In our last blog on convenience, my colleague, Trusha Pandya, wrote about her father’s experience running a small convenience store and the challenges he faced without the many tools that we have available today. In this blog, I’d like to pick up on a few key points around the critical nature of having data that enables you to truly know your customer, as well as how this data feeds the need to have a high degree of perspective around inventory space and the assortments that fit those spaces.
Knowing the customer
In Trusha’s blog, she speaks about how her father’s knowledge of customers was mostly through his interaction with them on a regular basis. While customer interaction and engagement are vital to any retailer’s success, to succeed today, they need to have a more sophisticated method. By leveraging insights from various data points such as loyalty card programs, point of sale data and demand data, we can gain an in-depth understanding of the patterns and anomalies in consumer shopping habits.
Many traditional (small) convenience stores may have a good understanding of purchasing habits in one location, but it’s more than that. Convenience retailers should be taking a page from larger grocers’ playbooks. They need to be able to take what’s happening in stores at an individual level and then aggregate that across hundreds or in some cases, thousands of stores. This way, they can identify patterns and then exploit those patterns to change their retail offering. The result is the ability to give shoppers what they’re looking for and the ability to do it in a way that is scalable.
Effectiveness of inventory and space allocation
Assortments have gotten larger and larger. As this has happened, it’s become impossible to manage in a manual way. Retailers of any size need software and science to accurately manage this. Part of this is having the right assortment, but it’s also having the right quantities of that assortment and the right number of facings on the planogram. And actually, to do all those calculations by hand and to do them to a standard which makes a highly efficient assortment would take forever. In my colleague’s father’s case, he was likely limited to using pen and paper.
Accurate allocation of space is critical to a convenience store. It’s why so many convenience stores have half of the store given over to liquor; it’s what sells well and that’s what’s going to make the money. But is that appropriate for every store? My coworker’s father didn’t have any help in figuring out space allocation. He had to just base his allocation on general trends he saw…and his peripheral knowledge of his customers. But, had he had the ability to see how other convenience stores in similar demographics handled their assortment – and their success or failure in that regard, it would have been a different game for him.
Knowledge means better supplier relationships
It goes without saying that the better you know your customers through understanding all your data, the better you can figure out assortments and space allocation – and of course – the better you can negotiate with suppliers. You want to do things that drive the most benefit for you and your suppliers. As a retailer, you want to get the best deals from them and the best cost of goods to generate the best margins etc. Today, the only way this can be done is through a rigorous approach around data…and gaining the key insights that inform you around the next best steps. When you consider larger retailers here as well, where they may be negotiating with suppliers across thousands of stores, this point becomes even more pronounced.
A few key takeways
- Convenience stores may be smaller than standard grocery, but their impact is larger than ever and they need to turn themselves into destination locations. That means ‘thinking big’ about understanding customers and having access to the data that enables that understanding. They also need to be able to understand behavior outside of their single location or cluster to effectively plan assortments.
- Assortments and product options continue to grow, even when physical stores do not. The limited footprint of convenience retail calls for an extremely agile and intelligent process to determine the right use of space. For today’s shoppers, the old rules no longer apply and only by using data and science can convenience retailers remain competitive.
- Supplier collaboration is vital to all retailers, but the concentration of items that convenience retailers have to manage means that negotiations are even more important. The only way to effectively work with suppliers to get the best costs, run the most successful promotions and achieve the best margins is through data. When you have the right assortment and know exactly what you need, you make your job – and your suppliers’ jobs – easier, more efficient and more profitable.
To learn more, view our on-demand webinar where I am joined by colleague Gina Hargrave to discuss why better assortment planning is more important than ever due to COVID-19.
Discover the Rule of 17 and how to apply it to optimize assortments and rationalize SKUs to achieve profitable revenue growth in every category.