Effective Customer Centric Merchandising Strategy Steve Olsen Vice President, Merchandising Sears Seminar Series Miller Center for Retailing Education and Research University of Florida April 17, 2009 Confidential.

Report
Effective Customer Centric
Merchandising Strategy
Steve Olsen
Vice President, Merchandising
Sears Seminar Series
Miller Center for Retailing Education and Research
University of Florida
April 17, 2009
Confidential
Agenda
 U.S. Office Products Industry
 Retail Challenges
 Merchandising Strategy Definition
 Category Management Framework
 Merchandising Strategy Tactics
2
U.S. Office Products Industry
Market is large and growing
CAGR
‘02-’07
Billions
$400
$350
$294B
$302B
$312B
$300
$250
$337B
2.8%
$323B
$331B
Delivery
$117B
Delivery
$120B
Delivery
$122B
3.1%
2.6%
Delivery
$105B
Delivery
$108B
Delivery
$113B
Retail
$189B
Retail
$194B
Retail
$199B
Retail
$206B
Retail
$211B
Retail
$215B
2002
2003
2004
2005
2006
2007
$200
$150
$100
$50
$0
Source: School and Office Products Network – State of the Industry Report 2008 / Office Depot Estimates
3
U.S. Office Products Industry
OSS comprise a small portion of the overall U.S. office supply industry
2007 Total U.S. Office Supplies
Market -- $337B
Other
Contract
Stationers
Specialty Stores
9%
1%
Contract
Specialists
2007 OSS Market Share
20%
ODP
3.4%
21%
10%
O.S.S.
SPLS
4.3%
Independent Dealers
6%
Internet/Direct Sales
Institutional/School Firms
OMX
3%
2% 3%
1%
4% 2%
18%
2.3%
Mass Retailers
Stationery/Gift Stores
Copy/Printing Services
Food/Drug Stores
College/Bookstores
Source: School and Office Products Network – State of the Industry Report 2008 / Office Depot Estimates
4
Note: Figures may not add to 100% due to rounding
Office Depot – Business Overview
•
Office Depot is a leading global provider of office products and services
•
2008 sales of $14.5 billion
•
–
Supplies: 61% of sales
–
Technology: 25% of sales
–
Furniture and Other: 14% of Sales
Multi-channel – stores, catalog, Internet and contract serve business customers of any
size, from small home office to Fortune 500 accounts
–
58% of 2008 sales were not in North American Retail
–
One of the world’s largest e-commerce retailers – $4.8 billion in sales in 2008
Artistree Retail
North American
(42% of 2008 Sales)
• Over 1,200 stores in U.S. and
Canada
• Largest concentration of stores
in California, Florida and Texas
Artistree
N.A. Business
Solutions
(29% of 2008 Sales)
Artistree
International
(29% of 2008 Sales)
• Catalog, contract and e-commerce
• Dedicated sales force works with
medium sized to Fortune 100
customers
• Catalog, contract, e-commerce
and retail
• Sells to customer directly and
through affiliates in 45 countries
outside of North America
• Orders serviced through 20
distribution centers
5
• 35+ websites and over 400 stores
Challenging Times
6
Category Management Methodology
Strategic Levers
 Assortment
Category
Role
 Brand
Management
Growth
Intent
 Pricing
Category
Category
Strategy
Management
Framework
Resource
Allocation
 Space
Planning
 Promotions
Category
Tactics
 Inventory
7
-7-
Merchandising Strategy Tactics
Product
Price
Merchandising
Strategy
Placement
Promotion
Product
 Line Review Process
Price
Product
Merchandising
Strategy
Placement
Promotion
 Style / Function / Design
 Pack Size
 Packaging
 Brand Awareness
 Innovation / Exclusivity
Product Line Review
 Comprehensive process
 Complete merchandising solution
 Market share and Industry trends
 Product quality, innovation, design
and exclusivity
 Willingness to help Office Depot
grow
 Ability to support and service Office
Depot
 Negotiate the best cost/value
relationship
10
Style, Functionality & Pack Size
11
Improved Style, Functionality & Pack Size
12
Packaging
13
Improved Packaging
14
Brand Awareness & Exclusivity
15
Price
 Pricing Strategy
Product
Price
Merchandising
Strategy
Placement
Promotion
 Business Objectives /
Financial Goals
 Competitive Strategy
 Zone / Channel Strategy
 Price Sensitivity
 Retail Prices
Pricing Strategy
 Strategic objectives
 Business objectives /
financial goals
Formulate
Manage
 Category management
framework
Pricing
Strategy
 Customer segment /
profitability objectives
Adjust
 Channel / Store format
Execute
 Competitive positioning by
category / store / region
Monitor
 Price zones
17
Strategic Pricing Process
Corporate
Planning
 Corporate
strategy
 Brand strategy
 Customer
strategy
 Merchandising
strategy
 Financial
plans
+
Department
Strategies
+
 Category role
 Growth
objectives
 Private brand
strategy
 Competitive
strategy
 Financial goals
 Marketing
strategy
 Zone strategy
Business
Rules
+
 Cent ending
 Pack size
 Product family
 Competitive
 Good/Better/Best
 Brand
relationship
Consumer
Price
Sensitivity
 POS data
 Product
attributes
 Insert media
 In-store
promotions
 Clearance
events
 Competitive
data
Prices Aligned with Financial needs and Corporate Goals
18
Setting Retail Prices
Traffic
Destination
Destination
Profit
Convenience
19
Traffic
Placement
 Color / Fashion / Trend
Product
Price
Merchandising
Strategy
Placement
Promotion
 Brand Position
 Assortment Flow /
Adjacencies
 Signage / Messages
 Shopping Experience
Color, Fashion & Trend
21
Improved Color, Fashion & Trend
22
Brand Position & Assortment Flow
23
Improved Brand Position & Assortment Flow
24
Signage & Messages
25
Improved Signage & Messages
26
Shopping Experience
27
Promotion
 Promotional Plan
Product
Price
Merchandising
Strategy
Placement
Promotion
 Print Advertising
 Direct Mail / Email
 Multi-Channel
Promotions
 Loyalty / Sponsorship
Promotional Plan
Q1
Q2
Q3
Direct Mail
Catalog
Email Web Blasts
Online Marketing
Broadcast
In-Store Signage
Worklife Reward Programs
Theme Events
29
Q4
Print Advertising
30
Direct Mail & Email
31
Multi-Channel Promotions
32
Loyalty - Worklife Rewards
33
Sponsorship - NASCAR
 Official office products
partner of NASCAR
 More Fortune 500
companies than any
other sport
 #1 sport in terms of
brand loyalty
 #1 spectator sport
 Relevant to our target
customer
Source:
NASCAR
34
Merchandising Strategy Tactics
Product
Price
Merchandising
Strategy
Placement
Promotion
Summary
 Retail has become a challenging environment and
consumers are harder to predict, satisfy and reach
 A merchandising strategy is critical because it
determines how a company will compete in the
marketplace and build customer loyalty
 Category management principles are foundational to
building a merchandising strategy and improving revenue
and operating margins
 The 4Ps, product, price, placement and promotion, are
critical tactics for an effective customer-centric
merchandising strategy
36

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