Chapter 9: Perspective of store

Question 1

For this purpose, it developed the retail monitor formula.
𝑆 = 𝐶𝐴 * ((UV*VF)/CA) * 𝐶 * 𝑈𝑃𝑇 * 𝐴𝑈𝑃

Using this formula, we can do several calculations:

Answer 1

• The number of visitors → 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑣𝑖𝑠𝑖𝑡𝑜𝑟𝑠 = 𝐶𝐴 * ((UV*VF)/CA) (is the first part of the retail monitor formula).
• The 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑖𝑞𝑢𝑒 𝑣𝑖𝑠𝑖𝑡𝑜𝑟𝑠 times the frequency of visits of visits is also called visitor index (VI)→𝑉𝐼 = ⎡⎣𝑈𝑉*𝑉𝐹 ⎤⎦ 𝐶𝐴
• The number of visitors who buy (customers) → 𝑁°𝑜𝑓𝑏𝑢𝑦𝑖𝑛𝑔𝑣𝑖𝑠𝑖𝑡𝑜𝑟𝑠 = 𝐶𝐴 * 𝑉𝐼 * 𝐶
• The Average Basket (AB): The amount on the receipt (if we know the n° of visitors who buy and how much they spend) → 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑎𝑠𝑘𝑒𝑡 (𝐴𝐵) = 𝑈𝑃𝑇 * 𝐴𝑈𝑃

Question 2

S = 𝐶𝐴 * ((UV*VF)/CA)

Answer 2

This part of the formula represents the external dominance of the retail formula and indicates the extent to which the retail formula is able to attract visitors to the store (attraction value of the formula).

Question 3

𝐶 * 𝑈𝑃𝑇 * 𝐴𝑈𝑃

Answer 3

Relates to all internal store factors and indicates the extent to which one is able to convert visitors into buyers (transaction value of the formula).

Question 4

The external and internal approaches will partly influence each other. For example, a successful improvement of the internal marketing mix, such as a logistical approach aimed at reducing out of stock, may in time lead to an increase in the VI. This may be because customers who were previously disappointed by out of stock are now noticing improvements.

Answer 4

• The monitor analysis is important and should be performed by every retailer with some regularity
• suitable at a store level chain departmental level and online retailers
• Also useful for customer segmentation and understanding and combating lost sales

Question 5

In the case of HEMA:

Answer 5

solution is primarily increasing the receipt amount, consisting of the UPT and the AUP. Two possibilities:
- cross-selling: how can we make the visitors buy one more unit per shopping visit?
- Up-selling: selling another more expensive product than the customer initially came to the store for.

At HEMA, upselling will occur to a lesser extent, since it is a difficult task in a pure self-service environment. This can be done more often at Bijenkorf because it offers several different product alternatives at different prices and with more sales staff on the store floor.

Question 6

In the case of Bijenkorf, we have more indications:

Answer 6

• VI, VF: can be influenced with a market penetration strategy (external promotion, loyalty systems and campaigns).
• C: require assortment analyses, research into the influence of the price level and analysis of the degree of presence of goods (renewing the presentations in the store and improving the logistics process)
• UPT: can be influenced with cross-selling strategy. Often, the additional sales are of a lower average unit price, but do have a higher margin. The presence of qualified sales staff offers many opportunities here.
• AUP: also can be influenced by upselling

Question 7

We can use the model for more concrete analyses in the area of assortment. Companies that try to market a total proposition to the customer by offering a multitude of sub assortment (as department stores, DIY stores but also Action, Blokker and Xenos), have to manage a large number of sub assortments: it requires attention. Is important to condense the information in such a way that you can quickly see which approaches are necessary for which sub-assortments. Suppose that we have the data for each department, we can categorise the departments according to the characteristics CA * VI and C. Such a classification leads to an overview that makes it possible to see at a glance how consumers react to what is on offer.

MODEL:

Answer 7

Vertical axis: CAVI low or high
horizontal axis: CUPT*AUP low or high

Question 8

CAVI low
CUPT*AUP low

Answer 8

little looking, little buying

question marks - better to close the department?

Question 9

CAVI low
CUPT*AUP high

Answer 9

little looking, lots of buying

functional item category
introduce fun-shopping elements

Question 10

CAVI high
CUPT*AUP low

Answer 10

lots of looking, little buying

browsing departments

important for atractiveness not for sales.
see what it is, price? offer?

Question 11

CAVI high
CUPT*AUP high

Answer 11

lots of looking, lots of buying

anchor departments

maintaining as a minimum, expanding further if possible

Question 12

Example Galeries Lafayette

Answer 12

The department store is capable of determining the size of its catchment area thanks to market research. Can also determine almost precisely the number of items per customer and the average item price per department. 3 variables known: CA, UPT, and AUP. VI and C still have yet to be examined. Lafayette does this through a periodic random survey of the residents of its catchment area “which departments did you visit and did you buy anything there? How often did you visit the department store in the past year?”. By comparing the results for each department with the average for the department store as a whole, an impression of the relative importance of each department is obtained.

Lafayette uses the results in two ways.
1) As a snapshot analysis: does the outcome of the measurement correspond to what we want with our concept?
2) Sequential analyses: firstly, by monitoring on a total level whether the conversion or the sales index is changing. Secondly, the sequential observations are used to determine whether there are shifts in the relative position of the departments.

Question 13

Lost sales

Answer 13

sales that a store failed to make. Specifically, is the % of visitors that have the intention to buy, but do not proceed to purchase.
To measure this phenomenon, customers must be classified according to their original intention to buy and their ultimate buying behaviour.

Value of lost sales = PI * ( 1 - C ) * AB

Question 14

To determine the true impact of lost sales for a retailer, it is good to determine

Answer 14

the missed conversion (MC) = is the lost sales percentage divided by the total conversion (unplanned and planned purchases) and the lost sales percentage.

Missed conversion (MC) = LS / (LS + C)
Where (LS + C) is the conversion that could have been realized but was not.

Question 15

Lost sales are the cause of a huge sales loss in the retail sector. It is necessary to know what precedes a lost sale. What is the reason that visitors with a buying intention decide not to buy?

Answer 15

? Most of the reason is in the assortment.
1) Out of stock* 2) Variation in the assortment 3) Price level
(4) **Staff is mentioned in only 2% of cases as a reason for lost sales. However, this should be looked at in a more nuanced way. The out-of-stock of products is experienced a lot by consumers. However, it is very rare that a retailer has an out-of-stock situation. The point is if the store employee was or was not able to show the customer the right products.

In addition, technology can increasingly help to reduce lost sales. Digital assistants can help the customer find the right product or alternatives for a product.

Question 16

For omnichannel retailers, an online presence can affect the number of UV and VF of their physical locations in two ways.

Answer 16

• in a negative way by lowering the attraction index of the physical store, when for example consumers order online and have the purchase delivered at home.
• positive influence is also possible by making the purchase online and then collecting it later from the store (the click and collect). There is then an immediate chance of an additional (impulse) purchase in the store.
• another important positive route is the ROPO (research online, purchase offline)
• research shows that physical stores have a positive effect on online sales. Physical stores don’t cannibalise online sales.

Question 17

Example How a retention strategy can contribute to profitable revenue growth

Answer 17

Suppose a company has a repeat-visit rate of 80%. This company is trying to increase its retention rate from 80% to 90%. They intend to increase the level of customer satisfaction with € 50 million investment. Suppose the approach is successful. In that case, we have only 10% of customers dropping away after each visit. The customer’s sales have doubled: instead of sales of € 250 per customer, it will be € 500. Instead of revenue of € 100 it will be € 200. The return on investment (ROI) of € 50million to increase customer satisfaction would therefore bring in a return of € 100 million over five years: a ROI of 200%.

From this example the message is that small improvements in the retention ratio can bring big improvements in profitability. Of course, this does not mean that nothing more should be done about acquire strategies, but means that retailers should pay relatively more attention to retaining good customers than is often the case. This requires a more nuanced approach than simply striving for as many transactions as possible. That is why more and more retailers are adopting so-called loyalty programmes, which are aimed at identifying customers worth retaining. In this case, it is more a case of pragmatic segmentation after, rather than a deliberate choice in advance for certain market segments.

Question 18

If the catchment area is well understood, the retailer knows what the visitor index is. If the visitor frequency (VF) is not known, the visitor index is a good alternative for segmenting the customers according to loyalty. For the degree of propensity to buy, a good indicator is our cash register: it keeps track of all transactions and if we divide the number of transactions on all visitors, we have the conversion. Conversion is then our other axis on which we can segment our customers.

Answer 18

1. Core customers: visit a store frequently and spend a lot. It is for these core customers that we have built the concept and these are eligible for retention strategies.
2. Loyal customers on a budget: visit the store often but do not buy very much. Are attracted to the concept but - probably due to budget constraints - cannot afford to buy a lot. In time, these customers may develop into core customers (maybe young people with low income). These customers are also eligible for retention, but in the short term, have a lower priority.
3. High value customers: visit the store infrequently, but when they do - buy a lot. Do not find the store attractive but have considerable resources or do not want to spend much time shopping and when they do, do it well. This is the group that many retailers target in their acquire strategies. The high potentials are, by definition, disloyal.
4. Low value customers: visit infrequently & spend very little. Is the group of customers for whom the store formula has not been developed in any case. Are often bargain hunters who are constantly “shopping around” and are almost impossible to hold on to.