PG Web Extra: Endcaps and Center Store
Editor’s Note: Gordon Wade, director of best practices at the Category Management Association, authored a shopper study based on in-store behavior analytics focusing on how endcaps impact sales throughout the core center store. The following are excerpts from that study; more information is at www.cpgcatnet.org.
As the in-store shopping experience has grown in importance, so has the imperative to understand the manufacturer’s ROI on the dollars being spent within the store.
Most manufacturers have been able to measure certain aspects of their in-store expenditure from Nielsen and IRI reports on sales lifts from features and displays. But they have lacked a more granular understanding of various merchandising options at retail. The retailers themselves have lacked a holistic understanding of the relative effectiveness of specific merchandising techniques on the overall shopping experience and, most importantly, the effect on market basket size.
More recently, as center store sales have declined, retailers have become much more concerned about understanding how they may merchandise brands and categories to drive overall market basket value. Often this means finding ways to drive shoppers down more aisles into the center of the store.
Analyzing behavior
New research suppliers have arisen to address these issues; among them is State College, Pa.-based VideoMining, which captures the actions of every shopper in the store during the shopper’s entire trip by multiple digital cameras placed unobtrusively in the ceiling of the store. The activities of each shopper are analyzed by patented digital analytics enabling the system to accumulate enormous masses of behavior and reduce it to metrics.
The data and analysis used in this report are based on VideoMining’s Grocery Shopper Insights (GSI) program, including a syndicated “MegaStudy” of over 2 million shopping trips and a variety of custom studies. In this specific report, the preponderance of the data and conclusions are from one conventional 45,000 square foot supermarket with 34 endcap display locations.
As should be expected, manufacturers and retailers have different perspectives regarding the role of endcaps in their marketing strategies. Both envision endcaps as a way to increase profitability but here the perspectives and objectives begins to diverge.
Manufacturers have historically looked at endcap displays as one of the most predictable and profitable ways to increase volume of a brand. Most manufacturers have repeatedly experienced dramatic volume increases from the endcap displays with or without an accompanying price reduction. Depending upon the brand, the category and the accompanying promotion, manufacturers can reliably expect volume increases from 2x to 5x versus base and control.
These significant increases have been repeatedly reported over the years by Nielsen and IRI. Everyone believes this to be the case. Some analysts are quick to point out that these are temporary increases that merely move purchases forward in time but don’t represent real increases in long-term in-home use-up rate. A few analysts have even shown that an increase in the movement of one brand in a category does not necessarily increase total category sales but merely cannibalizes the sales of other brands or later consumption thereby leaving the retailer with little in the way of incremental volume over a two or three month post promotion period.
It is here that one can begin to appreciate the differing objectives that a retailer has for the valuable endcap display space awarded to a specific manufacturer and brand.
Retailers want an increase in category market share versus direct competitors and other channels; an increase in total store sales and market share during the promo period; a promotion that helps to attract incremental shoppers to the store and generates incremental sales while the shopper is in store; and long term, an improvement in the banner’s value image among target shoppers as an outgrowth of the overall impact of the categories and items featured.
Findings
Here are the major findings that drive the conclusions outlined above:
Endcap response varies dramatically by location in the store quadrant. Back right/back left versus front right/front left. Manufacturers who do not reflect this understanding in their merchandising negotiations with retailers will probably not optimize their shopper marketing investment. Conversely, retailers who undervalue the prime endcap locations or suboptimize numerous locations will not generate the highest return on their available space.
Endcap response varies dramatically by category and of course by brand and offer. In some categories the extra movement generated by the brand off the endcap display itself simply cannibalizes the main aisle sale of the total category. This suggests manufacturers should review which of their categories they seek to invest their in-store shopper marketing dollars. From a retailer standpoint, this finding suggests that some categories should almost never be put on endcap display because other categories will generate a larger ROI from this valuable space.
Placement of the endcap display relative to the main aisle of the item on display has varying effects by category. In some instances it appears the endcap reminds shoppers to go down the upcoming main aisle. In other cases, placing the display after the main aisle seems to generate a subpar response. This is a critical issue for both manufacturers and retailers because of its implications for center store visitation and center store volume which has been in decline in the grocery channel.
Data suggests endcaps in the rear of the store are more effective than those in the front of the store. This is especially true of the locations in the front left of the store where traffic is quite heavy but conversion to sales is relatively low suggesting that these “shoppers” are actually at the end of their shopping trip headed toward the checkout aisle and therefore are uninterested in considering any other items for purchase.
Manufacturers and retailers need to reflect in their thinking what appears to be a significantly higher buyer conversion level and absolute purchase level in the rear store endcaps versus the front store endcaps.
On the surface, these findings are hardly surprising; shopper buying velocity rates (household penetration times annual purchase frequency per 100 households) vary dramatically among the categories in the store.
There were some fascinating differences in response by category. Among paper towels, pasta sauce, home & office, canned vegetables and baking mixes, overall category sales went down even though the category was being displayed on an endcap. Moreover in several of these categories (such as paper towels), the item on the endcap moved quite well (24.3 percent of total category sales) but total category volume decreased by 5 percent. It appears the endcap item actually decreased aisle traffic and overall category volume. The same phenomenon occurred in other categories although not so dramatically.
Conversely, in several categories – including condiments, cookies and carbonated soft drinks – movement off the display was modest but total category sales increased dramatically, suggesting that the endcap is performing some sort of trigger function to drive shoppers down the aisle.
Additional category-specific responses
Cookies and crackers: The study suggests that this impulse category is worthy of endcap space because shopper conversion (buying as a percentage of shopping) is 21 percent higher than for the average for all endcaps. Separate studies by Kantar retail seem to confirm the impulse appeal of the category.
Frozen bread dough: This category was among the most productive in the study primarily because it did an exceptional job in attracting the attention of store traffic. Its “shopper” metric was nearly three times the average end cap. The lesson here is not clear but may be that a smaller category which normally gets lost in the historically hard to shop frozen department, can attract favorable attention when it’s put on an endcap where shoppers can discover it.
Ice cream: This huge and complex category had a well above average index of “shoppers” (155 vs. the average category at 100), but a low index of conversion to buyers, only 48. The data suggests that shoppers notice the category item on the endcap but then go the main ice cream aisle to buy. This pattern exists in several multiple SKU categories characterized by numerous brands, types and flavors.
Beer: Endcaps with beer index significantly high in shopper to buyer conversion (130 vs. average category at 100). Data also showed that only 1 out of 20 shoppers who engaged with a beer endcap went on to purchase from the refrigerated beer aisle. Unlike many other categories, there appears to be no reason to put Beer on an end-cap near the beer aisle, with any high traffic area being a good candidate for beer.
Endcap vs. main category aisle
The relative location of the category on the endcap to its main aisle (before or after the main aisle in the predominant traffic flow) makes a difference. Endcaps located before the main aisle in the predominant traffic flow generated more sales than those located at the main aisle or beyond it. Even more remarkable was that some endcaps appear to drive more traffic down the main aisle of the category than do end aisles positioned after the predominant traffic flow relative to the main aisle. This makes sense intuitively and needs to be corroborated by additional research. Given the justifiable concern over center store visitation and overall shopper basket size, this seems to be a significant if unexpected discovery.
This study and similar category-specific studies strongly suggest retailers have the opportunity to optimize their valuable endcap display space by partnering with their vendors to gain a deeper understanding of the relative effect of the variables involved in the endcap display merchandising decision. This would seem to be an obvious and attractive alternative given the fact that the display space already exists and requires virtually no incremental investment in space or operational cost.
Can endcap displays actually lead to an increase in the home consumption of the category thereby generating incremental volume in the medium and long term for the retailer and the manufacturer?
Some manufacturers have captured data which seems to suggest that the mere presence of the product in the home leads to incremental consumption. This data generally comes from food-oriented and especially snack-related categories which can generate impulse consumption in the home when they are in stock in the family’s pantry. It seems reasonable to conclude that a purchase from an endcap could replenish the pantry and lead to incremental consumption by the family. This same reasoning clearly does not apply to many categories for example toilet tissue wherein home consumption is driven by basic physiological factors.
So, as retailers make their choices about the categories to put on endcap displays, they need to consider the value of displaying these impulse consumption categories versus those categories whose consumption will not vary longer term because of an immediate buying decision off an endcap.
Of course, vendors care passionately about shoppers buying their brand versus a competitive brand and for that matter retailers want shoppers to purchase these non-impulse consumption categories at their store rather than a competitor.
In the longer term however, the retailer’s interest may be better served by a relative increase in endcap space for those categories characterized by impulse consumption or expandable consumption in home. This is another example of the differing objectives of retailers vs. manufacturers.