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Analytics have become a vital element in grocery retailers’ toolboxes, helping them to hone in on best practices in order to improve customer service. From space management and promotion planning to price optimization and assortment planning, analytics are delivering the insights that help grow the business and improve the bottom line.
Retailers around the world are finding success with insight-driven analytics. Representing the largest grocery cooperative in Finland, Ilkka Alarotu from the S Group will share his expertise and experiences with analytics in an upcoming webinar.
Joining Alarotu during the webinar, industry consultant Jim Hertel from Willard Bishop will discuss his perspective on the benefits of analytics; and Cyndy Renfrow from SAS will share grocery case studies highlighting innovation and analytics.
Ilkka Alarotu, Jim Hertel, Cyndy Renfrow,S Group Grocery Trade Willard Bishop SAS Institute Inc.
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About Retail TouchPoints Launched in 2007 Over 20,000 subscribers To provide executives with relevant, insightful content across a variety of digital mediumFree subscription to our weekly newsletter:www.retailtouchpoints.com/signup
PanelistsIlkka Alarotu Jim Hertel Cyndy RenfrowDirector, Customer Managing Partner Senior Director, EMEAOriented Assortment Willard Bishop Retail/FMCG Practiceand Pricing - Food and SAS Institute Inc.Daily Consumer GoodsS Group Grocery Trade Moderator Debbie Hauss Editor-in-Chief Retail TouchPoints
Unique Challenges Facing Grocery Retailers Commodity pricing pressures Decreased household wallet share due to fewer shopping trips Increased competition from non-grocery retailers, including deep discounters Empowered consumers Numerous in-store departments Fresh food management Mountains of SKUs and UPCs Need for a highly optimized workforce Siloed internal business processes
Insight-Driven Analytics Boost Grocery Profits And Revenue Insight-driven retailing can break down the barriers/silos and provide transparency across the value chain Supermarket retailers can expect to increase same-store sales 5% to10% when becoming more shopper-centered – Jim Hertel, Willard Bishop Mobile Technology and Social Media will greatly impact the grocery business and analytics will play a key role. “Location-based information … represents the most important single feature of mobile.” – Richard Hastings, Global Hunter Securities Retailers must institute “outside-in” thinking in order to analyze customer sentiment and deliver actionable insights
Insight-Driven Analytics Boost Grocery Profits And Revenue Smart retailers will respond with a focused optimization strategy featuring 4 key components: 1. Assortment Optimization 2. Campaign Planning, Marketing and Promotion Optimization 3. Pricing Optimization 4. Demand Forecasting
10/12/11 SOK Päivittäistavarakaupan ketjuohjaus 9
1. S Group in brief2. Value Chain Optimization: Big Picture3. Space Optimization4. Price Optimization5. Interactive social media services6. Summary 10
1. S Group in brief2. Value Chain Optimization: Big Picture3. Space Optimization4. Price Optimization5. Interactive social media services6. Summary 11
– The S Group consists of 22 regional cooperatives and the SOK Corporation, which is owned by the cooperatives.– S Group has operations throughout Finland, in the Baltic Countries, and in St. Petersburg, Russia.– Retail sales: EUR 12,267 million (+5,0 %)– Profit before exceptional items: EUR 296 million– Bonuses paid: EUR 333 million– 1,636 outlets– 39,646 employees SOK Grocery Trade Chain Management 12
Grocery sales Service station stores Department stores and fuel sales and speciality goodsHotels and restaurants Cars and Agribusiness automotive goods Other S Group’s restaurants S Group’s car dealerships 13
“Higher quality at a lower price”S Group leads the industry with consistentlylower prices, wide variety and high customersatisfaction. 14
– Every Day Low Price (EDLP) requires Every Day Low Costs (EDLC)– Best demand-based assortment always (continuously) available– Easiest place to shop in all locations 15
1. S Group in brief2. Value Chain Optimization: Big Picture3. Space Optimization4. Price Optimization5. Interactive social media services6. Summary 18
1. Forecast 2. Forecast 3. Forecast • • S Group total / • Store / Product / • Store / Product / Day Product / Period Week • 28 days before Optimization Customer-oriented Storeassortment planning Space/product ReplenishmentPricing optimization: In-store efficiency Labour planning volume scenarios Logistics costs Logistics operations Sourcing Display methods Automated ordering Delivery Pack size Pricing Vendors: Vendors: Vendors:Auctions ->Orders Labour plans Logistics plans Raw material Production drivers Inventory levels purchasing Logistics Production plans Capacity operations 4 – 8 months 2 months 21 days – 48 hours 19
Orders for vendors 2. Forecast 3. Forecast • Drivers: • Store / Product / • Store specific Store / Product / Week space allocation Day • 28 days before 1. Forecast • 100% Shelf availability Optimization • S Group total / Display methods Tentative Order Product / Period Picking and delivery efficiency pack sizes In-store Store (warehouse / supplier) Recommended merchandizing Replenishment facings / System Wastage product level Replenishment Inventory cycle Order level at store (logistical costs) Sourcing Decisions Assortment Decisions Space optimizer Pricing Decisions Store Specific Space in units / Planograms Product / Store 4 – 8 months 2 months 21 days – 48 hours 20
1. S Group in brief2. Value Chain Optimization: Big Picture3. Space Optimization4. Price Optimization5. Interactive social media services6. Summary 21
Base drivers1. Shelf availability (100 % availability)2. Store specific sales forecast by product3. Store specific space allocation by categoryBusiness performance optimization1. Efficiency in store activities • Labour cost of shelving2. Logistics efficiency • Drop size • Drop times • Store replenishment cycles • Warehouse picking3. Vendor efficiency • Order volume of delivery pack sizes4. Total wastage in supply chainCustomer centricity = Best assortment – Easy to shopCost reduction in supply chain 22
Analyzing,ReportingStore layout, total area Total space utilization Store layout incl. sections - sales area - auxiliary area - concept developmentSales area Macro level allocation Allocation of sections to product categories - effectiveness of space - development of allocation Space optimization on store/category level recommendationsDisplay groups Micro space allocation - effectiveness of space allocation for products Automated production of store specific planograms - assortment optimization Space optimization on store/product level Automated replenishment process 23
40,000 store-basedplanograms perassortment period 24
1. S Group in brief2. Value Chain Optimization: Big Picture3. Space Optimization4. Price Optimization5. Interactive social media services6. Summary 25
Lower prices, better margin1. More forecasting power: Price elasticity calculations – When product A price changes, what happens to the product A volume – When product A price changes, what happens to the product B volume2. More analytical power – What is the best combination of prices: – Brand leader price is fixed (competition). There also are rules for economic products. What are optimum prices for other products than brand leader to get best margin possible? – How we could use customer owner information to improve our pricing? – Best customers: what do they buy and what they do not ? 26
Scenario -example – Maximize Margin (%) such that – Units sold is not sacrificed (Units sold ≥ Units sold LY) – Competitor price rules are not violated10/12/11 SOK Grocery trade chain management 27
1. S Group in brief2. Value Chain Optimization: Big Picture3. Store Localization4. Space Optimization5. Price Optimization6. Interactive social media services7. Summary 28
Foodie.fm - Facebook for groceries Personalized product and recipe recommendations Answers to a simple question: What would I buy and eat today? Unique server technology for personalized product and recipe recommendations. Empower people to consume smarter Foodie tailors recommendations based on your preferences. Use relevancy search to find products that fit your preferences and taste profile. Social grocery discovery Social interaction influences consumer behavior. Connect family to co-shop and share. Follow friends to discover new ideas and recommendations. 29
Foodie.fm – Social shopping where ever you are Mobile Facebook & Web SMS & Email iPhone, Nokia & Android Shopping list: CocaCola, Arla Cheese, Milk Widgets Retailer & checkout assortment link 30
Benefits– Social media speeds up fragmentation of consumer needs: Personalization technology provides a state of the art way to meet the unique needs of consumers.– Get the shopper before they buy: Service enables very transparent and interactive way of being part of everyday life of consumers. Create link to checkout from social discovery.– Analytics: Ability to feed back analytics from social shopping process. 32
1. S Group in brief2. Value Chain Optimization: Big Picture3. Store Localization4. Space Optimization5. Price Optimization6. Interactive social media services7. Summary 33
Summary– Best demand-based assortment and availability every day, every hour, every store– We are ambitious in developing world class productivity and business analytics– Value Chain Optimization connects all operations together to get the maximum output– Social media speeds up fragmentation of consumer needs: we need a new level of personalized digital and mobile services for our individual customers 34