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Smart cross-merchandising helps your holiday shoppers and bottom line

With the holiday season now upon us, grocers are beginning to wonder how their cross-merchandising displays will play out in terms of revenues and profits.

According to the BMO Holiday Outlook, Canadian consumer spending for the 2014 holiday season is expected to drop to a three-year low, with the amount spent on entertaining, dropping from $282 to $211.

Against this backdrop, it’s more crucial than ever for grocers to use smart cross-merchandising to maximize holiday shoppers’ basket size.

Today, with an average of over 43,000 items carried in each supermarket, grocery shopping choices are more abundant than ever. So why are shoppers not buying all of their required items at one grocery store? In a recent survey of Canadian grocery shoppers conducted by LoyaltyOne, it was found that Canadians are regularly shopping an average of three different grocery stores in order to find the full product selection they are looking for.

Grocers should consider strengthening their use of in-store cross-merchandising to better meet shoppers’ needs. During the busy holiday season, in particular, you have the opportunity to help customers cut down on the time and effort spent searching for the right products by shifting their focus to ‘meal solutions’ rather than individual items. This minimizes the number of grocery stores that your shoppers need to visit, which in turn increases the average basket size (and improves your market share).

Top performing grocers are smarter about cross-merchandising in two ways:

  1. 1. They look across categories to create easily-accessible solutions that meet their customers’ ‘need states’ - generally defined as a group of consumers who seek similar product benefits and attributes in a particular usage occasion.

  2. 2. They understand their shoppers based on past-behaviours, lifestage, lifestyle and potential value

Developing a smart cross-merchandising strategy, program or calendar for the holiday season isn’t just about linking turkey with cranberry sauce. It requires a grocer to collaborate beyond the fundamental structure of category management in order to create a broader strategy that develops and influences your shoppers’ need state during the holiday season.

For example, grocers can assist time-crunched holiday shoppers by cross-merchandising food products with higher margin items such as decorations, gifts, cards and kitchen utensils/food preparation tools. This provides a busy holiday shopper a one-stop-shop for all the items they’ll need for a holiday party. By cross-merchandising for the holiday season, a grocer brings complementary products together to deliver shopper solutions that only exist for a limited time but tie together multiple categories that are usually physically separated by aisles in store.

What shopper data is essential for smart holiday cross-merchandising?

It’s imperative that life stage, lifestyle, and the potential value by customer and category are looked at together and taken into consideration when developing cross-merchandising programs. This is especially important during the busy holiday season when retail space is at premium and merchandising decisions have a far larger impact on sales than at other times of the year.

Life stages might be considered fairly universal in retail, including groups such as “young singles”, “young couples”, “families with babies”, “parents with grown children”, and so on. However, there are important nuances to take into account and validate when segmentations are created. For example, you can’t simply assume that someone who starts to regularly buy diapers is automatically a family buying for a baby. It could be a grandparent or caregiver, so not the primary diaper shopper, but rather someone buying only for a few months.

Lifestyle further defines the shopper, providing the grocer with useful attributes such as “time-starved” or “convenience-focused”. This segmentation provides retailers with a clearer idea of what solutions work best to further support of shoppers’ need states. For example, if a shopper has a high cooking aptitude and an interest in healthy products, look to provide a holiday meal solution which includes a wider number of fresh whole foods and seasonings that require more advanced at-home preparation.

Potential value provides retailers with an understanding of what purchases the shopper is likely making elsewhere. When potential value is combined with lifestage and lifestyle, and used in a predictive model of your shoppers’ behaviours, retailers are given a clear picture on what specific products shoppers could be buying at their store but aren’t currently. For example, imagine a grocery shopper who regularly purchases fresh whole turkey, fresh green beans, and boxed stuffing for holiday meals. This person spends about $50 a week on their shopping basket, but other similar shoppers tend to spend around $65. What’s missing from their basket compared to similar shoppers? Maybe it’s bagged potatoes and pre-packaged spices? Potential value is the factor that can help identify the products required to guide the shopper to spend the additional $15 in store to complete their meal solution.

By identifying and understanding what strengths the store can leverage — fresh, value, convenience — and what their shoppers’ need states are, grocers are better able to deliver the most appropriate holiday solutions. The short and sweet is that if you cross-merchandise the smart way, based on an in-depth analysis of your own shopper data, you are sure to ring in the New Year on a successful note.

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