Retail - Shopper Centric Retailing SM

Shopper Centric Retailing^SM is the first and only beyond category business model. It is designed to better position retailers to effectively compete in an industry that is rapidly evolving to shopper centricity. Today the store is more important than ever before. It is now the primary demand generator with 60% to 70% of all shopper decisions made at the shelf during the shopping moment. The store is a primary communication and information vehicle. It is the shopper’s knowledge source.

Several years ago, keeping in mind that we introduced category management in the US market during a product/consumer centric ERA, we began to question its viability in what now is clearly a shopper centric environment. We concluded that category management has certain limitations that will prevent evolving the 20 year old model to a level that will sustain incremental gain in today’s environment. It cannot be refreshed. These limitations include:

The planning process is too narrowly positioned by focusing solely on a category instead of more broadly on a category as well as on those aisle, department and total store factors that can influence merchandising solutions and the effectiveness of the shopping experience

Organizational structures are typically compartmentalized into departments such as Grocery, HBC, GM, Meat and Produce. This is a huge barrier to optimizing complimentary category merchandising.

It excludes the necessary structure and process alignment with Operations to ensure vertically integrated “ownership” of store execution….the “Achilles Heel” of category management.

Sameness of the category planning process and available data/ information across retailers limits a retailer’s ability to move beyond parity through innovation and differentiation.

The primary emphasis on analytics and producing the plan, without sufficient emphasis on the development of creative merchandising solutions, has resulted in a noticeable deterioration of the “art” of merchandising skills.

Introducing Shopper Centric Retailing^SM …The Next Generation Model
Shopper Centric Retailing^SM overcomes the aforementioned limitations of category management and puts a much sharper focus on the customer and the shopping experience. It…

Bridges functional and departmental silos
Restores the emphasis on being good Merchants
Frees up time at the “Merchant’s” desk to focus on driving growth
Moves beyond sameness to a differentiation and innovation capability
Enhances the ability to execute merchandising programs at store level
Shifts collaboration between trading partners toward “actionable” shopper insights

Defined as...

The ability to enhance the shopping experience through the shopper centered alignment of:

Strategies, tactics and execution
Business processes (enabled by technology)
Merchandising competencies
Performance measures

across internal functions and between trading partners at the “touch point” with the shopper… the store.

It is a shopping experience, shopper solutions focused business model supported and enabled by Strategic Positioning, a Repository of Knowledge and Supplier Alignment

A Paradigm Shift for Retailers
The evolution to a shopper centric business model can be a major paradigm shift for some and require only
modest changes for others. It realigns Merchandising and Store Operations organizational structures and
processes; it challenges traditional behaviors and performance measures; it requires investment in building
Category Manager/Merchant merchandising skills; and it redefines the relationship between a retailer and
its suppliers.

Implementation of this revolutionary concept will differ for every retailer. The following are those factors
to consider when determining “how to” implement include:

The magnitude of culture, structure, technology and business process change
The company objectives and competitive environment may dictate the pace change
The current skill base across the organization
The degree of change required
The capacity of the organization to digest change at an acceptable rate
The readiness of the organization to accept change
The willingness of senior management to drive change throughout the organization

Our implementation experience to-date varies considerably from retailer to retailer. One retailer wanted to
implement the new model within a twelve month period while others want to phase implementation
over a two-three year period. In all cases we strongly suggest the `Shopper Centric RetailingSM model be
tailored to meet the specific needs of the retailer. No two retailers will look the same.

Implications on Trading Partner Relationships

The collaborative process between trading partners will evolve toward merchandising solution ideation
sessions and concept development. Top-to-top communications and routine sales call processes will
need to be completely overhauled. The evolution to a Shopper Centric Retailing^SM model will have
significant implications on how manufacturers will conduct business in the future. It will require a closer
alignment of sales and marketing. The roles and responsibilities of customer teams, category management,
customer marketing and support functions will require realignment. A shopper insights function within
sales will be necessary and new skills will be required in several areas. Investment in retailer specific,
actionable shopper insights will be a requirement.

The Future…Shopper Centric Retailing^SM

The evolution to the new model will take time…but it will happen. In 1991 we designed category
management at HEB in Texas, the first practitioner of the concept… doubters said the industry would
not follow. The rest is history. Since we are the architects of Shopper Centric RetailingSM , we know
exactly what retailers must do to prepare for the future. Response to-date has been overwhelmingly
positive.

“We welcome the opportunity to meet with you if you would like to learn more”