using market research to drive retail results

October 20, 2011

Winston Ledet - COO

Growing in Retail Home Improvement in the “New Normal”

www.premiumretailsolutions.com

Premium Business Model Winston Ledet

Premium Retail Solutions, Inc Chief Operating Officer • Co-Founder of Retail’s Solutions

Group focused on strategy, analytics and insight

• Worked with over 50 current and prospective suppliers

• Former Home Depot Merchandising Vice President -Merchandising Strategy and Innovation

• Led corporate strategy at Home Depot for three years prior.

• Strategic consulting background with McKinsey and Company

My Background

http://www.mohawk-flooring.com/Default.aspx

http://www.target.com/gp/browse.html/ref=nav_t_logo/602-6467706-2475052?_encoding=UTF8&node=1038576


Defining the “New Normal”

Pre Great Recession

Temporary Stimulants • Buoyant housing prices • 2 million housing starts • Ease refinance money • The decline of Sears • Diverse supply base consolidating

Long Term Tailwinds • Home as an investment • Positive store growth • DIY as an enabler • Aging of the housing stock

New Normal Temporary Depressants • Falling / stagnant housing prices • 500,000 housing starts • Underwater mortgages - deleverage • European Dept crisis

Long Term Headwinds • Home spending as consumption • Store saturation • Aging of the population • Leverage of the big boxes • Potential for significant inflation


Conditions Under the “New Normal”

Limited opportunities in new construction – more manufacturers chasing retail Less organic growth in the US and Canada – square footage growth is tiny Greater leverage of the Big Box players Pressure on big ticket Purchases Growing DIFM / BIY


Thriving in the new normal

Building a Consumer Brand.

Driving Bottom Line Profitability.

Current Playing Field • Traffic • Conversion • Share

Expand Into Adjacent Areas

What is the role for Research and Insights?


Growing in the Current Playing Field.

Promotion

• Special buys, wing stacks, clip strips

• Leverage the spend of the retailer

• Determining offers that work

• Manufacturer directed marketing

Selling Beyond the Shelf

• PRO desk and bid room

• Installed sales

• Web

Education / Theater

• POP, packaging, website, smartcodes

• Demos / Training in store

Expand Retail Footprint

• Increase store count at existing retail

• New retail partners in core channels

• New retail partners in new channels





Improving Location within Store

• Higher traffic area of the store

• Higher traffic area in the department/category

Traffic



Traffic - Example

To Do’s for Researchers

Understand what is lacking to drive traffic Access to timely POS data and appropriate analysis Improvement loop PDCA

Lack of greets in the kitchen department leading to lower sales Put in greeter / lead generator Utilizing POS data Pre / Post net of control


Merchandising & Assortment

• Understand your customer

• Right product for the market/store

• Understand JLQ

• Shoppability optimized

• Product quality, warranty & service

• POP, packaging, and display

• Extend the aisle

Field Execution & Logistics

• Timely delivery

• Always in stock at the shelf

• Priced correctly

• POP displayed, in good condition

Pricing

• Priced right

• Line structure

• Everyday price = value

• Differentiated pricing PRO vs DIY

Product Differentiation

• Competitive advantage

• Solve customer needs with improved product or packaging






Conversion

Grow Shelf Space and SKUs

• Target competitive SKUs

• Increase facings

Off-Shelf and Cross Merch

• Off-shelf spots in relevant categories and relevant seasons

• Constantly test and pitch new ideas



Conversion - Example


Pricing tests for existing items Conjoint or similar approach for new products May dovetail into cost – don’t be scared Go on shops – play games

Finding knees in the demand curve

• Recently we priced at this point (a 50% drop)

• Sales rose over 500%




Specific Room 38%

New home 13%

Good deal 13%

Project 12%

Don’t remember

12%

Replacement 10%

Other 3%

Reason for Purchase

Kitchen 46%

Utility / Laundry

11%

Garage 9%

Child's bath 6%

Closet 6%

Childs bedroom

2%

Basement or Attic

2%

Other 18%

Purchase by Room




To Do’s for Researchers Who buys, when do they buy and why do they buy In-store tests and tracking Break away from conventional thinking Planned

64%

Unplanned 36%

Consumer Purchase Occasions

Gender of Decision Maker





Conduct concept tests and choice based mapping Push the development teams to try new things Use another category / industry as an analog

Top Loading

Bottom Loading

30%

70%

A) Top Loader B) Bottom Loader

Disregarding Price – Consumers prefer bottom loader more then 2 to1

www.premiumretailsolutions.com Expanding the Playing Field





Manufacturing Adjacencies

What other products does the retailer sell that fit my manufacturing expertise? e.g., Vinyl Molding to Vinyl Fencing

Customer/Project Adjacencies

What other products do my customers buy that my brand and/or relationships give me an advantage in?

e.g., power tool company expanding into paint sprayers

Often this is a good place to look for acquisitions

Owning Categories

Power in providing an entire category.

Simplify the life of a merchant and gain control of key levers

What products in your bay or run can you produce or source?


Expand the Playing Field - Example

To Do’s for Researchers Use consumer insights to get the customer view of the category Stretch your partners to think beyond the 4 walls Know more about your category than anyone Be patient – this is very counter-cultural to a manufacturer – but not too patient

Attic

www.premiumretailsolutions.com Build a Consumer Brand.





Why is it valuable?

• Build high switching costs for retailer

• Build credibility with consumers

• Develop strength and stability in sales

• Create stronger case for expanding into new categories

Ways to Build a Consumer Brand

• Proprietary technology

• Consumer advertising

• Commercial channel success


Building a Brand - Example

To Do’s for Researchers Know your brand’s real value and short comings - track it ongoing and respond Know who key influencers are Understand impact of channel marketing and messages If it can’t be done make the organization face reality

WORX

• Go around the retailer

• Talk to your customer

directly

The #1 Brand in Cordless String Trimmers with NO retail distribution – now in Home Depot and Lowes

www.premiumretailsolutions.com Drive Bottom Line Profitability





Product Line Profitability

• One-view of cost (avoid getting picked apart by retailer behind the line programs)

• Use new product introductions to eliminate / obsolete low profitability products

• Drive operational and logistical efficiencies

• Expense productivity

Driving Cost Out

• Distribution costs

• Manufacturing costs

• Packaging costs

• Minimizing return costs

Retailer Negotiations

• Index commodity prices

• Start early on price increases (expect it to take months)

• Packaging costs


Understanding Cost - Example

The Reality of Cost in the “New Normal” To Do’s for Researchers Understand the CTQs for your products Experiment with ways to take cost out without impacting the customer Competitive intelligence on cost

Waiting for his cost increase to be approved

• Component costs are high and rising

• Retailers have significant leverage to deny, delay and decrease price additions

• Manufacturer who do not know how to intelligently cut costs will lose profitability or lose business


A Parting Thought – The Big Picture

Traditional - If you are not growing square footage – you have started your decline Digital – If you are not growing customer interactions – you have started your decline

How will your product be sold in the future

using market research to drive retail results

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