 7,7 5,0 6,6 2,1

Small

Supermarkets/

Discounters9,1 12,3 -3,9 11,6 -3,5 -7,7 -13,2 -3,6 -3,8 16,8 12,4 3,2 -6,8 10,2 8,1 9,5 -4,4 -6,0 -2,7 28,2 -2,7

Superettes -5,8 25,0 -6,8 -1,3 4,3 -22,9 -9,4 -4,5 1,7 17,7 5,4 1,3 1,6 0,7 8,1 2,5 -4,2 -16,8 -22,2 21,6 -0,2

Groceries -9,5 -6,2 -15,3 -2,3 -12,8 -11,6 -6,4 -5,5 -7,5 -6,4 -6,7 -11,0 -11,6 -2,5 -7,8 -3,8 -17,4 -13,5 -13,7 52,9 -3,0

Average number of items +/-% same period last year – Estonia – Food Feb/Mar09, Non-food Mar/Apr09



Average number of items is decreasing in all channels

Dark and

White

Bread

Milk Yogurt HamSau-

sages

Salted

Snacks

Cho-

colateCandies CSD

Juice /

Nectar/

Still

Drinks

Mineral


Pet

Food

Ciga-

rettes

Laundry

Deter-

gents

Sham-

poo

Face

Care

Tooth-

paste

Hypermarkets

>2500 7,0 -1,9 -2,5 -8,1 7,5 -7,5 -1,9 -1,9 12,6 -15,3 9,0 -3,7 -7,6 -7,5 15,7 -4,6 -11,6 1,8 -3,8 0,1

Large

Supermarkets -12,3 3,8 -11,1 -3,1 0,1 -4,4 -5,1 -11,8 2,1 -14,9 -1,8 -11,2 -10,7 -3,5 6,9 -7,0 -15,4 -9,3 -21,0 -3,7

Small

Supermarkets/

Discounters-4,0 10,9 0,5 -9,2 11,5 4,3 1,7 -0,7 1,1 -12,6 7,5 -6,2 2,2 3,8 7,1 -5,6 -3,6 -3,2 -19,6 7,5

Superettes -8,8 9,4 -7,9 -0,8 17,2 -0,7 -2,5 -4,8 -11,7 -16,2 -4,2 -17,9 0,4 -7,1 0,8 -18,4 -17,0 -20,6 -23,4 -17,2

Groceries -4,1 5,1 -16,0 12,2 7,5 1,2 -9,7 -16,0 -16,2 -17,9 -12,6 -18,8 -3,6 -17,8 6,4 -20,3 -20,5 -26,9 -21,6 -37,2

Average number of items +/-% same period last year – Latvia – Food Feb/Mar09, Non-food Mar/Apr09



Average number of items has decreased in almost all categories ingroceries

Dark and

White

Bread

Milk Yogurt HamSau-

sages

Salted

Snacks

Cho-

colateCandies CSD

Juice /

Nectar/

Still

Drinks

Mineral


Pet

Food

Ciga-

rettes

Laundry

Deter-

gents

Sham-

poo

Face

Care

Tooth-

paste

Hypermarkets

>2500 29,7 -1,7 -8,1 -8,1 6,6 7,5 3,6 -9,0 -2,1 9,9 -3,4 3,2 -4,7 1,6 -10,0 0,1 -11,4 -8,5 -4,7 -1,6

Large

Supermarkets 26,2 5,9 -16,7 -14,1 5,1 20,6 10,1 -9,1 8,2 6,9 3,1 2,2 -4,3 4,2 -3,2 7,5 -8,2 3,9 13,5 5,9

Small

Supermarkets/

Discounters13,1 5,7 -1,5 -9,2 7,5 21,1 14,9 -7,6 -0,6 -3,6 4,8 -1,9 -6,6 3,8 1,9 8,2 -15,5 -1,2 -4,2 -2,6

Superettes 6,9 3,1 -2,5 -12,3 0,6 -4,1 -5,9 -11,2 -5,5 -7,8 1,8 -11,8 -7,6 3,3 2,0 -0,8 -17,3 -13,4 -16,9 -14,0

Groceries -1,3 5,6 -11,0 -27,6 -7,1 2,7 -9,9 -8,7 -6,7 -24,7 -7,0 -11,4 -10,9 -8,2 -8,9 -6,9 -9,5 -13,2 -47,4 -22,8

Average number of items +/-% same period last year – Lithuania – Food Feb/Mar09, Non-food Mar/Apr09

What is the link between

assortment cut and sales?


US : What happened at Walmart is expected –it’s what happens when you take an average approach to the puzzle

Variation

-2,3

-0,4

1,3

-2,6

-0,4

1,2

-6,3

-1,2

3,5

-8

-6

-4

-2

0

2

4

theoretical sales

actual sales

items

SALES VARIATION PER LEVEL OF ASSORTMENT VARIATION

STORES CUTTING THEIR

ASSORTMENT BY MORE

THAN 5%

STORES CUTTING THEIR

ASSORTMENT

BETWEEN 0 AND 5

STORES INCREASING

THEIR ASSORTMENT

Source : Etude Nielsen Assortman 2010


Page 24

Rationalization

Key successes

A moderate reduction


Examples of categories that have cut their assortment in HM without penalizing the category

Whisky

+ bourbons

Number

of skus evolution

Revenue

evolution

Beer

Pet food

Champaigne

Chocolate

tablets

Number of skus

evolution

Revenue

evolution

Aniseed

aperitives

Shower gels

French dishes

-2%-2% +8%+8%

-4%-4%

-4%-4%

-4%-4%

-0.5%-0.5%

-4%-4%

-5%-5%

-3%-3%

+4%+4%

+5%+5%

+1%+1%

0%0%

+10%+10%

+3%+3%

+14%+14%

A relevant PL

development


Need to develop PL is different across countries

• France : Developing PL is less and less incremental, but still pushed a lot.– Already a high level

– Crisis less important than in the US

•US : In a strong crisis, PL are more and more requested by the consumers.

• Emerging countries : PL are not to be developed in most of the channels even if the level is low.– Reason : no substantial gap between low price manufacturers brands and PL price.

Confidential & Proprietary Copyright © 2010 The Nielsen Company2008 2009

Store Brand

Economy

Premium

New ItemHIGH

MARKETED

2008 2009 2008 2009

MEDIUMMARKETED

LOWMARKETED

US : strong progression of PL demand.They progress the most in high marketed categories.Only in low marketed categories they are the first in incrementality.

Consumer Response to Assortment

Want more Variety

Want less Variety


Total China hypermarkets... : movement towards premium and new products. New products to be more developed if high marketing…

2008 2009 2008 2009 2008 2009

Incremental in value sales of adding

one more item

Premium Basic New Product Private Label

Source: Nielsen l Assortman Benchmark – Total China Hypermarkets – 2009 vs 2008

Want more

variety

Want less

variety

High

MarketingMedium

Marketing

Low

Marketing

Don’t neglect

innovations

The right space

for each segment


Page 33

Liquors on several countries : a focus on the additive segments. France example :

What were the keys to drive the success on this assortment reduction?

� A squeeze in the less additive segments :�-3 skus on the less additive segments : fruits liquors

� An offering stability on the modern liquors : the most additive segment.

� An assortment rationalization for each brand� A focus on the strong skus

� 3 main brands have been preserved, keeping the best items for them.

Modern liquor

Traditional liquor

Fruits liquor

*en nombre totale de réf hors promo en HM

**CAM à fin mars 2010 vs CAM n-1 en HM

-5%Ref*

-5%Ref*

+6%CA**

+6%CA**

Incrementality ranking


Page 34

Rationalization

Conclusion


What does the consumer want ?�� Simplification and dependence/addiction to a specific product

Simplification Simplification Simplification Simplification

The Ritz section

(150 varieties)

I just want a cracker

Dependence on a Dependence on a Dependence on a Dependence on a

very differentiated very differentiated very differentiated very differentiated

productproductproductproduct

The Ritz section

(150 varieties)

But It hasto be

MY cracker

Cutting the assortment Global learnings - ECR Baltic · Wall Street Journal –26 th June, 2009...

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Transcript of Cutting the assortment Global learnings - ECR Baltic · Wall Street Journal –26 th June, 2009...