In an increasingly digital world, retailers need to rethink how they fill their square metres of selling space. “Innovation in retail is not limited developing a new store concept, it’s about adopting a shopper-driven philosophy.”
Let go of channel thinking
How do you determine which products are missing from your range? How do you decide on the optimal frequency for promotions? How do you improve the shopping experience? How to increase the value of small purchases? These are questions that retailers are constantly faced with and to which the answer is not always obvious. In his new book ‘The Retail Innovation Toolkit’, shopper marketing expert Constant Berkhout provides 42 tools that retailers or suppliers can use to serve shoppers better. It is not a theoretical book about category management, but a practical guide with exercises.
“Category management has to move with the times,” says the author. “Apart from the store, you have to include mobile and online, for example. The customer journey has become less linear: today’s customer journey includes so many different steps, and at each step you are competing with another party. Retailers still think too often in terms of distribution channels, instead of taking the customer’s perspective. You have to let go of that channel thinking: as a supermarket, you are now also competing with Amazon and Deliveroo.”
Use retail space differently
Category management is about collaboration, about partnerships, about trust, about sharing data. But cooperation is no longer limited to the retailer and its suppliers: “There are many more stakeholders. British supermarket chain Morrison’s was too late with its own online proposition, so it teamed up with web supermarket Ocado. But they also supply the fresh products for Amazon Fresh. And if things have to move fast, Deliveroo delivers the groceries. New ecosystems of partnerships are emerging.”
“I see a total rethink for the future about how you use the physical retail space,” Constant Berkhout points out. “Think about a topic like health in the supermarket: in the UK, Boris Johnson wants to impose restrictions on promotions and displays for unhealthy products. That will have enormous consequences on the placement of those categories. The Netherlands wants to ban the sale of tobacco in supermarkets. What should supermarkets do with their service counter? Can they make a profit by selling scratch cards? The further roll-out of self-scan also frees up space that can be used differently. In Alibaba‘s Chinese Freshippo supermarkets, only 40% of the space is reserved for the traditional ‘display’ of products. The rest is dedicated to logistics – preparing online orders – and to experience: in-store consumption, entertainment and education.”
Define new KPIs
This challenge also applies to non-food retailers. The American chain Office Depot, for example, saw strong competition from online for certain office supplies. The retailer reacted by focusing more on services for small and medium-sized businesses in its stores and opened pick-up points for orders from Alibaba. In Overvecht, near Utrecht, the Steck garden centre presents itself as an ‘urban oasis’. In cooperation with local partners, the entrepreneur gives new meaning to the garden centre concept, with more room for education. “And why can’t a DIY store work together with a coffee bar? For retailers, the question is: how do you get people to come to your shop more often? Give them more reasons to visit your shop: not just to buy, but also to get their bearings, or play with the kids, or have a coffee.”
But the problem is that retail organisations are often still stuck with old KPIs, Berkhout believes. “One supermarket chain wanted to install a children’s module in its stores, where children could play for a while. That costs space, and so the internal question arose: ‘what is the business case, what will it yield? But parameters such as productivity or turnover per square metre are not enough. You might start looking at customer satisfaction as a KPI, for example.”
Improve the shopper experience
Constant Berkhout does not see category management as the only way to bring innovation. “Innovation in retail is not limited to coming up with a new store concept. Innovation is not just something for the format development department. Every category manager has to innovate. If you are a category manager of soup, or of cooking pots, you have to be triggered to think about the shopper experience. It’s about adopting a shopper-driven philosophy.”
He deliberately opted for a very practical book with short texts, clear action points and appealing visuals. “In my assignments, I often work with very bright young people who are less familiar with category management because it was not part of their education and who are not inclined to read books but rather get their information from YouTube, for example. I want to give category management a new impetus and reach people who did not learn it at university. 30 years ago category management was a project, today it is a process. It is about improving the experience for the shopper, it is about more empathy. That is the message I want to convey.”
Readers of RetailDetail can order the book The Retail Innovation Toolkit here: with the discount code rdtoolkit you get 10% discount until 30 June.
