S(H)ELF IMPROVEMENTS

Manufacturers and retailers are in striking accord regarding the progress made in overall shelf conditions, according to the 2002 Survey of Merchandising Service Practices by the National Association for Retail Merchandising Services, Plover, Wis.Nearly 55% of manufacturers and about 60% of retailers agree that shelf conditions improved last year. Manufacturers were a bit less optimistic, with 11%

Manufacturers and retailers are in striking accord regarding the progress made in overall shelf conditions, according to the 2002 Survey of Merchandising Service Practices by the National Association for Retail Merchandising Services, Plover, Wis.

Nearly 55% of manufacturers and about 60% of retailers agree that shelf conditions improved last year. Manufacturers were a bit less optimistic, with 11% stating that conditions have deteriorated, compared to 3% of retailers who said the same.

Both retailers and manufacturers recognized speed-to-shelf and out-of-stock initiatives as high priorities. Fifty-five percent of total respondents saw an improvement in the out-of-stock situation, with 60% citing an improvement in speed-to-shelf.

Manufacturer and retailer participants in the NARMS survey were in agreement regarding increasing levels of shelf-support, with 34% and 33%, respectively, noting an increase in support. The study found that manufacturers contract with merchandising service organizations to provide about 26% of that support.

According to industry observers, MSOs have become a vital cog.

"The use of MSOs is growing," said Moe Rodriguez, a NARMS board member. "MSOs provide the manpower and the flexibility to work with a clear focus." Rodriguez is also director of retail operations for Pfizer's Consumer Healthcare Division, Morris Plains, N.J.

In some cases -- the launch of a key new product, for example -- a sales representative simply cannot provide sufficient support, Rodriguez said. In these cases a more flexile model needs to be put into play using a more targeted approach toward execution.

According to Ralph Bartolotta, NARMS board chairman and president of Division21, St. Paul, Minn., a retail space-management firm, this improvement is due to a renewed dedication to shelf conditions, dating back to the benchmark study released by the Coca-Cola Retailing Research Council in 1996. The industry has identified and acknowledged the true impact of committed shelf-support, he said, and resources are being allocated accordingly.

"The real driver behind these improvements is increased shelf activity," Bartolotta said.

Third-party support can play a crucial role in helping to fill some of the gaps created by the post-merger downsizing and centralization characteristic of both retailer and supplier operations during the past decade. A diluted merchandising force has left shelf-support and in-store activities lacking in precision and forethought.

"The real impact of poor merchandising decisions has finally been recognized in terms of out-of-stocks, share erosion, reduced same-store sales and channel switching," said Jim Hall, president of Advanced Retail Merchandising, Lakeland, Fla., and a member of the board at NARMS.

As evidence, Hall pointed to the resurgence in demand for experienced merchandisers. Hall believes MSOs have had the greatest impact in the area of efficient planning for speed-to-shelf initiatives. According to Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill., new products may account for more than half of same-store sales growth in a year.

"A retailer who gets items on the shelves quickly will generate new-item sales double those of the retailer who lags six months behind," Bishop said. There are two key factors to this equation, he explained. First, the retailer with a progressive speed-to-shelf program will have a monopoly on sales during the six months it typically takes for a less-evolved competitor to catch up. Additionally, data has indicated that product will continue to sell twice as fast at the store that carried the product first.

"MSOs provide retailers and manufacturers with the ability to capture these new sales in an environment where they would otherwise be lost," said Bishop

Out-of-stocks are another well-documented challenge to the integrity of store sets and merchandising plans. A study released earlier this year by the Grocery Manufacturers of America, Washington, found that 92.6% of food and grocery products in the top 25 food and grocery categories were available to the consumer at any given. This is actually slightly worse than the 93.5% average on-shelf availability recorded by the Coca-Cola Retailing Research Council in 1996.

"The challenge to any supplemental retail activity program is having the product available at store level," said Bartolotta.

Manufacturers are generally more concerned with the out-of-stock situation than their retail partners due to the retailer's focus on store-level trends. However, the stake for both parties is clearly visible.

"Suppliers simply have more at stake at the brand level, while retailers share the same concern at the category level," said Hall. "If properly understood and discussed between trading partners, this discrepancy can be improved with effective merchandising since both have a stake in the real prize: the register transaction."

According to Rodriguez, audits are an effective strategy. The sales information from market research firms does not expose out-of-stocks, he said.

"The best you can do is make inferences and create summaries. Using an audit, the manufacturer that hires the MSO can take this information to the retailer and the proper adjustments can be made to minimums and maximums," said Rodriguez.

Integral to the success of any shelf activity is early involvement on the part of the MSOs. Bartolotta called for a more integrated approach, involving MSOs throughout the entire process. It is difficult to achieve the desired results when working from a single phone call prior to execution, he said.

"MSOs need to be involved in developing programs, as well as with following programs with activity reports and then moving on key findings," Bartolotta said.

Hall echoed these sentiments.

"With little time for resource planning the results are often less than acceptable," he said.

However with the proper implementation, Hall sees a vast field of opportunities for MSOs in the realm of speed-to-shelf and out-of-stock support. This may include anything from creating published implementation schedules, to ensuring the accuracy and viability of planograms and working with suppliers on collaborative efforts using shared resources, Hall said.

While awareness and action surrounding the questions of out-of-stocks and speed-to-shelf have shown marked growth, the NARMS survey uncovered a distinct lack in the area of in-store advertising. Sixty-one percent of respondents experienced no improvement in support of ads, with 45% saying the same thing regarding support of point-of-purchase materials. The reasons behind these disheartening numbers are complicated, yet the missed merchandising opportunity remains a stark fact.

"A fair amount of retailers don't want POP in their stores," said Rodriguez. Some retailers like to maintain strict control of the retail format, he continued, and fear that too much extraneous material may spoil uniformity.

According to Bartolotta, in-store ad and POP support has taken a back seat to the more pressing issues of speed-to-shelf and out-of-stocks.

"Trading partners have identified the most immediate needs," he said. "Other issues, such as POP support, will receive greater attention as we move forward."

Hall said the sluggish economy and distribution problems are primary points to consider. "When the economy slows, [consumer packaged goods] manufacturers reduce spending budgets on television, radio, print media and direct mail," Hall explained.

However, many companies do not have the resources to ensure proper placement.

"The vehicle for cost-effective distribution has been vastly reduced.

"Fewer directs sales, brokers and experienced merchandisers, compounded with high turnover of store personnel, make assuring timely placement a crap shoot at best," said Hall.

Effective MSOs are working with suppliers to develop a practical approach to POP, including collaboration on published schedules and financial budgets to make sure that responsibility is clearly delineated.

In an effort to increase awareness and provide access to resources, NARMS has joined forces with five other nonprofit trade organizations to form the Retail Marketing Coalition. One of the coalition's primary concerns is the proper handling of POP materials.

"We are the six associations responsible for the last six to 10 feet of any campaign," said Gary Ebben, president of NARMS. "If a supplier is going to go through the whole process of creating and shipping POP materials and it never gets assembled, it serves no purpose."

Ebben sees this as an area of opportunity for manufacturers and MSOs to work together, creating teams dedicated to the task of installing and maintaining POP materials.