Standing out from the crowd

It's hard to believe that there's actually a business lesson in an adventure movie like "Pirates of the Caribbean," yet the original film has a perfect moment to consider. In one scene, the movie's hero tells a pirate captain that there is no chance the pirate could beat him in a fair fight.

The pirate responds simply: "That's hardly incentive for me to fight fair."

It's a motto many in the industry should adopt. We're not talking about cheating, but rather, as the pirate captain made clear, finding a way to play to your strengths and not the strengths of your competition.

Speaks, FMI's newest report of industry performance provides ample incentive for operators to follow this very advice. The report tracks a range of strategies for retailers, who combined operate 15,000 stores, and paints a vivid picture of what works.

The clearest lesson is that companies with a defined strategy are the ones growing sales fastest. And, interestingly enough, the group that performed the strongest in the last year were independent operators.

FMI asked retailers to identify a range of competitive strategies: ranging from pricing tactics to emphasis on perishables to creating a better overall shopping experience. Retailers then graded their own performance. It was disappointing to find that most said they were using every single strategy, resulting in mediocre performance.

The one group that stood out was independent operators. Independents were pursuing a limited group of merchandising strategies. And that approach is paying off with independents realizing higher grades.

Perhaps the biggest proof of success was that independents-especially operators with 10 or fewer stores-reported the best overall and same store sales gains (4.7% above previous year's sales) of any of the groups FMI surveyed.

Of course, good numbers from a single year don't provide any guarantee of future success, but it's a place to build. FMI also recently released our annual study of shopper trends, which demonstrates the complex and contradictory demands of today's shoppers. What comes through clearly is that more than ever shoppers seek value in all its different forms and they are prepared to shop a wide variety of formats.

Understanding how shoppers define value is more complex. Today's shoppers are increasingly diverse-in both their backgrounds and the needs they want fulfilled. They use many different stores and sometimes want completely different experiences from an individual store they shop at on different days of the week.

This means the fight for shoppers is harder and more complex as well. One answer won't work for all shoppers; in fact it may not work all the time for a single shopper. But again, the results reported by independents demonstrate that a good number of you are getting it right.

What's clear is that every retailer needs to keep evaluating his or her own stores and all the competition to find out the best way of winning in the future. And the competitive message must come through clearly to all your employees, who need to understand just how challenging this battle is.

FMI's newest research studies: Speaks and Shopper Trends are available at the FMI store at www.fmi.org.

Crack the Retail C.O.D.E.

Manufacturers and retailers face many growth opportunities, particularly at the store level.

However, optimizing store-by-store performance and adding top-line growth can be difficult without information tools and a framework. One way to consistently achieve this growth is through a winning retail execution strategy: applying a simple, systematic four-step process that we call 'Cracking the Retail C.O.D.E.'

The C.O.D.E. approach employs a series of critical steps that all manufacturers should use to optimize their brand's success in the market. This consumer-centric approach links your actions in the store, where they matter the most, back to the consumers that are most likely to purchase your brand.

The four steps to 'Cracking the C.O.D.E.' are:

1 - Consumer Profiling - accurately capturing the demographic profile of the brand's consumer

2 - Opportunity Gapping - quantifying store-level opportunities based on consumer demand potential

3 - Dynamic Clustering - grouping like stores using multiple store attributes, including demographics, competition, and upside opportunity

4 - Executing for the Consumer - based on steps 1-3, developing store-level tactical plans and giving the field force the right information to optimize in-store presence

This strategic approach provides a deeper understanding of the consumer around a given store, measures the gap between actual and potential demand, and offers an execution plan at the store and cluster level that fully meets potential demand. The result is improved execution, reduced out-of-stocks and overstocks, and improved promotion performance and inventory management.

Many of our clients have embraced this approach, as have their retail partners. In fact, a key ingredient in this process is the utilization of POS data.

Our methodology "consumerizes" actual movement data, enabling retail-specific, item-specific profiling. This, in turn, allows the manufacturer to deliver granular analyses down to the SKU level. The analyses are also retail specific, based on the retailer's own data - adding power to the recommendations.

The manufacturers that have most successfully employed the C.O.D.E. approach are those that leverage this information and partner closely with their buyer; not only to improve their own brand's performance, but to grow the overall category as well.

Retailers recognize the financial benefit they receive when their suppliers incorporate the C.O.D.E. into their plans. They often want manufacturers to use POS information to strategically advise them, provide direction on how to improve category profitability, and leverage their data to identify opportunity and action plans. Therefore, many top retailers have agreed to allow us to use their POS information in our analyses.

The information and tools are available. The next step lies with manufacturers and retailers to partner together and apply the C.O.D.E. to identify store-by-store opportunity and close the gap.