The Science of Retailing: Eighty Percent of Shopper Time Is Wasted
- Three Shoppers: Quick Trip, Fill-In, and Stock-Up
- Rise of the Small Store
- Perils of Promotion
- The Big Head and Long Tail
- Heads You Win
- The Communal Pantry
- Layered Merchandising
- The Right Paths for the Right Shoppers
- Purchase Modes and Selection Paradigm
- Spending Faster
- Conclusion: Dual Chaos
This chapter is from the book
This chapter is from the book
This chapter is from the book
- “I am the world’s worst salesman; therefore I must make it easy for people to buy.”
- —Frank W. Woolworth
In the fall of 2008, Wal-Mart launched a set of small stores in Phoenix, Arizona.1 With the arrival of these “Marketside” stores, it was clear that even the king of the mega-store was beginning to think small. The move was apparently in response to the arrival of UK retailer Tesco, which had come to the United States with its “Fresh & Easy” small-format stores. Tesco opened dozens of the stores in Nevada, Arizona, and Southern California. Safeway, Jewel-Osco, and many others are downsizing stores in an attempt to upsize profits. Retailers such as Trader Joe’s and other specialty stores have also successfully pursued the smaller store model in the age of mega-stores. When Wal-Mart is building smaller stores, it is clear that there is a shift in the winds. At the heart of this change, and the success of these smaller formats, is the quick-trip shopper.
Across the pond, German discounters Lidl and Aldi are growing rapidly in the British market with stores that are a tenth the size of Tesco or Asda stores. The smaller stores offer a faster trip with a more limited selection at lower prices. Although large UK superstores typically stock 32,000 different items, so shoppers are likely to find any obscure product they need to stock their pantries, Lidl carries 1,600 SKUs and an Aldi store sells just 900 items.2 Aldi, which arrived in the United States in 1976, has more than 1,000 stores. It is rapidly expanding its U.S. presence and competing aggressively against Wal-Mart and Kroger’s, using a limited selection and lower prices, as well as very different store designs.3
The rapid growth of Lidl and Aldi was aided by a tough economy in 2008, which sent more shoppers looking for discounts. But their success also depends upon an understanding of the power of the quick trip. Most supermarkets are designed for shoppers who are stocking up their pantries, but most shoppers walk out of the store with only a few items. In fact, the most common number of items purchased in a supermarket is one!
Three Shoppers: Quick Trip, Fill-In, and Stock-Up
Building on the work of Wharton Professor Peter Fader, we studied data collected on 75,000 shoppers across a series of three stores to develop behavioral segmentation of shoppers. By mathematically clustering a large number of shoppers by factors such as how fast they walk, how fast they spend money, how much of the store they visit, and how long their trips are, we found that shoppers group themselves into three basic segments or clusters, as shown in Table 1.1.
Table 1.1. Quick-trip shoppers spend more quickly than other segments.4
|
Clusters - Market Segments |
|||
|
Description |
Quick |
Fill-in |
Stock-up |
|
Share of store visited |
11.2% |
21.1% |
41.0% |
|
Trip duration (in minutes) |
13.4 |
18.5 |
25.3 |
|
Walking speed (feet per second) |
0.52 |
0.66 |
0.98 |
|
Buy time (seconds to buy a single unit) |
38.7 |
30.2 |
21 |
|
Spending speed (dollars per minute) |
$1.88 |
$1.32 |
$1.23 |
|
Efficiency (seconds per dollar) |
31.9 |
45.5 |
48.8 |
Each of the segments exhibits fairly distinctive shopping behavior, as follows:
- Quick: Short time, small area, slow walk, high-spending speed, very efficient.
- Fill-in: Medium time, medium area, slow walk, average-spending speed, modest efficiency.
- Stock-up: Long time, large area, fast walk, low-spending speed, lowest efficiency.
Very few supermarket retailers are aware that half of all shopping trips result in the purchase of five or fewer items (these numbers come from actual transaction logs from every continent except Africa and Antarctica). This ignorance is a consequence of the justified focus on the economics of the stock-up shopper, and a lack of attention to the behavior of the mass of individual shoppers in the store. This huge cohort of quick trippers is not a different breed of shoppers. They are simply stock-up shoppers on a different mission.
Anyway you slice it, these quick trips are an important part of retailing. Single item purchases account for more than 16 percent of all shopping trips. Further, as noted, half of all shoppers walk out with five items or less, and the average purchase size is about 12 items. As shown in the figure, in addition to looking at the average, we also need to consider the “median,” half of the distribution, and the “mode,” the most common result (see the box for discussion).
But it is not sufficient simply to begin catering to quick trippers. Rather, the store must be distinctly managed for all three types of shoppers, particularly the quick trippers and stock-up shoppers. Supermarketers are obsessed with stock-up trips, because even though there are so few of them, each one is worth a lot of money. But this has led to ignoring the importance of the one- to five-item trip. Even though these are smaller baskets, there are so many of them that they still constitute fully one-third of all the store’s sales. What is more, they represent a tremendous opportunity. Although it might be hard to convince a stock-up shopper to put another half-dozen items into a bulging cart, the quick tripper may have a hand free or room in a basket if the right product comes into view. Because the one- to five-item basket is presently generating one-third of dollar sales, simply doubling the size of those small baskets would increase total store sales by more than 30 percent.
But this is not simply about figuring out how to coax customers into picking up a few extra items on trips that continue to look just like the ones they are taking now. Instead, there is a need to understand distinctly the three primary types of shopping trips: quick trips, fill-in trips, and stock-up shopping. Those retailers and brands that make a conscious and focused distinction between the quick trip and the stock-up trip will steadily pull ahead in sales and profits.