Page 173 - DMGT552_VISUAL_MERCHANDISING

Visual Merchandising

Notes More specifically, Derrenberger, along with one of her colleagues, Cathrine Lockhart,
worked on the situation at Food Lion, a Charlotte, NC-based retailer with over 1,300
stores in 11 Southeast and Mid-Atlantic states. “We had a unique opportunity to start
there,” said Lockhart, also a category development analyst at J.M. Smucker. “Food Lion’s
data sharing program, Vendor Pulse, provides us with comprehensive access to actual
data: we now have full visibility over sales and inventory levels by day, by store, for each
of our references.
With this level of detail, we now can accurately determine where we have out-of-stocks
and understand how we can address their root cause.”

Understanding the Real Out-of-Stock Picture
Using solutions provided by Sunnyvale, CA-based Retail Solutions Inc. to leverage the
Food Lion Vendor Pulse data, J. M. Smucker realised that the out-of-stock problem at Food
Lion was indeed structural. “We looked at the warehouses first,” explained Derrenberger.
“We realised that there was no issue there and that our service levels were satisfactory.
We then started analysing the information down to the store level, matching stores not
scanning the products with inventory levels. Leveraging our partnership with Retail
Solutions Inc., we were able to look at sales and in-stock levels for 160 days, in each store,
for each SKU.”
The outcome was astonishing: at any point in time, an average of 12% of Food Lion stores
were out-of-stock for Dunkin’ Donuts Original Blend, the best selling reference in the
range. During promotions, the numbers tended to spike even higher. Equally importantly,
the issue happened across a large number of stores: 50% of stores were actually
out-of-stock for more than 10 days during the study period, and 13% of the stores were
out-of-stock for 50 days or more, or nearly a third of the reference period. “When you hit
these long out-of-stocks, it presents a clear risk to customer loyalty,” commented Lockhart.
“The last thing we want is to give an opportunity to a committed customer to switch
brands because they hardly ever find their first choice on the shelf.”
“Retail Solutions showed us we were losing 24% of our sales by not being in-stock,” added
Jessica Fording, the Food Lion team director at J. M. Smucker. “Based on that kind ofnumber,
it was obvious we needed to move into structural changes rather than tactical ones.”
Recommending an Optimised Planogram

The opportunity presented itself in the form of a major planogram reset at Food Lion
scheduled for August 2009. Till then, most stores just followed a simple guideline for
Dunkin’ Donuts: A single facing for each SKU. Derrenberger and Lockhart conducted an
extensive space-to-sales analysis (while reincorporating the lost sales to account for real
customer demand) for two different planogram sets at Food Lion.
“We went back with a completely different proposal,” said Scott Dacus, J. M. Smucker’s
national account manager for Food Lion. “We presented our findings to the category
management team at Food Lion and they blended our proposal with other suppliers’
recommendations.”

“Our strategy was not solely based upon incremental facings for Dunkin’ Donuts and the
other J. M. Smucker brands,” clarified Derrenberger. “We worked under a set of criteria
defined by Food Lion to not increase the planogram size but rather to reallocate space
between various products.”
This resulted in Dunkin’ Donuts coffee products receiving significantly more planogram
exposure while some slower-selling SKUs in other ranges saw their number of facings
decrease. The reset was enacted on August 3 and quickly rolled out across all stores.
Contd...

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