Interview by Symphony RetailAI’s Paul Hoffman. Mark Wilkinson, Head of Space Planning, Pets at Home, Ltd. talked about their category optimization process, results and learnings to date at Xcelerate Retail Forum 2019.
Tell us a bit about Pets at Home.
Pets at Home is the UK’s largest pet supplies retailer. We were founded in 1991 and we now have around 450 stores. Most of those stores have a veterinarian and a grooming parlor within them as added services. The business grew organically for most of its history but also benefited from the acquisition of the UK arm of PetSmart in about 2000.
We look to provide everything you need for your pet in one location on an out-of-town retail park. Our store average is around 7000 square foot of retail space, so probably small compared to some of the pet retailers like Petco and PetSmart that you’re used to seeing in the US, but quite large compared to any other pet retailer within the UK. There’s a large variation within our estates, so our smallest store is around 3000, our largest is 21,000, a big variation. That makes our assortment decisions pretty complicated, so we must make an offer that fits for our customers in both the smallest store and the largest store. We’ve got a product assortment that certainly won’t fit in 3000 square foot for the smallest ones, so we’ve got to be quite cute about how we get the right mix of products into those stores for our customers.
We like to think of ourselves as the best free zoo that your kids can visit on the weekend.
What do you see as the top few trends or influences on retailers these days?
I don’t think we’re unique in terms of the challenges that people are facing. I think it’s similar for all retailers. The growth of online shopping is forcing retailers to look again at the in-store experience, and to make sure that you provide the in-store customer with a shopping journey that’s convenient and compelling.
It’s no longer the case that you can just get away with being considered a good retailer if you provide the right product in the right place at the right price. The customers have got higher expectations for a store visit if they’re going to take the time to go there. They really want experiences, and you’ve really got to fulfill that. They want to see something different, they want to have an assortment of products that fit them as a customer, that feels like you’ve considered them, and to receive exceptional service while they’re there. Fortunately, the internet can’t give you the instant gratification that comes with purchasing a product in store. You can order something with an internet retailer and get it in one day or five days, but you can’t pick it up there and then use it right away. There’s still an important place for physical retail shopping, but you must make sure that you give your customers the experience and journey that is compelling and keeps them coming back – or why not just order what they want online?
You’ve touched on this a bit already, but why is assortment and space such a major focus for Pets at Home?
We’ve got a couple of challenges that make this an important direction for us.
Firstly, some of our stores were lacking the services that we offer in a majority of stores (e.g. veterinary, grooming) and we needed to move those services into those stores while considering how that would impact floor space and assortment. On top of this, our SKU count has consistently grown over the last decade, and we’ve got a much wider assortment than we can fit into our average-sized stores. If you’ve got a 3000-square-foot store and you’ve got an assortment that typically fits in comfortably in a store three times that size, how are you going to select the best products for that location? You need to make sure that you’re giving the customers who shop with that store the breadth of choice that they want, as opposed to using a generic, one-size-fits all model across the country? At the same time, we were investing more in inventory and that’s a significant financial outlay, but our stockturns are falling. We had to more carefully consider the space we’ve allocated for fast-moving products and, with reduced assortment, replenishment is much more frequent and key. If we get this mix wrong, we would increase our chance of a poor customer experience at the shelf.
Here’s another interesting bit; we’ve analyzed our inventory performance and we’ve seen that around 25% of our SKUs deliver very little sales or profit, but they occupy shelf space and inventory value. As a specialist retailer, we do need to have access to some lower-sales-potential products, but we don’t need to stock them in our stores – they are ideal for online or in-store ordering and 48-hour delivery.
You can see that changing the assortment in stores is delicate business. Customers are often very engaged with a given product. You’ve got to be very, very careful how you manage that experience, to be able to transfer them to a different product that you do continue to sell with that store, rather than be in a situation where you delist the product and lose the customer with the product.
Please give our readers a little teaser of what you covered in your presentation at Xcelerate 2019.
I discussed the challenges that led Pets at Home to consider how we manage assortment, the best practices to consider and pitfalls to avoid, and the process we went through to engage the business in looking at this area differently.
I spoke about the fundamentals for starting a project like this – things like fully understanding your macro space and having dimensionally accurate planograms, defining the rulesets on inventory and sales, organizing that data. I went through how we did own analysis and recorded how long it took is to do it. Then, we had Symphony RetailAI do exactly the same thing – and we compared the two scenarios. The results were extremely interesting and compelling. I covered in detail Symphony RetailAI’s category space optimization process, the scenarios we used and how we validated results.
It’s very interesting to note that, even once you have significantly compelling, validated results, there can still be acceptance issues within the business. It took us around 18 months to get buy in. There are mindsets you must overcome. For example, in the past, we always felt that the widest assortment was the imperative and would give us authority in the marketplace, so you have to build a strong case to convince the organization that that is not necessary.
Tell us something fun about yourself that our readers might enjoy.
Despite being a Brit, I’ve been a huge fan of American sports for many years, and I played basketball since school. For about 15 years, I was Chairman of one of the largest amateur basketball leagues in the UK with 45 teams playing in it. I frequently travel to America on holiday as a favorite destination, and I’ve managed to see several NBA games, a couple of baseball games, which I think is a bit like one of you guys coming over here and trying to watch cricket. I sit there slightly puzzled by some of the rules, but it’s all very interesting to watch.